Examples of Niche Markets?AnswerA niche market is the subset of the market on which a specific product is focusing. It defines the specific product features that are aimed at satisfying certain market needs. Niche markets are smaller areas of marketing aimed at a certain audience with specific needs. Specific age groups, gender, home office areas, and sports lovers are all examples of niche markets and the demographics on each area can vary greatly. Large companies aiming a product at a certain type of customer is a form of niche marketing.

Concentrating all marketing efforts on a small but specific and well defined segment of the population. Niches do not 'exist' but are 'created' by identifying needs, wants, and requirements that are being addressed poorly or not at all by other firms, and developing and delivering goods or services to satisfy them. As a strategy, niche marketing is aimed at being a big fish in a small pond instead of being a small fish in a big pond. Also called micromarketing.

Niche Marketing – What is It?

In marketing it’s understood that if you claim your market to be everyone for a specific product or service, it will likely result in no one purchasing. In other words, the more targeted your products and services are to meet the specific needs of individual customers, the better chances you have to generate interest, satisfy those needs and create, sustain and grow profitable customer relationships.

According to Susan Ward in About.com, “A niche market can be defined as a focused, targetable portion of a market. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. You can think of a niche market as a narrowly defined group of potential customers. For instance, instead of offering cleaning services, a business might establish a niche market by specializing in blind cleaning services.”

Some advantages of a successful niche marketing strategy can include:

Higher-margined business,

A competitive advantage among other small businesses who don’t know of your niche and among large businesses who simply do not want to bother with that particular segment, and

More efficient and effective use of marketing that is streamlined and targeted.

Ward goes on to say that “The trick to capitalizing on a niche market is to find or develop a market niche that has customers who are accessible, that is growing fast enough, and that is not owned by one established vendor already.”

Flanking Budget Rent-a-Car used a low-price strategy to flank dominant competitors Avis and Hertz in the car-rental

business. Softsoap used product innovation to flank hand-soap competitors, offering the first liquid soap.

Flanking and Guerrilla warfare strategies...

Well both of these strategies are performed by players with small market share...

Flankers are generally attackers whose market shares are around 15%... The difference

between the flankers and guerrilla's are that flankers operate close to their rivals but

guerrillas attack by staying away...

For example US when GM and Ford enjoyed 80% market together, American motors came

up with special convertible cars at a price close to rivals, attacking their territory...

Example of Guerrilla is Rolls Royce...Do you think any company like GM,Ford,Honda,Toyota

would look into that segment as an category extension of their cars??? Definitely no..

Their segment is too narrow to risk...

Points to remember:

Flanking attack should be a surprise for others to defend..So companies need to avoid big

test marketing..Other examples of flanking is Volkswagen small car concept by launching

Bettle("Think small campaign") etc...

Guerrillas should never come too exposed and should never try to act like leaders...

Since their markets are small size they should never make big tycoons to feel that the

segment being served is large or impressive...Brand extension should not be done(for

example mercedes Benz deluxe @ 3 crores...)etc.

Guerrillas are more often found locally...They compete with national brands..like a chitalle

bandhu(pune sweet shop) with big chains(if existed) etc.. Ramkumar

The language of marketing has been borrowed from the military. We talk about defensive marketing,

offensive marketing, and guerrilla marketing. Often overlooked, however, is flanking, one of the most

powerful military strategies.

In 1940, Germany stunned France by going around its vaunted Maginot Line and attacking the country

through Belgium. Six weeks later, the Battle of France was over.

In 1950, General Douglas MacArthur launched an amphibious operation at Inchon, flanking the North

Korean army that had American forces bottled up in the Pusan Perimeter a hundred miles to the

southeast.

Now isolated, the North Koreans rapidly retreated. Twelve days later, the two American armies joined up

and prepared for the next stage of the war, the invasion of North Korea.

In 1991, at the start of the first Iraqi war, the U.S. and its allies were encamped in Kuwait and eastern

Saudi Arabia. Naturally, the Iraqis assumed the invasion would come from the east.

So General H. Norman Schwarzkopf shifted 150,000 Allied forces 100 miles west and launched his major

attack from the south, taking the enemy by surprise. After 100 hours, the Iraqi defense collapsed and the

U.S. declared the war over.

Many marketers ignore the lessons of military history and continue to attack competitors head-on, a

strategy that seldom works. They should consider flanking. Take Mercedes-Benz, for example.

Mercedes has increased its sales in the U.S. market every year for the last 13 years in a row, from 61,899

vehicles in 1994 to 247,934 vehicles in 2006, an increase of 300 percent. Through November of last year,

Mercedes was up another 2.8 percent.

These increases were in spite of some pretty negative stories in the media about the reliability of the

brand.

Headline: An engineering icon slips. Subhead: Quality ratings for Mercedes drop in several surveys. The

Wall Street Journal, February 4, 2002.

Headline: Mercedes head-on collision with a quality survey. Business Week, July 21, 2003.

Headline: Mercedes hits a pothole. Subhead: Owner complaints are up. Resale values are down.

Fortune, October 27, 2003.

The bad news continues. In a 2007 Consumer Reports survey of 36 leading automobile brands,

Mercedes-Benz ranked dead last in predicted reliability.

No matter. Mercedes-Benz is a better automobile brand, if not a better automobile product. How did

Mercedes-Benz achieve its marketing victory? It flanked Cadillac, its chief competitor at the time.

When Mercedes-Benz arrived in the American market, its cars were considerably more expensive than

Cadillacs. The high prices created the perception that the Mercedes brand was somehow superior to the

Cadillac brand. In other words, in a class by itself. (Nicely reinforced by its long-time advertising theme:

Engineered like no other car in the world.)

As a result of its high prices, Mercedes sales took off slowly. Here are annual sales of Mercedes cars, a

decade apart.

1954: 1,000 (The number imported, not all of which were sold that year.)

1964: 11,234.

1974: 38,826.

1984: 79,222.

1994: 73,002.

After 40 years in the American market, Mercedes was still selling fewer vehicles in a year than Chevrolet

was selling in a month. No wonder General Motors wasn’t particularly concerned.

But Mercedes was building a brand that was going to pay enormous dividends down the road. In 2006,

Mercedes-Benz outsold Cadillac 247,934 to 227,014.

Remember when Cadillac used to mean something? Remember when the Cadillac of the category was a

compliment applied to many different brands in many different categories?

No longer. Cadillac is just another brand flanked by a competitor with a superior strategy.

What Mercedes did in automobiles, Absolut did in vodka. By pricing the brand 50 percent higher than the

best-selling Smirnoff vodka, Absolut created a new category which ultimately became known as premium

vodka.

What Absolut did to Smirnoff, Grey Goose did to Absolut. By pricing the brand 60 percent higher than

Absolut, Grey Goose created a new category which ultimately became known as ultra-premium vodka.

Seven years after its introduction, entrepreneur Sidney Frank sold his Grey Goose to Bacardi Ltd. for $2

billion.

Setting higher prices (or lower prices, for that matter) is just one of the many strategies involved in

building better brands. But in many cases, it’s a necessary strategy in a branding program, or the new

brand will never get off the ground.

But management never seems to learn this lesson.

With the enormous worldwide success of the Mercedes brand, you might think that German management

would get the message that the brand is more important than the product. And one of the best ways to

send a branding message is to make sure the product is priced right.

