Navigating the Waters of Product Differentiation: Insights from Pancrazio Auteri's Journey
S2-E10 (3 December 2023)
If you were forwarded this email or if you come from a social media, you can sign up to receive an article like this every fortnight.Gosh, it’s been months since my last post, but here I am again. First, here’s an update on AI loves Pasta, the side project I told you about in May. After a few weeks, I decided to put it on hiatus. I realized that cooking is a topic that requires videos because food is, first and foremost, emotion and storytelling. AI-generated recipes and fake pictures were simply not enough.
Content creators who do recipes are not interesting because they cook complex dishes (in fact, they usually are straightforward and fast to do) but because they tell what they do in a unique style. The problem is that producing videos takes a lot of time and is repetitive and tedious. It is not something I like to do. AI loves Pasta is simply a project incompatible with my personality. I love to explore, learn, and solve problems. I hate being forced to repeat the same thing, chasing followers and likes obsessively. Content creation is not my thing.
So, back to my passions. Again this year, I have almost finished my course on product management at Roma Tre University. I generally invite colleagues and professionals to give talks: last week, I had the pleasure of hosting Pancrazio Auteri.
Pancrazio Auteri’s Lessons
Pancrazio was raised in Sicily and moved to Milan at nineteen to pursue his studies in Telecommunications Engineering at the Polytechnic University during the 1990s. In 1996, he launched his first startup, a content management system aimed at helping Italian companies adapt to the Internet.
In 2003, he co-founded TVBLOB, developing the most advanced software platform for producing connected TV devices: set-top boxes and Smart TVs that combine the experience of Digital Broadcast and Cable TV with the possibilities offered by the Internet to enable entirely new television experiences and business models. The company was acquired by Minerva Networks in 2011, and Pancrazio moved to the United States. Since then, he has held various roles as a product leader in companies such as Tivo, Fing, and Audience View.
With Pancrazio, we went over his experiences and delved into some topics that are crucial for a product manager. In particular, he focused on three topics:
the importance of developing a product that creates value for a particular “initial” group of customers, one that is ready to understand the first release of the product (the beachhead segment);
the need to consider the alternatives to the product you are designing;
the analysis of the motivations and forces that influence buying behavior.
The Beachhead Segment
When we create a new product, we mistakenly believe that just having an idea or identifying a market need guarantees overnight success. However, it’s crucial to remember that building a functional product and making people aware of its existence takes time.
You can’t expect immediate demand. So, while it’s vital to envision a world transformed by your ideas, where everyone sees the value in them, a startup needs to remain alive and grow. I agree with Pancrazio when he says there are two strategies to thrive. First, you can try to fulfill any request that your customers do. This approach will inevitably distract from your vision and often transform your startup into a consultancy business. I have seen many startups going in this direction: in this scenario, the product you are trying to build becomes merely a differentiator of the consulting business.
The second, more intriguing strategy involves segmenting the market and identifying a beachhead segment – an area where you can establish dominance. To do this, you need to look for people so dissatisfied with their current situation that they would find even a basic version of your product valuable. These early adopters are also more forgiving if your product isn’t fully featured yet.
To understand this concept, it is helpful to use a diagram that allows us to prioritize customers’ needs, considering both the importance of the problem and how satisfying the available solutions are. We will plot importance on the x-axis and satisfaction on the y-axis.
For importance, the client is asked how important it is for them to achieve a particular outcome. For satisfaction, the question is how satisfied the client is with the tools he uses to achieve the desired outcome. Both values can be rated on a numerical scale from 1 to 10, with 1 being the lowest and 10 the highest.
When assessing a customer’s needs, you’ll find some in the top right corner, indicating they’re essential but already well-served. If you focus on the areas labeled as overserved and appropriately served, you will not be able to add much value. You can only compete on the price by offering a cheaper option. Instead, you should look at the bottom right corner, where important needs are not being met – this is where opportunities for differentiation and addressing underserved needs lie. Here, you can make a difference in a customer’s ability to reach a goal.
Job mapping can be used to identify and prioritize opportunities. This method involves breaking down the tasks of the people we’re studying into distinct phases or steps. For each step, we identify the desired outcomes.
To innovate effectively, you need to spend time interviewing or shadowing your target audience. You will map the steps they take, what the desired outcomes are, how important they are, and how painful it is to achieve a goal. This activity is invaluable not only for product development but also for positioning your product in the market and envisioning what your product's differentiators will be.
Available Options Analysis
Interviewing or shadowing your target audience, you will observe how they solve problems with current solutions. These are some of your competitors.
When considering competitive alternatives, always think beyond similar brands or services. From a user’s perspective, Netflix is just one option among many for leisure time after dinner. This could include watching YouTube, walking, reading a book, or sleeping. Netflix once concluded that one of its top competitors was sleep.
As Pancrazio recounted during the lecture:
A few years ago, we were analyzing competitors for a new project management tool. Surprisingly, the main competitor wasn’t a specialized tool like Jira; it was Excel. This experience taught me to always consider an Excel alternative in any competitive space.
When doing what I like to call available options analysis (rather than competitive analysis), remember to include three categories for a comprehensive view. First, consider suboptimal tools, like Excel, which may not be ideal but are still widely used.
Second, think about the interns option. This is where problems are addressed by throwing low-cost, often unqualified labor at them, rather than using a technological solution.
The third category is the ostrich option, where the strategy is to do nothing and live with the problem. This is important because it shows the real level of pain or inconvenience the problem causes.
Remember, when doing an analysis, always check these three categories: suboptimal tools, manual work (or the “interns”), and doing nothing. Understanding these categories helps you realize whether your solution is valuable enough to warrant a change from the current state.
