Product Service Matrix

The model was developed in 2016 by Carol-Ann Morgan, a business to business market research consultant, as a direct result of working with B2B companies seeking to identify and justify a price premium. It originates from the view that a company’s reputation and brand image is born out of the experience customers have with its products and service. This is particularly the position for newer brands that do not have the advantage of a heritage built over years.  In recent years, newer brands have emerged to challenge the traditional brands. This has created the imperative for all brands to clearly identify where their advantage lies, whether or not they justify a premium and what future investment is required to maintain their position.

As buyers become more savvy, and markets become more competitive, it is important for brands not to be complacent about their ability to command premium prices. The matrix encourages suppliers to look at their offers and clearly identify a position in the market that can justify a premium.

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This is a model for business to business companies. It focuses on the interest of buyers in product quality (either high or low) and service quality (either high or low).

The model highlights the options for premium pricing, and where investment would be needed to achieve this. It can be used to check that a company’s strategy and alignment of a brand fits with the market perceptions.

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The two axes of the matrix are product superiority and service superiority:

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• Product superiority: Products are considered to be superior if they are of a high quality, reliable, perform well, last a long time, have innovative features and a strong reputation.

• Service superiority: Service superiority is judged by the responsiveness of the service team, their knowledge and technical capability, the ability to sort out problems quickly, their proactivity in identifying problems before they arise, and the degree to which they are on the customer side.

There are four important positions that can be taken by a supplier of B2B products and, as often is the case, it is better to take a clear position in one of the quadrants of the matrix rather than be stuck in the centre.

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1. Premium positioning – High product superiority/high service superiority. A company can claim to be in this position if they are a market leader and able to charge premium prices for their offer.

2. Technical leadership – high product superiority/low service superiority. These are companies with a strong product offers but have not developed high levels of service. It is possible that some of companies in this quadrant are new to market and haven’t yet developed the service offering.

3. Service leadership – low product superiority/high service superiority. Companies in this quadrant succeed through service excellence. They may be distributors selling a range of imported products which, though not technically superior, may do a good job and have the backing of excellent service.

4. Low-cost leadership – low product superiority/low service superiority. Companies in this quadrant are likely to survive through a low-priced offer. Their products will be used by companies that either can’t afford or will not pay for higher performing offers.

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In reality most B2B companies are in the central "mediocre" diamond. Market surveys which assess the strength of B2B brands frequently show most companies have scores of around 7 to 8 out of 10 for satisfaction and performance. Customers may appear loyal because they stick with a supplier but this very often is due to inertia – they  see little incentive moving from one mediocre supplier to another. They are not fully engaged.

Achieving a position of leadership in one of the four quadrants of the diagram is difficult. As the term leadership suggests, there are only one or two such companies in any market. If there were more, they wouldn't be leaders. These leadership positions take time to achieve and are based on consistency.

Some things to think about:

• In business to business markets product quality and service quality are critically important.  Established companies can become complacent about their position, and charge premium prices which are not justified by their products and services.  Use customer feedback from complaints, warranty claims and market research as a reality check.  In the short term much can be improved by investing in service quality.

  
  

• Ask yourself what makes customers delighted about your products.  Use the Kano model to find product features that will delight customers.