Question: How do I position a new version of an existing product and avoid cannibalization?
We have a server-based software product and we are introducing a new desktop-based product. The products have the same features, they just differ in how they are installed. Rather than the new product replacing the existing one, we want both products to continue to exist in parallel, though obviously the goal is to increase revenue overall. What are some techniques and approaches to launch the new product without it having a negative impact on our sales?
- Was there any customer request for the desktop version?
- If so, what problem were they trying to solve with this solution? (e.g. non-workable pricing levels with the server product; performance issues)
- Was the goal to broaden your market with the desktop product? In other words, are there customer segments that you’re not addressing with the server product?
- Or do your competitors have a desktop version and is your win/loss analysis showing that the competitive solution is stealing market share?
Bottom line: You’re likely to cannibalize the server version, unless there is a compelling customer need that will enable you to expand market share in your current segments, or target new segments.
Given the information you’ve provided, my best advice is:
- Get really focused on what the customer’s problem is, and what they are asking for which points towards the need for a desktop version.
- Once you’re really clear on #1, think about the 5 Ps of marketing as follows, and then apply the strategies that make the most sense.
Product: You’ve said that the features currently are the same between the two versions. But is there any way you can differentiate the two by thinking about the “whole product” (in the Geoffrey Moore sense)? For example, are there any additional consulting services, or support or documentation, that you can offer with one version or the other? Maybe some different reports, or an enhanced reporting package for one version, as part of the product roadmap?
Pricing: Pricing could be a possible way to differentiate. You could structure pricing so that the desktop product priced best for customers who need up to X copies, with pricing on the server version that represents a lower per-user price for companies that need more licenses. Experiment with different models, and think about the level of overlap you want to create for customers in the mid-range. Also, I strongly recommend doing some price testing, either in-market or as a research study.
“Place” (Distribution): Depending how your product is distributed, you may have an opportunity to offer the desktop version via a subset of current channel partners or sales teams – or possibly through a new and different distribution channels. Thinking about this possible strategy makes me go back to the question “Did your customers ask for this, and if so, which ones, and which distribution channels currently serve them?” The answer will help point you to the best distribution strategy.
Promotion and Positioning: This brings us back to the segmentation question. Do some market segments have a stronger need for the server product and others would benefit more from the desktop version? Structure your promotional messaging and offers to make one of the two products more attractive to the most applicable segment. Also, back to the comments re: product – differentiated promotion and positioning will be easier if you can create some real differences between the two versions.
Each of these possible strategies is promising, but do make sure that you’re clear about customer needs and requests before you make your plans. Best of luck to you, and please do comment back if you have additional questions!
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