Differentiation and Positioning

Chapter 7

Subway

Strategic challenges

• The success of a product offered to a given target market depends on how well it is positioned within that market segment- that is, how well it performs relative to competitive offerings and to the needs of the target audience.

• Positioning refers to both the place a product or brand occupies in customers mind relative to their needs and competing products or brands and to the marketers decision making intended to create such a position.

Positioning

• Positioning is basically concerned with differentiation. It is creative undertaking whereby an existing brand in an overcrowded market place of similar brands can be given a distinctive position in the minds of targeted prospects.

• “how should a business position its product offering-whether goods or services- so customers in the target market perceive the offering as providing the benefits they seek.

Discussion Questions

1. What do we mean by positioning?A couple of definitions

• Creating distinct and valued physical and perceptual differences between one’s product and its competitors, as perceived by the target customer.

• The act of designing the firm’s market offering so that it occupies a distinct and valued place in the minds of its target customers.

Which words are critical here? Why?

Discussion Questions

2. What don’t we mean by positioning?

• Which stores or channels you’ll sell the product in• Where on the shelf you hope to have it placed• The market segment you will target• These decisions are related to or grow out of the

positioning decision, but they are not positioning, as marketers use the term.

Exhibit 7.1

Generic Competitive Strategies

Lower CostDifferentiatio

n

Broad Target

Cost Leadership Strategy

Differentiation Strategy

Narrow Target

Focus Strategy

Focus Strategy

(Differentiation Based)

Competitive Advantage

CompetitiveScope

Source: Adapted from Michael Porter, Competitive Advantage,New York: The Free Press, 1985, p. 12.

7-5

Differentiation: key to customer preference and comp adv• Differentiation is a powerful theme in developing

business strategies, as well as in marketing.• A company can outperform its rivals only if it can

establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or both.

• Most of the time , differentiation is why people buy.

Differentiation in business strategies

• Porter identifies three generic strategies, cost leadership, differentiation and focus.

• He argues that the worst strategy is to be stuck in the middle.

• Companies in such position offer customers little reason not to take their business else where.

• Strategy is implemented at product-market level, where differentiation lies in the heart of positioning.

Differentiation among goods and services.

• Customers in one market segment have wants and needs that differ in some way from those of customers in other segments.

• Positioning allows the marketer to take advantage of and be responsive to such differences and position particular goods and services so as to better meet the needs of consumers in one or more of these segments.

• These differences are both physical and perceptual.

Physical positioning

• One way to assess the current position of the product offering relative to competitors is on the basis of the various offerings compare on some set of objective physical characteristics.

• In many cases a physical comparisons can provide useful information to a marketing manager, particularly in the early stages of identifying and designing new product offerings.

Physical comparisons

• Despite being based primarily on technical rather than on market data, physical comparisons can be an essential step in undertaking a positioning analysis.

• It contributes to a better marketing/R&D interface by determining key physical product characteristics, helps define the structure of competition by revealing the degree to which the various brands compete with one another.

• It may indicate meaningful product gaps.

Limitations of physical positioning

• A simple comparison of only the physical dimensions of alternative offerings usually does not provide a complete picture of relative positions because positioning ultimately occurs in customers’ minds.

• Even though a products physical attributes, like package, brand name, price, can be designed to achieve a certain position but customer may attach less importance to them .

Perceptual positioning

• Consumer often be completely unaware of the physical attributes of many house hold products. Many consumers do not want to be bothered about a product’s physical characteristics because they are not buying these physical properties but rather the benefits they provide. For eg, painkiller, tooth paste, juice etc.

Perceptual positioning

• The evaluation of many products is subjective because it is influenced by factors other than physical properties, including the way product is presented, our past experiences with them and the opinion of others.

• For eg some people will pay considerably more for nestle bottled water than for gourmet water, even though they are essentially the same product.

Exhibit 7.3

Comparison of Physical and Perceptual Positioning Analysis

Physical positioning• Technical orientation• Physical characteristics• Objective measures• Data readily available• Physical brand properties

• Large number of dimensions• Represents impact of product

specs and price• Direct R&D implications

Perceptual positioning• Consumer orientation• Perceptual attributes• Perceptual measures• Need for marketing research• Perceptual brand positions

and positioning intensities• Limited number of dimensions• Represents impact of product

specs and communication• R&D implications need to be

interpreted

A Useful Tool for Positioning Decision Making: Perceptual Maps

Where would you plot your favorite cereals? Your kids’ favorites? Your grandma’s?