Not so. According to Automotive News, the Daimler board member in charge of the Mercedes group said

the price tag is not the defining characteristic of the Mercedes brand. Its quality and technology.

That’s the apparent justification for the launch of the relatively cheap A-class Mercedes in Europe. In the

U.S., Mercedes-Benz has promoted its low-end C-class models in the past with advertising messages

such as: Built like a Mercedes. Performs like a Mercedes. Priced like a regular car.

Regular cars are priced like regular cars. Luxury cars are priced like luxury cars. That’s a marketing

principle Mercedes management seems to have missed.

When you have a powerful brand like Mercedes, you can make these and many other mistakes and still

come out ahead. Compare General Motors, Ford and Daimler AG.

In 2006, General Motors and Ford sold 14.7 million vehicles worldwide, more than three times the volume

of Daimler AG (4.7 million), a figure that includes the money-losing Chrysler division which Daimler has

since sold off.

Yet on the stock market, Daimler (minus Chrysler) is now worth $94.8 billion, more than three times the

value of General Motors ($14.9 billion) and Ford ($14.1 billion) combined.

What should Cadillac have done? They should have moved upscale to block the Mercedes brand.

Instead, they moved downscale with such models as the Cimarron and the Catera.

You don’t make money building better products; you make money building better brands.

Recently a senior editor of Automotive News wrote: Sales success can be summed up in one word:

Product. Product. Product. OK, three words, but you get the idea.

I get the idea, but I don’t agree with it. Yet there seems to be a notion in management circles today that

nothing matters except the product. Take Audi, for example.

No automotive brand has introduced as many advanced technological features as Audi, a division of

Volkswagen. Some Audi innovations include all-wheel drive, direct fuel injection, the advanced design of

the TT coupe and the 12-cylinder, aluminum-bodied A8.

The goal: Audi AG wants to be the leading premium brand worldwide by 2010, according to chairman

Martin Winterkorn.

Ansoff's matrixAccording to the Chartered Institute of Marketing, ‘Marketing is the management process responsible for identifying, anticipating and satisfying consumer requirements profitably’. To do this, organisations require a marketing strategy.A marketing strategy is something that affects every part of an organisation. It is about using everything that a business does to create value for others. This includes customers but it also benefits employees and shareholders. The main purpose of a marketing strategy is to set out the means by which agreed marketing objectives are to be achieved.There are many types of marketing objectives. For example, these might include:

increasing market share growing sales/turnover enhancing the strength of the brand creating loyal customers managing costs effectively, thus increasing profitability.

A common marketing objective is to achieve growth. There are a number of ways in which organisations can grow. For example, they might expand internally. This is known as organic growth. A quicker but higher risk option is external or inorganic growth. This involves acquiring or merging with another business.One positive benefit of growth is that it helps a business to reduce costs through economies of scale. These include:

efficiencies arising from use of new technologies improved buying power as it can bulk buy at lower costs the ability to recruit more specialists to improve decision making.

By lowering costs, an organisation increases its profitability and becomes more competitive.One way of analysing the various strategies that an organisation may use to grow the business is with Igor Ansoff’s (1965) matrix. This considers the opportunities of offering existing and new products within existing and/or new markets and the levels of risk associated with each.

This matrix suggests four alternative marketing strategies:

1. Market penetration (Pravesh Karne)- involves selling more established products into existing markets, often by increased promotion or price reductions or better routes to market, for example online.

2. Product development - involves developing new products or services and placing them into existing markets.

3. Market development - entails taking existing products or services and selling them in new markets.

4. Diversification (wiwidhi karan)- involves developing new products and putting them into new markets at the same time. Diversification is considered the most risky strategy. This is because the business is expanding into areas outside its core activities and experience as well as targeting a new audience. It also has to bear the costs of new product development.

Enterprise has focused most of its growth strategies on market development, product development and diversification. These are highlighted in the following sections.

================================================================

Ansoff Matrix

To portray alternative corporate growth strategies, Igor Ansoff presented a matrix that focused on the firm's present and potential products and markets (customers). By considering ways to grow via existing products and new products, and in existing markets and new markets, there are four possible product-market combinations. Ansoff's matrix is shown below:

Ansoff Matrix

  Existing Products New Products

ExistingMarkets Market Penetration     Product Development    

NewMarkets     Market Development     Diversification

Ansoff's matrix provides four different growth strategies:

Market Penetration - the firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share.

Market Development - the firm seeks growth by targeting its existing products to new market segments.

Product Development - the firms develops new products targeted to its existing market segments.

Diversification - the firm grows by diversifying into new businesses by developing new products for new markets.

Selecting a Product-Market Growth Strategy

The market penetration strategy is the least risky since it leverages many of the firm's existing resources and capabilities. In a growing market, simply maintaining market share will result in growth, and there may exist opportunities to increase market share if competitors reach capacity limits. However, market penetration has limits, and once the market approaches saturation another strategy must be pursued if the firm is to continue to grow.

Market development options include the pursuit of additional market segments or geographical regions. The development of new markets for the product may be a good strategy if the firm's core competencies are related more to the specific product than to its experience with a specific market segment. Because the firm is expanding into a new market, a market development strategy typically has more risk than a market penetration strategy.

A product development strategy may be appropriate if the firm's strengths are related to its specific customers rather than to the specific product itself. In this situation, it can leverage its strengths by developing a new product targeted to its existing customers. Similar to the case of new market development, new product development carries more risk than simply attempting to increase market share.

Diversification is the most risky of the four growth strategies since it requires both product and market development and may be outside the core competencies of the firm. In fact, this quadrant of the matrix has been referred to by some as the "suicide cell". However, diversification may be a reasonable choice if the high risk is compensated by the chance of a high rate of return. Other advantages of diversification include the potential to gain a foothold in an attractive industry and the reduction of overall business portfolio risk.

Strategic marketing planning tool that links a firm's marketing strategy with its general strategic direction and presents four alternative growth strategies as a table (matrix). These strategies are seeking growth: (1) Market penetration: by pushing existing products in their current market segments. (2) Market development: by developing new markets for the existing products. (3) Product development: by developing new products for the existing markets. (4) Diversification: by developing new products for new markets. Named after its inventor, the father of strategic management, Igor Ansoff (1941- ), and first published in 1957 in Harvard business review.

New product development strategyWith a well-considered new product development (NPD) strategy, you can avoid wasting time, money and business resources. An NPD strategy will help you organise your product planning and research, capture your customers' views and expectations, and accurately plan and resource your NPD project. Your strategy will also help you avoid:

overestimating and misreading your target market

launching a poorly designed product, or a product that doesn't meet the needs of your target customers

incorrectly pricing products spending resources you don't have on higher-than-anticipated development costs

exposing your business to risks and threats from unexpected competition.

There are several important steps you will need to plan into your NPD strategy.

Define your productAn accurate description of the product you are planning will help keep you and your team focused and avoid NPD pitfalls such as developing too many products at once, or running out of resources to develop the product.

Identify market needsSuccessful NPD requires a thorough knowledge of your target market and its needs and wants. A targeted, strategic and purposeful approach to NPD will ensure your products fit your market. Ask yourself:

What is the target market for the product I am proposing?

What does that market need?

What is the benefit of my proposed new product?

What are the market's frustrations of existing products of its type?

How will the product fit into the current market?

