Product service positioning matrix

The product–service positioning matrix helps a company determine whether its customer offer can support premium pricing. It is especially useful in business-to-business markets, where brand position is shaped not only by communications but by customers’ direct experience of product performance and service. The framework reveals the pricing positions available and the investment needed to reach or defend them. Its two dimensions are product superiority and service superiority.

When to use it

• Position an offer according to customers’ perceptions of product quality and service value.

• Test whether current prices and brand claims are supported by the delivered experience.

• Identify whether product improvement, service improvement or a low-cost position offers the strongest strategic route.

• Explore what could delight customers, using the Kano model where appropriate to distinguish basic, performance and delight attributes.

Origins

Carol-Ann Morgan, a business-to-business market-research consultant, developed the matrix in 2016 while working with suppliers that needed to identify and justify a price premium. It rests on the premise that reputation and brand image emerge from customers’ experience of both the product and the surrounding service. This is particularly important for newer brands that cannot rely on a long heritage.

As new challengers enter established markets and buyers become more informed, every supplier must be clear about the source of its advantage, whether that advantage warrants a premium and what investment is needed to sustain it. The matrix was designed to make those questions explicit. It can combine customer-experience measures, brand attitudes and internal management views; comparing internal beliefs with market perceptions exposes gaps that require strategic action.

What it is

• Product superiority: the extent to which customers consider the product high quality, reliable, durable, innovative, effective and reputable.

• Service superiority: the extent to which customers experience the service team as responsive, knowledgeable, technically capable, proactive, quick to resolve problems and committed to the customer’s interests.

The matrix defines four positions:

1. Premium positioning — high product superiority/high service superiority. A supplier in this position combines market-leading products with market-leading support and may therefore be able to command a premium.

1. Technical leadership — high product superiority/low service superiority. These businesses have strong products but an underdeveloped service offer. Some may be recent entrants whose support capability has not yet caught up with their technical proposition.

1. Service leadership — low product superiority/high service superiority. These businesses compete through exceptional service around products that are not technically distinctive. A distributor, for example, may succeed by making standard imported products easier and safer to buy, use and maintain.

1. Low-cost leadership — low product superiority/low service superiority. These businesses rely primarily on price and serve customers who cannot or will not pay for higher performance or stronger support.

The matrix helps a company decide:

• whether its current prices are justified;

• whether there is room to increase prices;

• whether it risks overcharging relative to the experience delivered;

• whether an unoccupied leadership position matches its capabilities; and

• where investment is required to establish or protect its intended position.

In the strict interpretation of the framework, a genuinely premium position requires superior product and superior service delivered consistently. The matrix should nevertheless be treated as a diagnostic rather than proof that a price increase will succeed: willingness to pay must still be tested.

Developments of the model

The framework has been extended to describe the opportunities and threats associated with each position in more detail:

Although the axes refer to product and service quality, both must be measured as customers perceive them. Brand strength can influence those perceptions, but a desired brand position cannot substitute for the market’s actual experience.

How to use it

Define the relevant market, customer segment and competing alternatives. Develop separate evidence-based measures for product superiority and service superiority, then plot the company and its competitors. Use customer research as the primary evidence and compare it with internal estimates to reveal perception gaps. Where possible, show confidence ranges and segment differences rather than reducing every respondent to a single unquestioned point.

In one application, a chemical company investigated whether it could charge a premium. Market-survey results positioned the company against competitors and were supplemented with expected future positions. No supplier occupied the premium quadrant. Supplier X, which sponsored the research, received the strongest satisfaction result for pricing, suggesting some headroom, but its weaker service rating threatened its long-term technical-leadership position.

The supplier responded by training sales and customer-service staff and giving front-line employees more authority. Customers’ service perceptions improved, moving the company towards the north-east quadrant and strengthening the case for premium pricing.

A second application involved an engine manufacturer serving makers of large construction equipment. Revenues were falling, competitors were advancing, and warranty claims and lawsuits made customer complaints expensive. The company historically occupied a premium position based on complex, bespoke products and long-term supply and maintenance relationships with original equipment manufacturers. The matrix was used to compare:

• the company’s desired and communicated market position;

• employees’ perceptions of its position; and

• customers’ perceptions of their actual experience.

The comparison showed that customers placed the company far from its intended position. Its pricing reflected the aspirational position rather than delivered value, damaging the brand. Workshops and external research then reframed pricing and investment choices. Product innovation was needed to resolve technical weaknesses, but it could not deliver an immediate recovery. Management therefore improved service in the short term while product development worked to rebuild the premium proposition.

Some things to think about

• In business-to-business markets, product and service quality are central to value. Established suppliers can become complacent and continue charging premiums that the experience no longer supports. Use complaints, warranty claims, retention data and independent customer research as a reality check. Service may offer the faster route to improvement, but it cannot permanently compensate for a deficient product.

• Ask which attributes merely meet expectations, which improve satisfaction as performance rises and which genuinely delight customers. The Kano model can help structure that investigation.

Top practical tip

Plot internal beliefs and customer evidence separately before discussing action. The distance between the two is often more strategically useful than the apparent quadrant, because it shows where pricing, communications and operational investment have drifted apart.

Top pitfall

Do not infer a right to premium pricing from management’s desired position. A quadrant is only a summary of customer evidence; validate willingness to pay by segment and confirm that product and service superiority are durable, relevant and consistently delivered.

Further reading

• Morgan, C.-A. (twenty sixteen). “Product–Service Positioning Matrix.” B2B International.
• Anderson, J.C., Narus, J.A. and van Rossum, W. (two thousand and six). “Customer Value Propositions in Business Markets.” Harvard Business Review.