Positioning Strategy: The Basics of Positioning Your Business

positioningstrategyPositioning strategy defines the tactics, tools and strategies used by a business to differentiate itself from competitors and gain market share.  In an ultra-competitive market, positioning strategy is often the difference between failure and success. In this blog post, we’ll learn the basics of positioning strategy and how you can leverage it to better market your business.

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What is Positioning Strategy?

According to the Kauffmann Foundation, more than 565,000 businesses are launched in America every month. This means that at any time, you are competing with hundreds, if not thousands of other businesses in your niche.

How you differentiate yourself from this competition comes under gamut of positioning strategy.

For example: the core ingredients in soap are largely the same – fatty oils, a few specialty oils, and perhaps, some lye. Since it is difficult for soap manufacturers to differentiate themselves based on ingredients, they must rely on positioning strategy to set themselves apart from competitors. Thus, Axe makes advertisements that emphasize masculine fantasies to gain market share among male users, while Dove’s marketing is largely women-centric. Smaller brands might focus on their soap’s organic, handmade manufacturing process, while some others may highlight how their soap doesn’t dehydrate the skin or costs less than competitors.

Essentially, each brand positions itself differently to gain customers. This is the essence of positioning strategy, wherein you consciously create a narrative that facilitates business growth.

Positioning is a catch-all term that includes multiple processes, including brand, product and pricing strategies. Let’s look at them in detail below:

1. Brand Positioning Strategy

In an age of unbridled competition, branding is often what sets apart businesses.

Consider an example: both Louis Vuitton and GAP sell clothes. Yet, Louis Vuitton is able to charge thousands of dollars for a suit, while GAP’s suits will rarely set you back by more than a couple of hundred dollars.

This is because the Louis Vuitton brand is perceived as a luxury brand, and thus, can command luxury brand prices. GAP, on the other hand, has consciously positioned itself as a brand for the middle-class urban consumer, hence the lower prices.

Building a brand is often very different from building a business. It involves identifying and communicating the qualities that make your business special. It is largely a marketing enterprise, though to be successful, it must reflect qualities your business truly values.

Creating a successful brand positioning strategy requires a number of steps, such as:

  • Identify Values: Identify your brand’s primary values. Try to distill these values into a concise ‘mission statement’. Amazon’s mission statement, for instance, is to create ‘Earth’s most customer-centric company’.

  • Identify Competitors: Who are your primary competitors? What values do they espouse? How do they differentiate themselves? Answering these questions will help you understand competition and thus, create your own brand identity.

  • Differentiate: Identify what makes your brand different from competitors. Maybe you have a larger portfolio of products, maybe you use better ingredients/construction material, or maybe you have better customer service. This is a crucial step as it will dictate much of your brand marketing.

  • Communicate: The last step is communicating your brand’s values and what makes it different to consumers. This can be done through advertising, PR campaigns, media, etc.

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2. Product Positioning Strategy

Product positioning strategy defines the processes used to market and differentiate products. Product and brand positioning goes hand in hand – how individual products are perceived affect brand perception, and vice versa. A well-received product might make the brand appear more attractive, while a beloved brand might be able to sell inferior products simply on the strength of the brand name.

For example, this graph shows sales of different Apple products over the years:
Source: Barefigur.es

As can be seen, sales of Apple products have fed off of each other. Nowhere is this more apparent than in unit sales of iMac. Before the launch of the iPod, Apple was a respected, but minor player in the desktop computing market. Total sales in 2001 – before the iPod launch – were around 3.087M units. In 2004, just as the iPod was beginning to pick up momentum, this increased to 3.29M units. By 2007, the iPod phenomenon had reached its peak and iMac sales increased more than twofold to 7.051M units.

This is a prime example of the interplay between brands and products. The iPod’s remarkable success introduced a lot of new customers to Apple’s desktop products. Positive feedback for these products further improved Apple’s brand perception, which, in turn helped improve iPod (and later, iPhone and iPad) sales.

Positioning a product, therefore, is key if you want to build a successful brand and business. Some of the questions you must ask when creating a product positioning strategy are:

  • What makes the product different from competitors?

  • What benefits does the product offer to consumers?

  • How relevant is the product to the consumer’s needs and requirements?

  • What is your product’s USP (Unique Selling Proposition)?

  • What kind of technology does your product use? Is it unique enough to be highlighted?

Beyond this, you must also consider product pricing (see below) and how the product fits into the broader brand position as a whole.

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3. Pricing Strategy

Pricing your products is the final piece of the positioning puzzle. This is what makes or breaks most businesses. Therefore, you must consider the following when deciding on a pricing strategy for your product:

  • Brand Heritage: Premium brands such as Louis Vuitton and Apple can often command premium prices. If you have a strong brand, consider increasing your prices. Remember that this is a two-way street: people perceive more expensive brands to be ‘better’ and better brands to be more expensive.

  • Product Quality: You may be able to command premium prices with little brand pedigree if you have an exceptionally high quality product. This is all the more true when your competitors have inferior products.

  • First Mover Advantage: If your products are among the first of its kind in the market, you can often dictate pricing – at least until other competitors appear. For example, Apple was able to charge upwards of $500 for an iPhone because it was the only touchscreen smartphone on the market when it launched in 2007.

  • Target Market: Your pricing strategy must reflect the purchasing power of your target market. For instance, a clothing brand for wealthy Wall Street brokers would be able to charge a lot more for its products than a brand for 18-25 year old college kids.

  • Product Category: Certain product categories are less sensitive to price than others. A luxury car manufacturer, for instance, need not worry about pricing as much as a commuter car manufacturer.

This is the essence of positioning strategy in business – a combination of brand, product and pricing strategies. The best way to approach this is to focus on the broad, company-wide brand strategy, then move onto narrower topics, such as individual product prices.

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