What sets this product apart from its competition?Draw on your existing market research. You may need to undertake additional research to test your new product proposal with your customers. For example, you could set up focus groups or a customer survey.

Establish time framesYou need to allow adequate time to develop and implement your new products. Your objectives for developing new products will inform your time frames and your deadlines for implementation. Be thoughtful and realistic. Some objectives might overlap but others will be mutually exclusive.

Your objective to race against your competition will require efficiency from your team.

Your aim to achieve a specific launch date will be influenced by demand for seasonal products and calendar events.

Your aim to be responsive to your customers' needs and demands will require time for research to ensure you develop the right products at the right time.

Your objective to stick to business as usual and maintain other schedules will affect the resources you make available for NPD.

Identify key issues and approachesThere are many tasks involved in developing a product that is appropriate for your customers. The nature of your business and your idea will determine how many of these steps you need to take. You may be able to skip or duplicate certain stages, or start some of them simultaneously. Key tasks include:

generating and screening ideas

developing and screening concepts

testing concepts

analysing market and business strategy

developing and market testing products

implementing and commercialising products.

New product developmentFrom Wikipedia, the free encyclopedia

[hide]This article has multiple issues. Please help improve it or discuss these issues on the talk page.

This article may require cleanup to meet Wikipedia's quality standards. The specific problem

The object is to eliminate unsound concepts prior to devoting resources to them.

The screeners should ask several questions:

Will the customer in the target market benefit from the product?

What is the size and growth forecasts of the market segment / target market?

What is the current or expected competitive pressure for the product idea?

What are the industry sales and market trends the product idea is based on?

Is it technically feasible to manufacture the product?

Will the product be profitable when manufactured and delivered to the customer at the target

price?

3. Concept Development and Testing

Develop the marketing and engineering details

Investigate intellectual property issues and search patent databases

Who is the target market and who is the decision maker in the purchasing process?

What product features must the product incorporate?

What benefits will the product provide?

How will consumers react to the product?

How will the product be produced most cost effectively?

Prove feasibility through virtual computer aided rendering and rapid prototyping

What will it cost to produce it?

Testing the Concept  by asking a number of prospective customers what they think of the idea -

usually[citation needed] viaChoice Modelling.

4. Business Analysis

Estimate likely selling price based upon competition and customer feedback

Estimate sales volume based upon size of market and such tools as the Fourt-Woodlock equation

Estimate profitability and break-even point

5. Beta Testing and Market Testing

Produce a physical prototype or mock-up

Test the product (and its packaging) in typical usage situations

Conduct focus group customer interviews or introduce at trade show

Make adjustments where necessary

Produce an initial run of the product and sell it in a test market area to determine customer

acceptance

6. Technical Implementation

New program initiation

Finalize Quality management system

Resource  estimation

Requirement publication

Publish technical communications such as data sheets

Engineering  operations planning

Department scheduling

Supplier collaboration

Logistics  plan

Resource plan publication

Program review and monitoring

Contingencies - what-if planning

7. Commercialization (often considered post-NPD)

Launch the product

Produce and place advertisements and other promotions

Fill the distribution pipeline with product

Critical path analysis  is most useful at this stage

8. New Product Pricing

Impact of new product on the entire product portfolio

Value Analysis (internal & external)

Competition and alternative competitive technologies

Differing value segments (price, value and need)

Product Costs (fixed & variable)

Forecast of unit volumes, revenue, and profit

These steps may be iterated as needed. Some steps may be eliminated. To reduce the time that the NPD

process takes, many companies are completing several steps at the same time (referred to as concurrent

engineering or time to market). Most industry leaders see new product development as a proactive process

where resources are allocated to identify market changes and seize upon new product opportunities before

they occur (in contrast to a reactive strategy in which nothing is done until problems occur or the competitor

introduces an innovation). Many industry leaders see new product development as an ongoing process

(referred to ascontinuous development) in which the entire organization is always looking for opportunities.

For the more innovative products indicated on the diagram above, great amounts of uncertainty and change

may exist which makes it difficult or impossible to plan the complete project before starting it. In this case, a

more flexible approach may be advisable.

Because the NPD process typically requires both engineering and marketing expertise, cross-functional

teams are a common way of organizing projects. The team is responsible for all aspects of the project, from

initial idea generation to final commercialization, and they usually report to senior management (often to a vice

president or Program Manager). In those industries where products are technically complex, development

research is typically expensive and product life cycles are relatively short, strategic alliances among several

organizations helps to spread the costs, provide access to a wider skill set and speeds up the overall process.

Also, notice that because both engineering and marketing expertise are usually critical to the process, choosing

an appropriate blend of the two is important. Observe (for example, by looking at the See

also or References sections below) that this article is slanted more toward the marketing side. For more of an

engineering slant, see the Ulrich and Eppinger, Ullman references below.[2][3]

People respond to new products in different ways. The adoption of a new technology can be analyzed using a

variety of diffusion theories such as the Diffusion of Innovations theory.[citation needed]

A new product pricing process is important to reduce risk and increase confidence in the pricing and marketing

decisions to be made. Bernstein and Macias describe an integrated process that breaks down the complex task

of new product pricing into manageable elements.[4]

The Path to Developing Successful New Products[5] points out three key processes that can play critical role

in product development: Talk to the customer; Nurture a project culture; Keep it focused.

Fuzzy Front End[edit]

The Fuzzy Front End is the messy "getting ended" period of new product engineering development processes.

It is in the front end where the organization formulates a concept of the product to be developed and decides

whether or not to invest resources in the further development of an idea. It is the phase between first

consideration of an opportunity and when it is judged ready to enter the structured development process (Kim

and Wilemon, 2007;[6] Koen et al., 2001).[1] It includes all activities from the search for new opportunities through

the formation of a germ of an idea to the development of a precise concept. The Fuzzy Front End ends when

an organization approves and begins formal development of the concept.

Although the Fuzzy Front End may not be an expensive part of product development, it can consume 50% of

development time (see Chapter 3 of the Smith and Reinertsen reference below),[7] and it is where major

commitments are typically made involving time, money, and the product’s nature, thus setting the course for the

entire project and final end product. Consequently, this phase should be considered as an essential part of

development rather than something that happens “before development,” and its cycle time should be included

in the total development cycle time.

Koen et al. (2001, pp. 47–51)[1] distinguish five different front-end elements (not necessarily in a particular

order):

1. Opportunity Identification

2. Opportunity Analysis

3. Idea Genesis

4. Idea Selection

5. Concept and Technology Development

The first element is the opportunity identification. In this element, large or incremental business and

technological chances are identified in a more or less structured way. Using the guidelines established here,

resources will eventually be allocated to new projects.... which then lead to a structured NPPD (New Product &

Process Development) strategy.

The second element is the opportunity analysis. It is done to translate the identified opportunities into

implications for the business and technology specific context of the company. Here extensive efforts may be

made to align ideas to target customer groups and do market studies and/or technical trials and research.

The third element is the idea genesis, which is described as evolutionary and iterative process progressing

from birth to maturation of the opportunity into a tangible idea. The process of the idea genesis can be made

internally or come from outside inputs, e.g. a supplier offering a new material/technology or from a customer

with an unusual request.

The fourth element is the idea selection. Its purpose is to choose whether to pursue an idea by analyzing its

potential business value.

