New Product Design– A Toolkit for Identifying Whitespaces

When developing new products it is the job of a Product Manager(PM) to use his judgment based on inputs from market research, competitive intelligence and development teams to come with a product-mix that offers customers a compelling reason to buy.


Any offering by its very existence forms a unique triangular dependence with three major constituents:OfferingTriangle

  1. Customers
  2. Substitutes (Competition)
  3. Firm’s Offering

When conceiving new products the triangular relationship is of paramount importance. A new offering can either be similar or distinct from what’s available in the marketplace.

A savvy PM will instantly think of “Differentiating” his offering in order to attract buyers and gain a footing in the marketplace.

Why Differentiate an offering in the first place ?

Differentiation makes a product/service less sensitive to price based competition by limiting the buyers choice set on substitutes. 

Differentiation is a strategic weapon whereas Pricing can be both strategic and tactical. 

Is differentiation always good ?

Differentiation is a double edge sword in that while it allows a firm to generate higher margins it has the effect of restricting sales volume due to heterogeneity in customer traits. 

In many industries the breakdown on Customer Segments and Market Size based on Price and Quality dimensions shows remarkable similarity (Table below).







Premium / Luxury
( Market Size: 15% -20% ) 

Value / Mass Market
( Market Size: 50% -60% ) 



Arbitrage / Opportunistic
( Market Size: 5% -10% ) 

Bottom Market
( Market Size: 10% -15% ) 

Source: Creating Strategic Leverage, Milind M. Lele

Assuming you have factored all of this in, and convinced that differentiation is the way to go then the question boils down to How do you differentiate ?

Diving into Differentiation:

Broadly speaking, a Firm and its Product Manager have two basic means for differentiating a product based on either “Tangible OR “In-Tangible attributes:



1. Features

1. Aura

2. Aesthetics

2. Service & Support

 A. Tangible Attributes

1. Features:

Are the primary vehicle used to deliver a benefit. Features are what a product manager and all constituents internal to a company focus on. For the end user or paying customer features matter very little if they don’t confer some benefit.

This is where most Product Managers commit fallacies that result from:

(a) Scoping products with rich feature sets that drive up cost without paying attention to what benefits they deliver or the benefits that customer care about.

(b) Casting products without anticipating current/future needs or misjudging close competitors and substitutes as the only viable choice set for consideration.

(c) Failure to position and map the product features into benefits for customers and stakeholders alike during marketing and sales pitch. 

2. Aesthetics:

Aesthetics govern the look and feel for a product or service. Its sole purpose sometimes is to engage customers visually to lure them and on rare occasions invoke feelings of pleasure each time the product is used.

Are Features and Aesthetic accorded equal weight by customers ?

Not always, for some product classes customers exhibit asymmetry when weighing between aesthetics and features. Most products sold to B2C customers fall in this category.

Example: Desktop-PC’s vs. Laptop’s

All else being equal a desktop computer, usually tucked under the table, might still attract buyers even when it has inferior aesthetics. On the other hand a laptop needs to be both feature rich and visually appealing for it to sell.

 B. In-Tangible Attributes

 1. Aura:

Aura defines the cognitive feelings and responses that a product or service invokes in the customer’s mind read this article. Branding and Advertisements play an important role in creating, communicating and conditioning the attitudes and behaviors on both the demand-side and supply side of the market place.

Aura confers status, establishes identity and reassures customers of their choices.

2. Service and Support:

Not all products carry service and support, in fact most buyers prefer not to deal with it. But invariably anything that is sold needs some amount of support in facilitating its procurement, installation, usage and consumption.

A pure Service Good on the other hand has no physical product that is sold but rather solves a problem or eliminates hurdles for the end customers. Services also include ecosystems that differentiate and augment the core offerings.

7 Rules of Product Acceptability:

A new product although differentiated may still fail to gain market acceptance   if the following rules of product acceptability are overlooked.

  1. Functional Performance
  2. Acquisition Cost
  3. Ease-of-Use
  4. Operating Cost
  5. Reliability
  6. Serviceability
  7. Compatibility

Identifying White Spaces: Tangible or In-Tangible Dimension

Now that we have explored the four possible dimensions to differentiate an offering in the marketplace, lets look at how to indentify whitespaces and to go after new opportunities.

When indentifying new market opportunities a strategist should neither exclude nor focus on solely one dimension. The only thing that should matter is whether there are enough customers who given the varied choices (offerings) before them prefer one combination over others.

Matrix of Whitespaces – New Opportunities


The number of possible combinations using different mix of tangible (product features ) and in-tangible (service) attributes yields a matrix of 16 different cells each representing a unique offering in the market place. However not all offerings are relevant to all markets. Each offering in the matrix above shares a very unique and separate triangular relationship with its customers and substitutes.

The matrix offers firms and would be entrepreneurs a blue print to evaluate market opportunities and to formulate new product strategy. Implicit in the opportunity matrix above is the assumption that the returns exceed the cost of capital.

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