Tuesday, August 13, 2013

How Camera Product Positioning Works

I'm a firm believer that all great companys are product-led, not sales driven. Is Apple the company that they are because they have an aggressive sales staff, or is because the whole world by now pretty much instinctively knows what an iPhone is? Marketing and advertising are involved disciplines in their own right, but the first part of the equation is the product. If the product does not speak for itself without the help of advertising, then the sales team is going to have a harder job to do. So in terms of speaking to the customer, what a product is becomes just as important as what is said about it.

Another non-advertising aspect of product marketing is the lineup in which the product sits. To extend the analogy, "The company that you keep says something about who you are." Where a product sits in the lineup conveys information to the consumer, sometimes in a clearer way than the brochure can. When it comes to judging value, the human brain is surprisingly poor at making judgments in a vacuum. What happens more often than not is that consumers tend to subconsciously make judgments about products relative to other products. Would you be happier having the most expensive compact camera in a group of friends who shoot with compacts, or would you be happier with the cheapest DSLR in a circle of DSLR users? Logic dictates that you would be better off with having the DSLR, as the vast majority of DSLR's are superior in overall functionality to the best compacts. However, the science suggests that the majority of people would prefer to be in the group of compact users if they could have the best compact.... despite getting an objectively inferior camera experience. (Econ students will recognize this as a set of well-known income/residency preferences studies). In part, I think this is why the Nikon D600 and Canon 6D cameras have only been well-received sales-wise; at heart, they tend to convert a set of users who were top togs in the APS-C category (D7000 and 7D users) into the lowest rung of the full-frame category, and all of the envy that goes with it.

That's the power of product positioning. Without strong-arming the customer, you can shape their decision making simply by offering them a set of choices; how the choice are presented can serve different purposes for the manufacturers, and lead to different purchasing outcomes on the part of consumers. 

Nikon's product positioning shares a lot of similarities to Honda. Unlike the domestics (but like Toyota), Honda tends to have consistent product naming schemes: the Fit and Civic at the lower end, and the Accord at the higher end. What's more, Honda's car names don't change from model to model, and the relative sizes of the cars between models remains consistent. Nikon's product positioning works this way as well; the D3200 and D5200 for mass-market shooters and the D7100 for advanced-enthusiasts. When Nikon refreshes their cameras, they tend to refresh within each product line; as the D3200 succeeded the D3100, so does the D5200 supersede the D5100.

The advantage to this type of product alignment is that consumers can quickly identify which category they fall into. It also tends to turn consumers into aspiration purchasers because higher product categories are easily identifiable. D7000 and D7100 owners end up eyeing the jump to FX; D5200 users look on enviously at the rich feature set of the D7100, etc and so on.

The downside to Nikon's approach is that it requires that inventory levels be watched closely; if demand falls for one category, the slack might not be easily made up for by re-aligning another. For example: if sales of the D5200 weaken, a discounted D7000 might not be answer, as Nikon's lineup has trained its customers to not only differentiate on price, but also on features. In other words, even though a discounted D7000 might fall within a D5200 user's budget, it might not be the right camera as it is larger and heavier.

If there is one way in which Nikon's product placement doesn't quite match what Honda has done, it is in the area of category drift. Honda, like much of the rest of the automotive industry, has had most of their models slowly grow in size and power over the years; the current Civic is actually larger than the Accord from the late 80's. This too, serves a function, as it lets the consumer grow with the product. If you grew up with a small hatchback Civic in your college years, chances are the more polished and grown-up sedan of today will appeal to you if you have a family. Filling in the product gap from the bottom, the Fit becomes the spiritual successor to the Civic hatchbacks and wagons of old. Most of the Nikon cameras have not drifted as obviously in this manner, with the exception of possibly the D7000/D7100, which now sits in a position above where the D90 was, but still below what is expected of the D300 level cameras.

From the 60D and up, Canon's product positioning is as category-driven as Nikon's, but below this, Canon uses a different strategy, one much more like how Apple positions iPhones. As each new iPhone enters the market, the previous generation gets pushed down the line and serves as the company's budget model. As the iPhone 4s moved the iPhone 4 into the cheap seats and the 3gs into the bargain model, so did the iPhone 5 in turn shift the phones down the line once more. That's essentially what is happening with Canon, which now has a number of models to choose from below the 60D, from T5i (700D), the ostensibly phased-out T4i (650D) and the now budget T3i (600D).