The fifth element is the concept and technology development. During this part of the front-end, the business

case is developed based on estimates of the total available market, customer needs, investment requirements,

competition analysis and project uncertainty. Some organizations consider this to be the first stage of the

NPPD process (i.e., Stage 0).

The Fuzzy Front End is also described in literature as "Front End of Innovation", "Phase 0", "Stage 0" or "Pre-

Project-Activities".

A universally acceptable definition for Fuzzy Front End or a dominant framework has not been developed so

far.[8] In a glossary of PDMA,[9] it is mentioned that the Fuzzy Front End generally consists of three tasks:

strategic planning, concept generation, and, especially, pre-technical evaluation. These activities are often

chaotic, unpredictable, and unstructured. In comparison, the subsequent new product development process is

typically structured, predictable, and formal. The term Fuzzy Front End was first popularized by Smith and

Reinertsen (1991).[10] R.G.Cooper (1988)[11] describes the early stages of NPPD as a four step process in which

ideas are generated (I), subjected to a preliminary technical and market assessment (II) and merged to

coherent product concepts (III) which are finally judged for their fit with existing product strategies and portfolios

(IV). In a more recent paper, Cooper and Edgett (2008)[12] affirm that vital predevelopment activities include:

1. Preliminary market assessment

2. Technical assessment

3. Source-of-supply-assessment: suppliers and partners or alliances

4. Market research: market size and segmentation analysis, VoC (voice of the customer) research

5. Product concept testing

6. Value-to-the customer assessment

7. Product definition

8. Business and financial analysis

These activities yield vital information to make a Go/No-Go to Development decision.

In one of the most earliest studies using the case study method, Khurana and Rosenthal[13] defined the front-

end to include the interrelated activities of:

product strategy formulation and communication

opportunity identification and assessment

idea generation

product definition

project planning

executive reviews

Economical analysis, benchmarking of competitive products and modeling and prototyping are also important

activities during the front-end activities.

The outcomes of FFE are the

mission statement

customer needs

details of the selected concept

product definition and specifications

economic analysis of the product

the development schedule

project staffing and the budget

a business plan aligned with corporate strategy

Types of new products October 3, 2007

Posted by Coolguy in Design for Six Sigma. Tags: Product Developmenttrackback

In the area of new product development, here are some commonly accepted new product terms

1. New-to-world products : These are inventions and discoveries such as laser printers etc.2. New category products : These are products that are not new to the world, but to the company.3. Additions to product lines : These are extensions to the company’s existing product line like diet coke.4. Product improvements : Improvements to existing products.5. Repositioning’ s : Products that are re targeted for new use. Baking soda as a deodorant6. Cost Reductions: New products replacing exisitng one’s, with lower cost

Pricing - Pricing Strategies

Author: Jim Riley  Last updated: Sunday 23 September, 2012

Marketing - Pricing approaches and strategies

There are three main approaches a business takes to setting price:

Cost-based pricing: price is determined by adding a profit element on top of the cost of making the product.  

Customer-based pricing: where prices are determined by what a firm believes customers will be prepared to pay

Competitor-based pricing: where competitor prices are the main influence on the price setLet’s take a brief look at each of these approaches;

Cost based pricing

This involves setting a price by adding a fixed amount or percentage to the cost of making or buying the product.  In some ways this is quite an old-fashioned and somewhat discredited pricing strategy, although it is still widely used. 

After all, customers are not too bothered what it cost to make the product – they are interested in what value the product provides them.   

Cost-plus (or “mark-up”) pricing is widely used in retailing, where the retailer wants to know with some certainty what the gross profit margin of each sale will be. An advantage of this approach is that the business will know that its costs are being covered.  The main disadvantage is that cost-plus pricing may lead to products that are priced un-competitively.

Here is an example of cost-plus pricing, where a business wishes to ensure that it makes an additional £50 of profit on top of the unit cost of production.

Unit cost £100

Mark-up 50%

Selling price £150

How high should the mark-up percentage be? That largely depends on the normal competitive practice in a market and also whether the resulting price is acceptable to customers.

In the UK a standard retail mark-up is 2.4 times the cost the retailer pays to its supplier (normally a wholesaler).  So, if the wholesale cost of a product is £10 per unit, the retailer will look to sell it for 2.4x £10 = £24.  This is equal to a total mark-up of £14 (i.e. the selling price of £24 less the bought cost of £10).

The main advantage of cost-based pricing is that selling prices are relatively easy to calculate.  If the mark-up percentage is applied consistently across product ranges, then the business can also predict more reliably what the overall profit margin will be.

Customer-based pricing

Penetration pricing

You often see the tagline “special introductory offer” – the classic sign of penetration pricing. The aim of penetration pricing is usually to increase market share of a product, providing the opportunity to increase price once this objective has been achieved.

Penetration pricing is the pricing technique of setting a relatively low initial entry price, usually lower than the intended established price, to attract new customers. The

strategy aims to encourage customers to switch to the new product because of the lower price.

Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume.  In the short term, penetration pricing is likely to result in lower profits than would be the case if price were set higher.  However, there are some significant benefits to long-term profitability of having a higher market share, so the pricing strategy can often be justified.

Penetration pricing is often used to support the launch of a new product, and works best when a product enters a market with relatively little product differentiation and where demand is price elastic – so a lower price than rival products is a competitive weapon.  

Price skimming

Skimming involves setting a high price before other competitors come into the market.  This is often used for the launch of a new product which faces little or no competition – usually due to some technological features.  Such products are often bought by “early adopters” who are prepared to pay a higher price to have the latest or best product in the market. 

Good examples of price skimming include innovative electronic products, such as the Apple iPad and Sony PlayStation 3. There are some other problems and challenges with this approach:

Price skimming as a strategy cannot last for long, as competitors soon launch rival products which put pressure on the price (e.g. the launch of rival products to the iPhone or iPod).

Distribution (place) can also be a challenge for an innovative new product. It may be necessary to give retailers higher margins to convince them to stock the product, reducing the improved margins that can be delivered by price skimming.A final problem is that by price skimming, a firm may slow down the volume growth of demand for the product.  This can give competitors more time to develop alternative products ready for the time when market demand (measured in volume) is strongest.

Loss leaders

The use of loss leaders is a method of sales promotion.  A loss leader is a product priced below cost-price in order to attract consumers into a shop or online store. The purpose of making a product a loss leader is to encourage customers to make further purchases of profitable goods while they are in the shop.  But does this strategy work?

Pricing is a key competitive weapon and a very flexible part of the marketing mix.

If a business undercuts its competitors on price, new customers may be attracted and existing customers may become more loyal. So, using a loss leader can help drive customer loyalty.

One risk of using a loss leader is that customers may take the opportunity to “bulk-buy”.  If the price discount is sufficiently deep, then it makes sense for customers to buy as much as they can (assuming the product is not perishable).

Using a loss leader is essentially a short-term pricing tactic for any one product.  Customers will soon get used to the tactic, so it makes sense to change the loss leader or its merchandising every so often.

Predatory pricing (note: this is illegal)

With predatory pricing, prices are deliberately set very low by a dominant competitor in the market in order to restrict or prevent competition.  The price set might even be free, or lead to losses by the predator.  Whatever the approach, predatory pricing is illegal under competition law. 