Nutritious Not Nutritious

Sweet

Not Sweet

Levers marketers can use to establish positioning.• Customer or prospective customer perceive some physical as well as

other differences between goods and services within a product category.

• Marketing decision makers seeking to win a particular position in customers minds will seek to endow their product with various kinds of attributes.

Simple physically attributes

• These are directly related to a single physical dimension such as quality, power or size.

• There is direct correspondence between a physical dimension and a perceptual attribute, an analysis of which will help develop a good marketing strategy.

• Complex physically based attributes: when physical characteristics are large in number then consumers may use only some attributes for evaluation, therefore it becomes highly subjective in nature.

• Essentially abstract attributes: these perceptual attributes are influenced by physical characteristics, but they are not directly related.

• Price: price may infer other attributes such as high or low quality.

Exhibit 7.4

Steps in the Positioning Process (1 of 2)

1. Identify relevant set of competitive products serving a target market.

2. Identify the set of determinant attributes that define the “product space” in which positions of current offerings are located.

3. Collect information from a sample of customers and potential customers about perceptions of each product on the

determinant attributes.

Exhibit 7.4

Steps in the Positioning Process (2 of 2)

4. Determine product’s current location (positioning) in the product space and intensity thereof.

5. Determine customers’ most preferred combination of determinant attributes.

6. Examine the fit between preferences of market segments and current position of product (market positioning).

7. Write positioning statement or value proposition to guide development and implementation of marketing strategy.

Step 1: identify a relevant step of competitive products

• At the company or business-unit level such analyses are useful to determine how an entire company or business unit is positioned relative to its competitors.

• At product category level, the analysis examines customers perceptions about types of products they might consider as substitutes to satisfy the same basic need.

• At brand level, what appeals in a brand can be found out.

Step 2: identify determinant attributes

• Features• Benefits• Parentage• Manufacturing process

• Ingredients• Endorsements• Comparison• Proenvironment• Price/quality.

Step 2

• Consumers can use many attributes to evaluate products or brands, but the number actually influencing a consumers choice is typically small, partly because consumers can consider only attributes of which they are aware.

• More variables used in positioning result in greater confusion and even disbelief.

• There positioning should be simple and clear at all costs.

Step 3:collect data about customers’ perceptions for products in the competitive set. • After identifying a set of competing products, the marketer needs to

know what attributes are determinant for the target market and the product category under consideration.

• Then see how these products are viewed on these attributes.• Conduct qualitative research and then quantitative.

Step 4 : Analyze the current position of products in the comp set.• It is important to develop a clear understanding of the

positioning of the products that have been determined to be in the competitive set.

• There are two methods.1. Positioning grid2. Value curve.

Step 5 : determine customers’ most preferred combination of attributes• Survey respondents can be asked to think of the

ideal product or brand in a product category• Respondents can then rate their ideal product and

existing products on number of attributes.• Analyst using the appropriate statistical techniques,

can locate the respondents’ ideal points relative to the positions of brands on the product space map.

Step 6: consider fit of possible positions with customer needs and segment attractiveness

• Since differences between customers’ ideal points reflect variations in the benefits they seek, a market positioning analysis can simultaneously identify distinct market segments as well as the perceived positions of different brands.

Step 7 : Write positioning statement• The final decision about where to position a new brand or reposition

an existing one should be based on both the market targeting analysis and market positioning analysis

• The position chosen should match the preferences of a particular market segment and should take into account the current positions of competing brands.

Positioning Statement for Volvo in North America

• For upscale American families, Volvo is the family automobile that offers maximum safety

• Generic format for positioning statements: For (target market), (brand) is the (product category) that (benefit offered).

Value Proposition for Volvo in North America

• Target market: Upscale American families• Benefits offered: Safety• Relative price: 20% premium to domestic family cars• Generic format for value propositions:

• Target market• Benefits offered (and sometimes not offered)• Relative price