What you'll learn to do: explain the process of selecting a positioning and differentiation strategy
Positioning and differentiation are powerful tools to help you establish the market position you want for your product or service. In this section you'll learn how various positioning approaches work for different target segments and how to choose an effective positioning and differentiation strategy.
The specific things you’ll learn in this section include:
- Explain the concept of competitive advantage and how it relates to positioning strategy
- Differentiate between product features and benefits
- Explain positioning (perceptual) maps
- Identify common positioning strategies
The Positioning Process
Arriving at the best positioning and differentiation strategy involves a process. The goal of the process is to design an identity that both confirms the value of the product, service, or brand in the customer's mind and explains why and how the offering is better than the competition. To reach that goal, marketers typically follow a positioning process comprised of the following five steps:
Steps of the Positioning Process
- Confirm your understanding of market dynamics
- Identify your competitive advantages
- Choose competitive advantages that define your market "niche"
- Define your positioning strategy
- Communicate and deliver on the positioning strategy
Step 1: Confirm Your Understanding of Market Dynamics
At the start of the positioning process, you need a firm understanding of your target market and answers to the following questions:
- In which product, service, or market category (also called the "frame of reference") do you plan to use this positioning?
- Which target segment is your focus for the positioning you are developing?
- What factors do these buyers evaluate when they make a purchasing decision?
- How do these buyers view your competitors in the category?
If you don't have answers to these questions, you should consider conducting formal or informal marketing research to reach a better understanding of your target market and the market dynamics around it. Some marketers may have the time and resources to conduct extensive research, while others may need to rely on their own experience and anecdotal conversations with target customers. Either way, you'll remember that the customer is at the center of the marketing mix, so knowing whom you're targeting is the only place to start.
Step 2: Identify Your Competitive Advantages
A competitive advantage
is some trait, quality, or capability that allows you to outperform the competition. It gives your product, service, or brand an advantage over others in purchasing decisions. Competitive advantage may come from any or all of the following:
- Price: Something in your production process or supply chain may make it possible for you to provide comparable value at a lower cost than competitors.
- Features: You may provide tangible or intangible features that your competitors do not: for example, more colors, better taste, a more elegant design, quicker delivery, personalized service, etc.
- Benefits: You may provide unique benefits to customers that your competitors cannot match. Benefits are intangible strengths or outcomes your customer gets when they use your offering. For example, time savings, convenience, increased control, enjoyment, relaxation, more choices, feeling better about oneself, being more attractive, etc.
Create a list of the things that make you different from competitors in positive ways. Then identify which of these factors are also competitive advantages: the influential factors that help you perform better in the marketplace and cause customers to choose your product, service, or brand over other options.
As a rule, it is relatively easy for competitors to undercut your pricing or match your features, so it is difficult to maintain a consistent competitive advantage in either of these areas. Market-leading products, services, and brands are most likely to differentiate based on benefits—the intangible strengths and outcomes that are harder for competitors to match.
For example, many car companies achieve strong ratings in safety tests, but driving a Volvo provides an extra, intangible benefit for the driver of feeling
safer because of Volvo's longstanding record and reputation for safety. A variety of theme parks in Southern California offer exciting rides and family fun, but only Disneyland's Magic Kingdom makes people feel like they're in the happiest place on earth
You don't necessarily need a long list of competitive advantages, but your list should be substantive: it should include the things that truly create distance between your offering and competitors. Dig deep to identify the intangible benefits your customers experience–or intangible benefits they could
experience—from your offering that make it different and better than the alternatives.
Step 3: Choose Competitive Advantages That Define Your Niche
Your list of competitive advantages represents a set of possible positioning strategies you could pursue for your product, service, or brand. The next step is to examine how these factors fit into customer perceptions of your broader competitive set. Your goal is to pick a positioning approach that gives you a unique and valued position in the market that competitors are not addressing.
A perceptual map
is a great tool for this step. Perceptual maps create a picture of how different competitors are positioned in the market, based on the key criteria that strongly influence customer decisions. Examples of two different perceptual maps are included below. The first one maps automobile brands based on customer perceptions of price and quality. The second one maps lifestyle programming on cable TV channels, according to whether it is younger/edgier vs. older/mainstream and educational vs. entertainment.
Marketers use these sorts of perceptual maps to identify gaps in the market; these, in turn, represent opportunities to to fill a niche in the market that isn't being addressed. For example, the lifestyle programming map suggests that there are not a lot of choices in the area of younger/edgier AND educational space. This might be a good place to position a new cable channel or programming direction. On the other hand, there are already lots of established players in the younger/edgier/entertaining space, so new entrants would have to beat out more competition to make an impact.
You can create a perceptual map similar to these by identifying the key criteria customers use when deciding what to buy and setting these as the horizontal and vertical axes. Then you can overlay competitors in the perceptual space where they seem to fit. You can even create multiple maps of the same market with different criteria on the horizontal and vertical axes to get a different view of how competitors are positioned. Perceptual maps are most robust when they are based on actual marketing research data, but marketers can also create directional maps based on their experience and anecdotal understanding of market dynamics.