Psychological pricing

Sometimes prices are set at what seem to be unusual price points.  For example, why are DVD’s priced at £12.99 or £14.99? The answer is the perceived price barriers that customers may have.  They will buy something for £9.99, but think that £10 is a little too much.  So a price that is one pence lower can make the difference between closing the sale, or not!

The aim of psychological pricing is to make the customer believe the product is cheaper than it really is.  Pricing in this way is intended to attract customers who are looking for “value”.

Competitor-based pricing

If there is strong competition in a market, customers are faced with a wide choice of who to buy from. They may buy from the cheapest provider or perhaps from the one which offers the best customer service.  But customers will certainly be mindful of what is a reasonable or normal price in the market. 

Most firms in a competitive market do not have sufficient power to be able to set prices above their competitors. They tend to use “going-rate” pricing – i.e. setting a price that is in line with the prices charged by direct competitors.  In effect such businesses are “price-takers” – they must accept the going market price as determined by the forces of demand and supply.

An advantage of using competitive pricing is that selling prices should be line with rivals, so price should not be a competitive disadvantage.

The main problem is that the business needs some other way to attract customers.  It has to use non-price methods to compete – e.g. providing distinct customer service or better availability.

Pricing strategies

From Wikipedia, the free encyclopedia

A business can use a variety of pricing strategies when selling a product or service. The Price can be set to

maximise profitability for each unit sold or from the market overall. It can be used to defend an existing market

from new entrants, to increase market share within a market or to enter a new market. Businesses may benefit

from lowering or raising prices, depending on the needs and behaviors of customers and clients in the

particular market. Finding the right pricing strategy is an important element in running a successful business.[1]

Contents

  [hide] 

1   Models of pricing

o 1.1   Absorption pricing

o 1.2   Contribution margin-based pricing

o 1.3   Cost-Plus pricing

o 1.4   Creaming or skimming

o 1.5   Decoy pricing

o 1.6   Freemium

o 1.7   High-low pricing

o 1.8   Limit pricing

o 1.9   Loss leader

o 1.10   Marginal-cost pricing

o 1.11   Market-oriented pricing

o 1.12   Odd pricing

o 1.13   Pay what you want

o 1.14   Penetration pricing

o 1.15   Predatory pricing

o 1.16   Premium decoy pricing

o 1.17   Premium pricing

o 1.18   Price discrimination

o 1.19   Price leadership

o 1.20   Psychological pricing

o 1.21   Target pricing

o 1.22   Time-based pricing

o 1.23   Value-based pricing

o 1.24   Other pricing approaches

2   Nine laws of price sensitivity and consumer psychology

3   References

Models of pricing[edit]

Absorption pricing[edit]

Method of pricing in which all costs are recovered. The price of the product includes the variable cost of each

item plus a proportionate amount of the fixed costs and is a form of cost-plus pricing

Contribution margin-based pricing[edit]

Main article: Contribution margin-based pricing

Contribution margin-based pricing maximizes the profit derived from an individual product, based on the

difference between the product's price and variable costs (the product's contribution margin per unit), and on

one’s assumptions regarding the relationship between the product’s price and the number of units that can be

sold at that price. The product's contribution to total firm profit (i.e. to operating income) is maximized when a

price is chosen that maximizes the following: (contribution margin per unit) X (number of units sold).

Cost-Plus pricing[edit]

Main article: Cost-plus pricing

Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producing the product and adds

on a percentage (profit) to that price to give the selling price. This method although simple has two flaws; it

takes no account of demand and there is no way of determining if potential customers will purchase the product

at the calculated price.

This appears in two forms, full cost pricing which takes into consideration both variable and fixed costs and

adds a percentage as markup. The other is direct cost pricing which is variable costs plus a percentage as

markup. The latter is only used in periods of high competition as this method usually leads to a loss in the long

run.

Creaming or skimming[edit]

In most skimming, goods are sold at higher prices so that fewer sales are needed to break even. Selling a

product at a high price, sacrificing high sales to gain a high profit is therefore "skimming" the market. Skimming

is usually employed to reimburse the cost of investment of the original research into the product: commonly

used in electronic markets when a new range, such as DVD players, are firstly dispatched into the market at a

high price. This strategy is often used to target "early adopters" of a product or service. Early adopters

generally have a relatively lower price-sensitivity - this can be attributed to: their need for the product

outweighing their need to economise; a greater understanding of the product's value; or simply having a higher

disposable income.

This strategy is employed only for a limited duration to recover most of the investment made to build the

product. To gain further market share, a seller must use other pricing tactics such as economy or penetration.

This method can have some setbacks as it could leave the product at a high price against the competition.[2]

Decoy pricing[edit]

Method of pricing where the seller offers at least three products, and where two of them have a similar or equal

price. The two products with the similar prices should be the most expensive ones, and one of the two should

be less attractive than the other. This strategy will make people compare the options with similar prices, and as

a result sales of the most attractive choice will increase.[3]

Freemium[edit]

Main article: Freemium

Freemium is a business model that works by offering a product or service free of charge (typically digital

offerings such as software, content, games, web services or other) while charging a premium for advanced

features, functionality, or related products and services. The word "freemium" is a portmanteau combining the

two aspects of the business model: "free" and "premium". It has become a highly popular model, with notable

success.

High-low pricing[edit]

Method of pricing for an organization where the goods or services offered by the organization are regularly

priced higher than competitors, but through promotions, advertisements, and or coupons, lower prices are

offered on key items. The lower promotional prices are designed to bring customers to the organization where

the customer is offered the promotional product as well as the regular higher priced products.[4]

Limit pricing[edit]

Main article: Limit price

A limit price is the price set by a monopolist to discourage economic entry into a market, and is illegal in many

countries. The limit price is the price that the entrant would face upon entering as long as the incumbent firm

did not decrease output. The limit price is often lower than the average cost of production or just low enough to

make entering not profitable. The quantity produced by the incumbent firm to act as a deterrent to entry is

usually larger than would be optimal for a monopolist, but might still produce higher economic profits than

would be earned under perfect competition.

The problem with limit pricing as a strategy is that once the entrant has entered the market, the quantity used

as a threat to deter entry is no longer the incumbent firm's best response. This means that for limit pricing to be

an effective deterrent to entry, the threat must in some way be made credible. A way to achieve this is for the

incumbent firm to constrain itself to produce a certain quantity whether entry occurs or not. An example of this

would be if the firm signed a union contract to employ a certain (high) level of labor for a long period of time. In

this strategy price of the product becomes the limit according to budget.

Loss leader[edit]

Main article: Loss leader

A loss leader or leader is a product sold at a low price (i.e. at cost or below cost) to stimulate other profitable

sales. This would help the companies to expand its market share as a whole.

Marginal-cost pricing[edit]

In business, the practice of setting the price of a product to equal the extra cost of producing an extra unit of

output. By this policy, a producer charges, for each product unit sold, only the addition to total cost resulting

from materials and direct labor. Businesses often set prices close to marginal cost during periods of poor sales.

If, for example, an item has a marginal cost of $1.00 and a normal selling price is $2.00, the firm selling the

item might wish to lower the price to $1.10 if demand has waned. The business would choose this approach

because the incremental profit of 10 cents from the transaction is better than no sale at all.

