What is Positioning Strategy?
A positioning strategy is a plan that seeks to place a business or product in a market position that is both profitable and sustainable.
A profitable market position will not be sustainable unless is in some way difficult to imitate or “defendable,” while a defendable position that is not profitable is not sustainable for the business.
Unless a business offers products and services that are unique and valuable to target customers, or to some extent difficult to imitate, their position will be vulnerable to imitation as we explained in the differentiation section.
Therefore, to be successful, a positioning strategy must make decisions about two critical factors for the business:
- The benefits and features that your products and services will offer to target consumers (your products’ “Value Proposition”), and
- How the company’s resources (including money, people and assets) will be organized to create that Value Proposition, (which is characterized through your business’s “Value Chain”), in a way that is difficult to imitate
As we saw in our business strategy principles, a differentiated Value Proposition and a distinctive Value Chain are the only ways through which you can find a market position that is both profitable and
How to Create a ‘Positioning Strategy’
One challenge that you continually face as a business executive is the persistent threat that other companies could copy what you do once you have found a market position where you make superior profits.
The problem is not so much that they could copy your strategy, but that competition along the same product dimensions, as we explained earlier, leads to commoditization and with that comes a shrinkage of margins.
Therefore, the goal of a positioning strategy is carving out a market position where you can make good margins and lift some competitive advantages that keep copycats at bay. These advantages may be in the form of strong brands, robust distribution, exclusive access to key resources or channels, or just a very distinctive (e.g., proprietary) way to make and deliver your products and services.
Commoditization can happen to product features (e.g., computer memory and toothpaste whiteness), to the products themselves (e.g., fast internet and generic drugs) or to how products are made (e.g., computer assembly and manufacturing), strategic positioning must therefore be an iterative process to monitor the businesses’ performance continually and adjust their strategic direction accordingly.
In general, the process to find and defend a profitable market position can be described in four different steps:
- Market segmentation: Find effective ways to classify potential customers and slice the market into groups sharing common characteristics that make them approachable through the same value networks.
- Choose target segments: Based on your segmentation of the market and your value proposition research, select the segments that you are going to target within those markets.
- Craft your market positioning strategy: Make decisions about how you will position your products with the selected target consumers, which can be done through product features and benefits, pricing models, sales, distribution and promotion efforts.
- Monitor and adjust: Once your strategy has been deployed, measure the traction you get with your target consumers and the performance of your marketing efforts, validate previous assumptions and adjust your market positioning preferences accordingly as new information becomes available.
The goal of this iterative process is to find a profitable position where it is most difficult for your business to be challenged by potential competitors and where your products and services are less likely to be commoditized.
You don’t need to destroy a competitor to win in a competitive market. The beauty of strategy comes from its diversity, which is what allows multiple players to win at the same time within the same industry.
How to Visualize your Positioning Strategy
You can visualize your positioning strategy by using Centrality-Distinctiveness map if you wish. To see how that would work, take a look at the following fictitious map for the beer industry at a given point in time.
From this map, managers at Anheuser-Busch InBev, owner of the Stella Artois brand, can view a picture of their industry and realize that Dos Equis is a closer competitor than Heineken.
They can also realize that to move right on the map (to make their product more mainstream), they would need to do a better job selling their more complex product to segments that may not appreciate their thicker texture, consumers more familiar with mainstream brands like Miller or Coors.
In the mid-1960s, Procter & Gamble (P&G) saw how new deodorant soaps and so-called “beauty bars” attacked the soap market that its product Ivory had reigned over for a long time.
For decades since its introduction in the late 1800s, Ivory enjoyed a privileged differentiation leadership position, being the brand that defined and resembled what “cleanness” meant in the soap category. That position allowed P&G to command premium prices and retain a large share of the market for a long time.
But when under the attack of fancier entrant solutions, P&G decided to reposition its iconic brand to become the low-price leader in that space, rather than engaging in head-to-head competition with the new entrants.
In essence, the idea is to zig when others zag. If competition for a particular segment is tough, you must move onto a different market position or just switch customers.
The same process can also be used to expand into new markets and segments that are sub-optimized. If Stella finds out their brand is not clicking with the female segment, for example, they can launch a marketing campaign with strong female figures to increase the traction with women.
The success of this iterative process is in finding a position where you can sustainably produce superior profitability and pinning down the business’s products and services there.
Monitor and Adjust your Positioning Strategy
Strategic Positioning is not an event but rather a process. Once you find a defendable position of superior profitability, you must continually monitor the environment for signs that the position is at risk of being “commoditized.”
In the end, it is the commoditization of a product’s features that leads to price wars and value destruction in most cases.
When the benefits that a product offers become a commodity, a common feature of all solutions, customers will not be willing to pay premium prices for them. In the end, if they can get the same benefits from other products, they are better off by just picking the cheapest one.
For example, it is more and more difficult nowadays to find sizable segments of customers willing to pay premium prices for more whiteness in toothpaste or faster internet downloads since even the most basic offers deliver way more than what most people need.
For those customers, the “perception of value” that those benefits deliver are not that powerful anymore, since they can find that same value anywhere else.
As differentiation and price become less effective providing a competitive edge, we may find a profitable way out by retooling our business model to attack more or less targeted populations, for example, toothpaste for people with sensitive teeth or ultra-fast internet services for gamers.
As we mentioned before, the idea is to use market research to “zig” when they “zag.”
In general, there are four levers that executives can use to influence such perception:
- Differentiated products: Offering products and services that are both unique and valuable to target consumers. These products may be continually improved and augmented along dimensions that matter to customers, to reduce business erosion.
- Differentiated promotion: Experimenting with different promotional tools and messaging campaigns, or testing proved campaigns with new customer segments. Strong brands can play a big role in differentiating a company’s offerings, especially in crowded markets.
- Differentiated sales and distribution channels: Distribution channels and sale efforts bring prospective buyers and customers together. In the end, the real demand reachable by a product is not the number of people who would like to buy it, but how many of them the product can reach.
- Pricing differentiation: In most markets, a product’price can be used to influence demand and adjust customers’ expectations of value. Companies must intimately know their markets and use pricing strategically to target both consumers and non-consumers.
You may use these four levers to influence the perception of value in the minds of your target consumers, however, what really gives you an edge is not whether or not your products actually deliver more value, but the perception that they do.
As a business leader, you must continually monitor this perception and take proper action when necessary.
The teams out in the field must produce reliable information about these perceptions, to enable executives to make educated decisions. They must keep their ears on the ground, tracking changes and trends in the marketplace, and use their knowledge and expertise to produce information that can be acted upon.
s At the end, to create a winning positioning strategy, you either do different things from rivals or do similar things in different ways.
Wu, Sun. Strategy for Executives, this book can now be downloaded for free here.
Hooley, Graham; Piercy, Nigel; Nicolaud, Brigitte; Rudd, John M. Marketing Strategy and Competitive Positioning. 6th edition (Jan 2018). Pearson.
Magretta, Joan. Understanding Michael Porter: The Essential Guide to Competition and Strategy. Harvard Business Review Press. Kindle Edition.
Bagga, Charan K.; Dawar, Niraj. A Simple Graph Explains the Complex Logic of the Big Beer Merger. Harvard Business review website: URL: https://hbr.org/2015/10/a-simple-graph-explains-the-complex-logic-of-the-big-beer-merger