This strategy potentially gives Canon a little more leeway in managing inventories than Nikon. The downside is that it tends to produce products that aren't as differentiated from one another as they would be in a category-differentiated lineup like Nikon's. In other words, Canon's strategy changes the mix of thinking in the consumer's mind, shifting it slightly away from feature-differentiation towards price-differentiation. This makes sense for Canon, as it is a larger company than Nikon and correspondingly serves a larger number of non-enthusiast DSLR shoppers, who tend to be more price sensitive than the consumers who buy 7D's and D7100's. A major downside to this is strategy is that consumers aren't dumb, and recognize when products aren't significantly changed from the year to year, as was the case with the T4i to T5i transition. Taken to it's extreme, it gives the impression, fairly or unfairly, of a company that has gotten lazy in the design department.

Fujifilm, though an established company, is the new-kid on the block when it comes to camera systems. In the beginning, it didn't appears as though they had a coherent strategy for the X-system, as it wasn't initially clear if the X-Pro1 and X100 could make the leap from niche cameras to being a family of cameras. It also didn't help that Fuji has a history of abandoning camera platforms and technologies...

As Fujifilm's lineup works right now, they are essentially selling the same camera, but with different feature sets. At the heart of each model, you have the same basic sensor and lens mount, but depending on which model you get, you can have the hybrid view-finder or not, or dispense entirely with the viewfinder completely

In this sense, the X-system works a lot like how the Porsche 911 is positioned. Though the 911 lineup is extensive, at heart, it's not really a collection of different models, it's the same car but with different options. From the base Carrera, you can any combinations of  S-variant engines, turbos, 4WD and convertible tops to produce the 911 range of models.

 This type of product marketing works for smaller niche products, which both the 911 and the X-system cameras arguably are. It gives the lineup an identifiable family identity, and allows the company to differentiate the product without excessive investments in resources. Though the base 911 and the GT2 give radically different driving experiences, the fact that they are at heart the same car means that a completely separate product platform isn't devoted to the creation of the higher model. In comparison, Ferrari's 458 and F12 cars are completely different in engine and chassis, and have to be produced on separate manufacturing lines.

Sony, more than anybody else, is notorious for the marketing tactic of shelf-stuffing. This is when a line-up of very similar, albeit tiered products is produced to take up as much retail shelf space as possible so that the brand crowds up consumer head-space for competing products. Sony did this with their compacts, did it again when they entered DSLR's with the original A-mount cameras, then the SLT cameras, and now the NEX cameras. It's a brute force tactic that Nikon and Canon also employ to a lesser degree, and it's also a method that is unavailable to a smaller market player like Fujifilm... or Olympus and Panasonic. Go to any camera retailer and you'll see what I mean; part of the reason why m4/3 hasn't taken over the North American market is because Sony, Nikon and Canon have been vigilant about command floor space at the retail level.

Sony's product placement strategy actually has commonalities with how cereal is marketed in a supermarket. Food manufacturer's fight tooth and nail for floor space, and even more so than in cameras, product differentiation is key to maintaining floor space. Frosted, chocolate, strawberry, wholewheat... take your pick, so long as you pick a brand coming from the same conglomerate. Have another look at the cereal isle and take note of how much floor space Kellogg's and Post take up; it's staggering.

However, this strategy only works if your products aren't that different from one another. The key is to keep the customer comparing between the models in your own brand, rather than to compare your brand versus another. In that sense, the Sony shelf-stuffing strategy is similar to the Starbuck's menu. Famous amongst economic circles, the Starbuck's menu is a classic case of price-discrimination: through many different incremental differences  in ingredients, they are able to offer a range of drinks from reasonably priced black coffee to very expensive coffee-milkshakes. What Starbucks wants to do is to identify those customers who are willing to spend more, without scaring off the customers that want to spend less. The fancier your drink, the more you are signalling to the company that price is a less important factor in your purchasing decision. The same goes with the NEX line-up, though to a much lesser extent. Though there are real differences between an NEX-3 and a NEX-7, the differences aren't so obvious between similarly-priced models, making the customer dwell longer on a potential Sony purchase.

No comments:

Post a Comment