Market-oriented pricing[edit]

Setting a price based upon analysis and research compiled from the target market. This means that marketers

will set prices depending on the results from the research. For instance if the competitors are pricing their

products at a lower price, then it's up to them to either price their goods at an above price or below, depending

on what the company wants to achieve.

Odd pricing[edit]

In this type of pricing, the seller tends to fix a price whose last digits are odd numbers. This is done so as to

give the buyers/consumers no gap for bargaining as the prices seem to be less and yet in an actual sense are

too high, and takes advantage of human psychology. A good example of this can be noticed in most

supermarkets where instead of pricing at $10, it would be written as $9.99. This pricing policy is common in

economies using the free market policy.

Pay what you want[edit]

Main article: Pay what you want

Pay what you want is a pricing system where buyers pay any desired amount for a given commodity,

sometimes including zero. In some cases, a minimum (floor) price may be set, and/or a suggested price may

be indicated as guidance for the buyer. The buyer can also select an amount higher than the standard price for

the commodity.

Giving buyers the freedom to pay what they want may seem to not make much sense for a seller, but in some

situations it can be very successful. While most uses of pay what you want have been at the margins of the

economy, or for special promotions, there are emerging efforts to expand its utility to broader and more regular

use.

Penetration pricing[edit]

Main article: Penetration pricing

Penetration pricing includes setting the price low with the goals of attracting customers and gaining market

share. The price will be raised later once this market share is gained.[5]

Predatory pricing[edit]

Main article: Predatory pricing

Predatory pricing, also known as aggressive pricing (also known as "undercutting"), intended to drive out

competitors from a market. It is illegal in some countries.

Premium decoy pricing[edit]

Method of pricing where an organization artificially sets one product price high, in order to boost sales of a

lower priced product.

Premium pricing[edit]

Main article: Premium pricing

Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage

favorable perceptions among buyers, based solely on the price. The practice is intended to exploit the (not

necessarily justifiable) tendency for buyers to assume that expensive items enjoy an exceptional reputation, are

more reliable or desirable, or represent exceptional quality and distinction.

Price discrimination[edit]

Main article: Price discrimination

Price discrimination is the practice of setting a different price for the same product in different segments to the

market. For example, this can be for different classes, such as ages, or for different opening times.

Price leadership[edit]

Main article: Price leadership

An observation made of oligopolistic business behavior in which one company, usually the dominant competitor

among several, leads the way in determining prices, the others soon following. The context is a state of limited

competition, in which a market is shared by a small number of producers or sellers.

Psychological pricing[edit]

Main article: Psychological pricing

Pricing designed to have a positive psychological impact. For example, selling a product at $3.95 or $3.99,

rather than $4.00. There are certain price points where people are willing to buy a product. If the price of a

product is $100 and the company prices it as $99, then it is called psychological pricing. In most of the

consumers mind $99 is psychologically ‘less’ than $100. A minor distinction in pricing can make a big difference

is sales. The company that succeeds in finding psychological price points can improve sales and maximize

revenue.

Target pricing[edit]

Pricing method whereby the selling price of a product is calculated to produce a particular rate of return on

investment for a specific volume of production. The target pricing method is used most often by public utilities,

like electric and gas companies, and companies whose capital investment is high, like automobile

manufacturers.

Target pricing is not useful for companies whose capital investment is low because, according to this formula,

the selling price will be understated. Also the target pricing method is not keyed to the demand for the product,

and if the entire volume is not sold, a company might sustain an overall budgetary loss on the product.

Time-based pricing[edit]

Main article: Time-based pricing

A flexible pricing mechanism made possible by advances in information technology, and employed mostly by

Internet based companies. By responding to market fluctuations or large amounts of data gathered from

customers - ranging from where they live to what they buy to how much they have spent on past purchases -

dynamic pricing allows online companies to adjust the prices of identical goods to correspond to a customer’s

willingness to pay. The airline industry is often cited as a dynamic pricing success story. In fact, it employs the

technique so artfully that most of the passengers on any given airplane have paid different ticket prices for the

same flight.[6]

Value-based pricing[edit]

Main article: Value-based pricing

Pricing a product based on the value the product has for the customer and not on its costs of production or any

other factor. This pricing strategy is frequently used where the value to the customer is many times the cost of

producing the item or service. For instance, the cost of producing a software CD is about the same

independent of the software on it, but the prices vary with the perceived value the customers are expected to

have. The perceived value will depend on the alternatives open to the customer. In business these alternatives

are using competitors software, using a manual work around, or not doing an activity. In order to employ value-

based pricing you have to know your customer's business, his business costs, and his perceived alternatives.It

is also known as Percieved-value pricing.

Other pricing approaches[edit]

Other pricing strategies include Yield Management, Congestion pricing and Variable pricing.

Nine laws of price sensitivity and consumer psychology[edit]

In their book, The Strategy and Tactics of Pricing, Thomas Nagle and Reed Holden outline nine "laws" or

factors that influence how a consumer perceives a given price and how price-sensitive they are likely to be with

respect to different purchase decisions. [7][8]

They are:

1. Reference Price Effect – buyer’s price sensitivity for a given product increases the higher the

product’s price relative to perceived alternatives. Perceived alternatives can vary by buyer segment,

by occasion, and other factors.

2. Difficult Comparison Effect – buyers are less sensitive to the price of a known or more reputable

product when they have difficulty comparing it to potential alternatives.

3. Switching Costs Effect – the higher the product-specific investment a buyer must make to switch

suppliers, the less price sensitive that buyer is when choosing between alternatives.

4. Price-Quality Effect – buyers are less sensitive to price the more that higher prices signal higher

quality. Products for which this effect is particularly relevant include: image products, exclusive

products, and products with minimal cues for quality.

5. Expenditure Effect – buyers are more price sensitive when the expense, accounts for a large

percentage of buyers’ available income or budget.

6. End-Benefit Effect – the effect refers to the relationship a given purchase has to a larger overall

benefit, and is divided into two parts: Derived demand: The more sensitive buyers are to the price of

the end benefit, the more sensitive they will be to the prices of those products that contribute to that

benefit. Price proportion cost: The price proportion cost refers to the percent of the total cost of the

end benefit accounted for by a given component that helps to produce the end benefit (e.g., think CPU

and PCs). The smaller the given components share of the total cost of the end benefit, the less

sensitive buyers will be to the component's price.

7. Shared-cost Effect – the smaller the portion of the purchase price buyers must pay for themselves,

the less price sensitive they will be.

8. Fairness Effect – buyers are more sensitive to the price of a product when the price is outside the

range they perceive as “fair” or “reasonable” given the purchase context.

9. The Framing Effect – buyers are more price sensitive when they perceive the price as a loss rather

than a forgone gain, and they have greater price sensitivity when the price is paid separately rather

than as part of a bundle.

onsidering Six Approaches to Effective PricingPricing is an integral part of the marketing process. The right price can generate more sales; the wrong price can

make your potential customers and clients look elsewhere. The following are six of the most common approaches to

setting prices. Carefully consider which approach makes the most sense for your business as you determine your

pricing strategy.

Start-up pricing: If you're just getting started in your business, offer your customers an introductory rate that's

set at a point somewhere between what other, established businesses charge and the amount you would be

paid if you were doing the work on salary for an employer.

The going rate: Set your price at the going rate and differentiate your business through things other than price,

such as better customer service.

