In marketing, product differentiation is the process of distinguishing your product offering from from others, to make it more attractive to a potential buyers. One of the main reasons is to differentiate from competitors’ products. The objective of this process is to develop a position that customer will see as unique. A successful product differentiation strategy will move your product from competing based primarily on price to competing on non-price factors – product characteristics, distribution strategy, technology, etc.
Differentiation is a challenge in PLM industry. After more than two decades of product development by vendors and multiple acquisition, the functional scope of a core PLM product is pretty much standard. And it serves the same group of industrial companies. Check my last year blog about PLM differentiation.
PLM vendors are saying that their platforms are different. Yes, they are. Different technologies were created in a different time. New user interface is nicer than one that was created 15 years ago. New administration tools are simpler. Cloud was a differentiation factor for some PLM vendors over the past few years, but these days cloud is everywhere. PLM companies are innovating in open source, business models and marketing.
You can claim differentiation even if it doesn’t exist. Lucky Strike used it many years ago. “It is toasted” is one of the strategies to create differentiation. You most probably heard about it from a famous movie “Smoke Gets in Your Eyes”. Don Draper explains to executives at Lucky Strike how to re-position their products in lights of new regulation. He said Lucky Strike will become the only manufacturer whose product is “toasted”. My favorite moment in the video is related to the definition of happiness and how a brand can help convey that emotion. I will come to brand loyalty later in this post.
So, what are possible ways for PLM products today to create a differentiation story that will help to position its product against the competitors?
1. Unique product and technological features
This is one of the most widely used methods. PLM companies used to develop or acquire new products and technologies to expand their product portfolios. It worked in the past, but as product functional set became mature and standard, to use this method is not as simple and this is a place where I can see a major challenge for PLM companies. Vendors claim product and technology differences, but customers really don’t care about these differentiators.
2. New domains of expertise
Expanding into new domains was one of the methods PLM vendors used to raise the bar of differentiation. New modules, new industry verticals. Expand upstream and downstream in the product lifecycle. It is also a place like connected devices or IoT that is booming these days.
3. Packaging
To bring PLM product as part of CAD package (or tightly integrated with CAD package) is a method used by vendors many years. It certainly worked, especially when the situation came down to the ability to integrate with a specific CAD systems. The demand for vertical integration is high. The latest trend in this domain is to sell “platforms” and not individual products. A combination with ERP worked for some vendors too. You can consider a combination with one of the existing tech platform as a part of this strategy too.
4. Business model
Price and distribution model. The last decade was fueled by “freemium” business models, subscriptions and service driven business models combined with open source and cloud software strategy. It is certainly one of the differentiation that can be used by vendors.
5. Customer support and Brand loyalty
PLM market is well know by long lifecycle – manufacturing companies are buying product for years. So, customer support in a broad sense can be an efficient strategy too. And it can be used in combination with business models. Customers can be driven by loyalty to brand, knowledge, people connection and many other personal factors. You cannot dismiss it completely and can be your competitive factor too.
What is my conclusion? Differentiation is tough in PLM segment. Although you may think that five categories I outlined in this blog can provide a lot of space to differentiate, the problem is basic functionality differentiation. Because of long product lifecycle, manufacturing companies are more sensitive to sustainable business models, brand loyalty and fundamental product functionality set. In my future blogs I will touch these topics more in details. The main issue – is there a way to differentiate main PLM features and functions and how it to do that. This is a question I guess PLM architects are trying to answer these days. Just my thoughts…
Best, Oleg
Disclaimer: I’m co-founder and CEO of openBoM developing cloud based bill of materials and inventory management tool for manufacturing companies, hardware startups and supply chain. My opinion can be unintentionally biased.