Motivations and forces that influence purchase
When considering what drives a person to purchase, there are three key energy sources or motivations.
The first motivation is functional: what the customer does. Often, this is the only aspect considered by some product managers. They focus on building products that fulfill functional needs. In Pancrazio’s words:
My experience taught me that focusing solely on functionality isn’t enough. There are two additional essential categories. The second is the emotional aspect: how a person feels when they see the solution or face a problem. The third category is social: how using the product affects the user's perception by others and how they want to be seen.
For example, in my previous role at a software company for theaters and music venues, we realized our product lacked the features necessary for a particular segment of our customers. These were theaters that relied heavily on donations. They needed to report to their boards about donations and donors, which our product didn’t support well. So, we developed new reporting features, including easy export to PowerPoint. This addition was technically simple, but it was precious for our customers. It not only fulfilled a functional need but helped them be perceived as effective fundraising managers by their executive board members.
If we consider social media, they cater to both emotional and social needs. When you post and don't receive likes quickly, you might feel unnoticed or unappreciated. Instagram’s algorithm pushes your post to those likely to like it early on, satisfying your emotional need for validation and your social need to be seen as posting exciting content. And this motivates you to post again.
Therefore, when evaluating needs and designing features, consider these three categories: functional, emotional, and social. This approach ensures a more holistic understanding of what drives users’ decisions to adopt a new product, keep using it and tell about it.
Together with the motivations of progress, we can also consider the forces of progress involved in shifting people from their current behavior to adopting a new product.
As a product manager, the focus is often on showcasing the product through demos, highlighting its features and benefits. This is working on the pull of the new solution, trying to attract people to our product.
However, it’s crucial to understand where the potential user is coming from (the push force). What, in their current situation, is causing discomfort or driving them crazy? For instance, if selling a new smartphone, knowing if the customer is struggling with an outdated phone is critical: is it slow? does the battery die soon? storage full? blurry photos? This knowledge helps you tailor the presentation of the product, so you can highlight what addresses their specific needs, pain points and desires.
But in the shadows, there are two other forces at play. One is the anxiety of adopting a new solution, moving away from familiar tools like an old software program or a laptop they’re used to. People often hesitate to switch because of the unfamiliarity with the new product. To address this, we must offer solutions that reduce this anxiety, like a full refund guarantee or flexible subscription models. For example, Netflix’s easy unsubscribing feature significantly reduces the anxiety of long-term commitment.
The fourth force is the habit of the current behavior. People are creatures of habit, preferring familiar routines and tools. Recognizing this, it’s essential to make the transition to the new product as seamless as possible. This can be achieved through features like backward compatibility or migration tools that help transfer data to the new system smoothly.
Understanding these forces helps in effectively positioning and marketing the product. It’s about not just showcasing the product features but also addressing the underlying anxieties and habits that might holding back users from adopting the new solution. These insights are vital, especially for smaller companies where product development and go-to-market strategies are closely intertwined.
Finally, time plays a crucial role in the buying process, and understanding this can significantly improve cooperation between marketing, sales, and customer success teams. In many companies, these departments work in isolation, which can be problematic. Marketing focuses on generating leads, sales on converting these leads into customers, and customer success on ensuring ongoing satisfaction. However, harmonizing these functions can lead to a more effective organization.
There are seven key stages in a buyer's journey. The actual purchase is only the fourth step. The process starts much earlier, with the first thought a potential buyer has about their situation. For example, a person might buy a new mattress impulsively, but the decision likely stemmed from a prolonged period of discomfort and bad sleep, leading them to recognize the need for a change.
The journey begins with creating mental space for alternatives to the status quo. This can be achieved through storytelling, by asking questions, offering a new metric or stating an obvious problem. Once this mental space is created, people start passively noticing related information, eventually leading to active searching and learning how to compare options. This phase is crucial for understanding and evaluating different products.
During active looking, events like sales promotions or free trials can push the buyer toward a decision. However, the decision to buy is not just about seeing the product features; it’s about understanding what’s important to them and facing a time constraint that compels action.
After the purchase, it’s essential to focus on the first use of the product. This phase, where we measure the time to value, ensures customers feel they’ve made a good decision. Following this, the goal is to establish the product as a new habit, integrating it seamlessly into customer's life.
The final phase is ambassadorship, where satisfied customers become advocates for your product. This word-of-mouth marketing is precious and can be fostered by understanding what makes customers happy enough to recommend your product to others.
These stages form a framework that can be applied to various business contexts, helping to understand and optimize the customer journey from initial awareness to long-term advocacy.
Sales Pitch
Sales Pitch (affiliate link) by April Dunford is probably the best book I’ve ever read on crafting the perfect pitch for a B2B product. She provides a straightforward process and a step-by-step guide to build a narrative that clearly communicates how your product is different and better than anything else on the market.
In this book, you will learn:
why you need to be your prospect’s guide in the buying process
why a sales pitch is a unique style of story designed to help your customer say “yes” with confidence
how to use the time you have with a prospect
how “do nothing” is the most fearsome competitor you have
how and when qualification, discovery, and product demos fit into a sales pitch
how your positioning is reflected in a great sales narrative
why your differentiated value is the star of the show
the eight components of a solid sales pitch
Thanks for taking the time to read this episode of my newsletter. I hope I’ve been helpful. If you think my sketchbook might interest someone else, I’d be glad if you shared it on social media and forwarded it to your friends and colleagues.
See you in a couple of weeks… maybe 😊
Nicola
 | A guest post by
|