Splitting the difference: If your competitors offer a range of prices for the same products or services — some

high, some low, and some in between — split the difference between the top and the bottom of the range so you

can be sure that your price is neither too high nor too low.

Percentage of the results: Rather than focusing on price, focus on results by tying your fees to the outcomes

that you bring about. For example, if you run a collections business out of your home, you may charge a

percentage of the money that you collect, say 40 percent, or 40 cents of every dollar collected.

Bargain basement: If you really want to generate a lot of business quickly, you can dramatically undercut your

competitors' prices. Before you try this approach, understand that some potential clients may be wary of buying

products and services that are priced substantially below the competition. Understand, too, that you may not be

able to keep this approach up for long without doing serious financial damage to your company.

Premium: Another option is to set the price at a premium, above your competition. This approach works well

when the product or service you sell can be differentiated from those offered by your competition, and you can

add value that your clients and customers can see and appreciate.

After you set your prices, keep close tabs on what your competition is doing. Are they raising their prices? Lowering

them? When your competition moves, be prepared to adjust your prices accordingly. Many times, you simply want to

maintain your prices exactly where they are, and deny requests to lower or discount them. While you may lose

potential customers in the process, your business will be healthier.

The following sections examine price increases and decreases.

Price increases

Price increases are not usually a pleasant event for the company that makes them — no one wants to tell their clients

that they are going to have to pay more money for their products — but they are often necessary for a variety of

reasons. Here are some of the most common:

You've underpriced your products. After you set a price and begin to sell your products and services, you

may discover that the money you're bringing in isn't enough to cover the expenses of the business and generate

a reasonable profit. In this case, when you can't or don't want to reduce your expenses, you have no other

choice but to increase your prices.

Your expenses have increased. If your costs of production increase, you can either reduce your profit or

increase your price. The choice is up to you.

You need to cover a client's hidden expenses. If you're performing services for a client and discover costs

due to working with that client that you didn't anticipate in advance (for example, your client requires you to

attend meetings twice a week instead of just once per month as you planned), you have to find a way to recoup

them without reducing your profit. The easiest way is to increase your price.

You want to test the marketplace. Sometimes you simply want to test the marketplace with a higher price, to

see if the quantity of units that you sell increases, decreases, or stays the same. Airlines, food manufacturers,

and others do this all the time.

You don't want the work. What if you don't want to do work for certain clients at the low prices you have

agreed to? The best way to get out of this kind of situation is to raise prices to a point where you feel you're

getting the profit you deserve. If the customer decides to pay more, great! If not, you won't miss it.

Whatever you do, be as forthcoming as you can possibly be when you increase your prices, and give your customers

plenty of advance notice so that they can adjust.

Price decreases

In some cases, you find that there's good reason for decreasing your prices, such as the following:

You've overpriced your services. If you've overpriced your services, you can choose to keep the extra money

as profit or give it back to your customers as lower prices.

Your expenses have decreased. Then again, you can always keep the fruit of your decreased expenses as

profit and increase the amount of money you're able to put into savings.

You want to reward long-term clients. Long-term clients always like to know that they are appreciated. You

can show your appreciation for your long-term clients (and build their loyalty) by decreasing the prices you

charge them, either on a one-time basis or permanently.

You want to get new work. One way to get new business is to drop your prices for new customers as a way to

introduce them to your company and your products and services.

You want to extend a professional courtesy. Doctors, lawyers, and other professionals are noted for

extending lower prices to colleagues as a professional courtesy. Why not extend lower prices to your

colleagues, too?

Positioning (marketing)From Wikipedia, the free encyclopedia

Contents

  [hide] 

1 Definitions

2 Brand positioning process

3 Product positioning process

4 Positioning concepts

5 Measuring the positioning

6 Repositioning a company

7 See also

8 References

9 External links

Definitions[edit]

Although there are different definitions of brand positioning, probably the most common is: identifying and

attempting to occupy a market niche for a brand, product or service utilizing traditional marketing placement

strategies (i.e. price, promotion, distribution, packaging, and competition).

Positioning is also defined as the way by which the marketers attempt to create a distinct impression in the

customer's mind.

Positioning is a concept in marketing which was first introduced by Jack Trout ( "Industrial Marketing"

Magazine- June/1969) and then popularized by Al Ries and Jack Trout in their bestseller book "Positioning -

The Battle for Your Mind." (McGraw-Hill 1981)

This differs slightly from the context in which the term was first published in 1969 by Jack Trout in the

paper "Positioning" is a game people play in today’s me-too market place" in the publication Industrial

Marketing, in which the case is made that the typical consumer is overwhelmed with unwanted advertising, and

has a natural tendency to discard all information that does not immediately find a comfortable (and empty) slot

in the consumers mind. It was then expanded into their ground-breaking first book, "Positioning: The Battle for

Your Mind," in which they define Positioning as "an organized system for finding a window in the mind. It is

based on the concept that communication can only take place at the right time and under the right

circumstances" (p. 19 of 2001 paperback edition).

What most will agree on is that Positioning is something (perception) that happens in the minds of the target

market. It is the aggregate perception the market has of a particular company, product or service in relation to

their perceptions of the competitors in the same category. It will happen whether or not a company's

management is proactive, reactive or passive about the on-going process of evolving a position. But a

company can positively influence the perceptions through enlightened strategic actions.

A company, a product or a brand must have positioning concept in order to survive in the competitive

marketplace. Many individuals confuse a core idea concept with a positioning concept. A Core Idea

Concept simply describes the product or service. Its purpose is merely to determine whether the idea has any

interest to the end buyer. In contrast, a Positioning Concept attempts to sell the benefits of the product or

service to a potential buyer. The positioning concepts focus on the rational or emotional benefits that buyer will

receive or feel by using the product/service. A successful positioning concept must be developed and qualified

before a "positioning statement" can be created. The positioning concept is shared with the target audience for

feedback and optimization; the Positioning Statement (as defined below) is a business person's articulation of

the target audience qualified idea that would be used to develop a creative brief for an agency to develop

advertising or a communications strategy.

Positioning Statement As written in the book Crossing the Chasm (Copyright 1991, by Geoffrey Moore,

HarperCollins Publishers), the position statement is a phrase so formulated: For (target customer) who

(statement of the need or opportunity), the (product name) is a (product category) that (statement of key benefit

– that is, compelling reason to buy). Unlike (primary competitive alternative), our product (statement of primary

differentiation).

Differentiation in the context of business is what a company can hang its hat on that no other business can.

For example, for some companies this is being the least expensive. Other companies credit themselves with

being the first or the fastest. Whatever it is a business can use to stand out from the rest is called

differentiation. Differentiation in today’s over-crowded marketplace is a business imperative, not only in terms of

a company’s success, but also for its continuing survival.

Brand positioning process[edit]

Effective Brand Positioning is contingent upon identifying and communicating a brand's uniqueness,

differentiation and verifiable value. It is important to note that "me too" brand positioning contradicts the notion

of differentiation and should be avoided at all costs. This type of copycat brand positioning only works if the

business offers its solutions at a significant discount over the other competitor(s).

Generally, the brand positioning process involves:

1. Identifying the business's direct competition (could include players that offer your product/service

amongst a larger portfolio of solutions)

2. Understanding how each competitor is positioning their business today (e.g. claiming to be the fastest,

cheapest, largest, the #1 provider, etc.)