With your maps in hand, look for areas where there are fewer competitors: these are the spaces where you are most likely to be successful creating your own niche. Consider where your competitive advantages would help you fit well into these gaps; this will direct you to the strongest positioning opportunities for your product, service, or brand.
Give this approach a try: Suppose you are exploring whether to introduce your homemade, artisan-style ice cream to a wider audience, which will mean competing with national brands carried in local and regional grocery stores. Looking at the following perceptual map, where are the gaps in which you could create a niche for your product? Who would be your closest competitors?
Your competitive advantage around a homemade, artisan-style product puts you on the upper half of the map. You would have to choose between more classic versus interesting and innovative ice cream choices. Based on your strengths and preferences, you can choose where to claim your positioning niche: Perhaps you stake your future on the classical side by introducing the most marvelous, pure, premium vanilla and chocolate ice creams your customers have ever tasted. Alternatively, you might choose to introduce an ice cream line that capitalizes on interesting flavor combinations using local and seasonal ingredients, which would position you squarely in the innovative quadrant. Either approach could be a winning combination in a unique market niche.
If you choose not to create a perceptual map, an alternate approach is to list competitors and their competitive advantages. Then, add your own own offering and competitive advantages to the list. Based on the alternatives available to customers, think about where there are gaps between what customers want and value most and what they can get from the choices available today. Identify where your competitive advantages can help you fit into these gaps, since they will be the most promising positioning approaches for you.
Remember to think creatively as you are defining your competitive advantages and choosing those that will define your positioning and market niche. You have a greater likelihood of success if you are also the first in the market to claim your positioning. You won't have to displace anyone else, and you can generate excitement by fulfilling a previously unmet need.
Step 4: Define Your Positioning Strategy
With your competitive advantages identified and information about how key competitors are positioned, you're ready to evaluate and select your positioning strategy. This is the decision you make about how, exactly, you plan to position your offering relative to the rest of the field. How will you be different and better?
There are several common positioning strategies you should consider, shown in the following table:
|Common Positioning Strategies
||Position yourself as "owning" an important benefit and delivering it better than anyone else
||Volvo = Safety
Hallmark = Caring shared
Hawaii = Aloha spirit
|Best fit for the Customer
||Position yourself as an ideal fit for the customer's personality, style, and approach
||Red Bull = Extreme
Guess Jeans = Sexy chic
Virgin Atlantic = Ultra cool fun
||Position yourself with a distinctive approach to doing business
||Jimmy John's = Unbelievably fast
TurboTax = Easy DIY
||Position yourself as a preferred alternative to the competition
||Apple = Think different
Seven-Up = The Uncola
||Position yourself according to pricing: lowest cost, best value for the money, luxury or premium offering, etc.
||Wal-Mart = Lowest prices
RyanAir = Cheap flights
Old Navy = Affordable fashion
||Position yourself according to a quality standard: high quality, best-in-class, or else reliably good quality at a reasonable price
||Hearts on Fire = Perfect cut
Ritz Carlton = Ultimate luxury
Strong positioning is simple: it focuses on a single, powerful concept that is important to the customer. It uses your most promising competitive advantage to carve out the niche you will fill better than anyone else. Your positioning strategy puts this competitive advantage into the context of your competitive set: it explains what distinguishes you from the competition. Perhaps you deliver an emotional benefit that your target audience doesn't get anywhere else (escape? balance?) Perhaps you are hands down the best choice for a geeky, gear-head audience (bikers, coders). Perhaps you provide great customer service in a category where customer service is unheard of (cable TV, contractors).
Your positioning will become the "special sauce" that sets you apart. Concoct it well.
Step 5: Communicate and Deliver on Your Positioning Strategy
The next sections of this module will delve deeper into this step, but don't underestimate its importance. Communicating your positioning strategy begins with creating a positioning statement and sharing it internally across the organization to make sure that everyone understands how and where your offering will fit in the market. Your positioning builds on a competitive advantage, and it is essential for you to deliver on the expectations your positioning sets in customers' minds. You should design your positioning strategy to endure over time, while recognizing that it can and should be adjusted from time to time to reflect changes in the competitive set, your target segment, market trends, and so forth.
If your positioning is based on being an ideal "lifestyle" fit for your target audience, for example, you need to demonstrate how your offering is attuned to the needs and experiences of this audience. This includes evolving as your target segment evolves. If your positioning is based on "owning" an important benefit like security
, then you should explore all the ways you can deliver that benefit better than any competitor who might try to imitate you.
The marketing mix provides the set of coordinated tools you use to execute on your positioning strategy. You might think of your positioning strategy as the tune you want your target segment to hear. The marketing mix is how you orchestrate and harmonize that tune, making it a memorable, preferred choice for your target customers.
Video: Starbucks Delivers Community and Connection
What business is Starbucks really in?
"We wanted to build a third place between home and work," says Starbucks' CEO Howard Schultz, as he sits in one of his cafés, "at a time in America when people are hungry for human connection."
Watch the following video to learn how, from the beginning, Starbucks has positioned itself to be much more than just a seller of gourmet coffee. It has built its entire brand experience around a core positioning that offers "a sense of community" as much as coffee.
Read a transcript for the video "Starbucks the Brand."
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