3. Documenting the provider's own positioning as it exists today (may not exist if startup business)

4. Comparing the company's positioning to its competitors' to identify viable areas for differentiation

5. Developing a distinctive, differentiating and value-based positioning concept

6. Creating a positioning statement with key messages and customer value propositions to be used for

communications development across the variety of target audience touch points (advertising, media,

PR, website, etc.).

Product positioning process[edit]

Generally, the product positioning process involves:-

1. Defining the market in which the product or brand will compete (who the relevant buyers are)

2. Identifying the attributes (also called dimensions) that define the product 'space'

3. Collecting information from a sample of customers about their perceptions of each product on the

relevant attributes

4. Determine each product's share of mind

5. Determine each product's current location in the product space

6. Determine the target market's preferred combination of attributes (referred to as an ideal vector)

7. Examine the fit between the product and the market.

Positioning concepts[edit]

More generally, there are three types of positioning concepts:

1. Functional positions

Solve problems

Provide benefits to customers

Get favorable perception by investors (stock profile) and lenders

2. Symbolic positions

Self-image enhancement

Ego identification

Belongingness and social meaningfulness

Affective fulfillment

3. Experiential positions

Provide sensory stimulation

Provide cognitive stimulation

Measuring the positioning[edit]

Branding is facilitated by a graphical technique called perceptual mapping, various survey techniques, and

statistical techniques likemulti dimensional scaling, factor analysis, conjoint analysis, and logit analysis.

Repositioning a company[edit]

In volatile markets, it can be necessary - even urgent - to reposition an entire company, rather than just a

product line or brand. When Goldman Sachs and Morgan Stanley suddenly shifted from investment to

commercial banks, for example, the expectations of investors, employees, clients and regulators all needed to

shift, and each company needed to influence how these perceptions changed. Doing so involves repositioning

the entire firm.

This is especially true of small and medium-sized firms, many of which often lack strong brands for individual

product lines. In a prolonged recession, business approaches that were effective during healthy economies

often become ineffective and it becomes necessary to change a firm's positioning. Upscale restaurants, for

example, which previously flourished on expense account dinners and corporate events, may for the first time

need to stress value as a sale tool.

Repositioning a company involves more than a marketing challenge. It involves making hard decisions about

how a market is shifting and how a firm's competitors will react. Often these decisions must be made without

the benefit of sufficient information, simply because the definition of "volatility" is that change becomes difficult

or impossible to predict.

Positioning is however difficult to measure, in the sense that customer perception of a product may not have

been tested on quantitative measures.

See also[edit]

Brand management

Brand community

Customer engagement

Marketing

Marketing management

Target market

Product management

Market segment

Product differentiation

Proximity mapping

Marketing plan

Sustainable competitive advantage

Strategic management

Marketing strategies

Placebo (origins of technical term)

Points-of-parity/points-of-difference

Right-time marketing

List of renamed products

An effort to influence consumer perception of a brand or product relative to the perception of competing brands or products. Its objective is to occupy a clear, unique, and advantageous position in the consumer's mind.

Position strategy

Positioning Strategy

August 30, 2010 by Hitesh Bhasin 5 Comments

Positioning strategies can be conceived and developed in a variety of ways.

It can be derived from the object attributes, competition, application, the

types of consumers involved, or the characteristics of the product class. All

these attributes represent a different approach in developing positioning

strategies, even though all of them have the common objective of projecting

a favorable image in the minds of the consumers or audience. There are

seven approaches to positioning   strategies:

(1) Using Product characteristics or Customer Benefits as a

positioningstrategy

This strategy basically focuses upon the characteristics of the product or

customer benefits. For example if I say Imported items it basically tell or

illustrate a variety of product characteristics such as durability, economy or

reliability etc. Lets take an example of motorbikes some are emphasizing on

fuel economy, some on power, looks and others stress on their durability.

Hero Cycles Ltd. positions first, emphasizing durability and style for its

cycle.

At time even you would have noticed that a product is positioned along two

or more product characteristics at the same time. You would have seen this

in the case of toothpaste market, most toothpaste insists on ‘freshness’ and

‘cavity fighter’ as the product characteristics. It is always tempting to try to

position along several product characteristics, as it is frustrating to have

some good characteristics that are not communicated.

(2) Pricing as a positioning strategy - Quality Approach or Positioning

by Price-Quality – Lets take an example and understand this approach just

suppose you have to go and buy a pair ofjeans, as soon as you enter in the

shop you will find different price rage jeans in the showroom say price

ranging from 350 rupees to 2000 rupees. As soon as look at the jeans of 350

Rupees you say that it is not good in quality. Why? Basically because of

perception, as most of us perceive that if a product is expensive will be a

quality product where as product that is cheap is lower in quality. If we look

at this Price – quality approach it is important and is largely used in product

positioning. In many product categories, there are brands that deliberately

attempt to offer more in terms of service, features or performance. They

charge more, partly to cover higher costs and partly to let the consumers

believe that the product is, certainly of higher quality.

(3) Positioning strategy based on Use or Application – Lets understand

this with the help of an example like Nescafe Coffee for many years

positioned it self as a winter product and advertised mainly in winter but

the introduction of cold coffee has developed a positioning strategy for the

summer months also. Basically this type of positioning-by-use represents a

second or third position for the brand, such type of positioning is done

deliberately to expand the brand’s market. If you are introducing new uses

of the product that will automatically expand the brand’s market.

(4) Positioning strategy based on Product Process – Another

positioning approach is to associate the product with its users or a class of

users. Makes of casual clothing like jeans have introduced ‘designer labels’

to develop a fashion image. In this case the expectation is that the model or

personality will influence the product’s image by reflecting the

characteristics and image of the model or personality communicated as a

product user. Lets not forget that Johnson and Johnson repositioned its

shampoo from one used for babies to one used by people who wash their

hair frequently and therefore need a mild people who wash their hair

frequently and therefore need a mild shampoo. This repositioning resulted

in a market share.

(5) Positioning strategy based on Product Class - In some product class

we have to make sure critical positioning decisions For example, freeze

dried coffee needed to positions itself with respect to regular and instant

coffee and similarly in case of dried milk makers came out with instant

breakfast positioned as a breakfast substitute and virtually identical product

positioned as a dietary meal substitute.

(6) Positioning strategy based on Cultural Symbols - In today’s world

many advertisers are using deeply entrenched cultural symbols to

differentiate their brands from that of competitors. The essential task is to

identify something that is very meaningful to people that other competitors

are not using and associate this brand with that symbol. Air India uses

maharaja as its logo, by this they are trying to show that we welcome guest

and give them royal treatment with lot of respect and it also highlights

Indian tradition. Using and popularizing trademarks generally follow this

type of positioning.

(7) Positioning strategy based on Competitors - In this type of

positioning strategies, an implicit or explicit frame of reference is one or

more competitors. In some cases, reference competitor(s) can be the

dominant aspect of the positioning strategies of the firm, the firm either

uses the same of similar positioning strategies as used by the competitors

or the advertiser uses a new strategy taking the competitors’ strategy as

the base. A good example of this would be Colgate and Pepsodent. Colgate

when entered into the market focused on to family protection but when

Pepsodent entered into the market with focus on 24 hour protection and

basically for kids, Colgate changed its focus from family protection to kids

teeth protection which was a positioning strategy adopted because of

competition.