Class.5/3 Segmentation , Targeting, Differentiation & Positioning

3- Differentiation & Positioning for Competitive Advantage

Once a company has decided which segments of the market it will enter, it must decide what positions it wants to occupy in those segments. A product's position is the way the product is defined by consumers on important attributes—the place the product occupies in consumers' minds relative to competing products.

Positioning involves implanting the brand's unique benefits and differentiation in customers' minds.

Thus, Tide is positioned as a powerful, all-purpose family detergent; Ivory Snow is positioned as the gentle detergent for fine washables and baby clothes. In the automobile market, Toyota Tercel and Subaru are positioned on economy, Mercedes and Cadillac on luxury, and Porsche and BMW on performance. Volvo positions powerfully on safety.

Consumers are overloaded with information about products and services. They cannot reevaluate products every time they make a buying decision. To simplify the buying process, consumers organize products into categories—they "position" products, services, and companies in their minds.

A product's position is the complex set of perceptions, impressions, and feelings that consumers have for the product compared with competing products. Consumers position products with or without the help of marketers. But marketers do not want to leave their products' positions to chance. They must plan positions that will give their products the greatest advantage in selected target markets, and they must design marketing mixes to create these planned positions.

Choosing a Positioning Strategy

Some firms find it easy to choose their positioning strategy. For example, a firm well known for quality in certain segments will go for this position in a new segment if there are enough buyers seeking quality. But in many cases, two or more firms will go after the same position. Then, each will have to find other ways to set itself apart. Each firm must differentiate its offer by building a unique bundle of benefits that appeals to a substantial group within the segment.

The positioning task consists of 3 steps:

1. identifying a set of possible competitive advantages upon which to build a position,
2. choosing the right competitive advantages, and
3. selecting an overall positioning strategy.

The company must then effectively communicate and deliver the chosen position to the market.

Identifying Possible Competitive Advantages

The key to winning and keeping customers is to understand their needs and buying processes better than competitors do and to deliver more value. To the extent that a company can position itself as providing superior value to selected target markets it gains competitive advantage. But solid positions cannot be built on empty promises.

If a company positions its product as offering the best quality and service, it must then deliver the promised quality and service.

Thus, positioning begins with actually differentiating the company's marketing offer so that it will give consumers more value than competitors' offers do.

To find points of differentiation, marketers must think through the customer's entire experience with the company's product or service. An alert company can find ways to differentiate itself at every point where it comes in contact with customers. In what specific ways can a company differentiate its offer from those of competitors? A company or market offer can be differentiated along the lines of product, services, channels, people, or image.

Competitive advantages: Volvo positions powerfully on safety: All most people want from a car seat is "a nice, comfy place to put your gluteus maximus." However, when a Volvo is struck from behind, a sophisticated system "guides the front seats through an intricate choreography that supports the neck and spine, while helping to reduce dangerous collision impact forces."

Product differentiation takes place along a continuum. At one extreme we find physical products that allow little variation: chicken, steel, aspirin. Yet even here some meaningful differentiation is possible. For example, Perdue claims that its branded chickens are better—fresher and more tender—and gets a 10 percent price premium based on this differentiation. At the other extreme are products that can be highly differentiated, such as automobiles, commercial machinery, and furniture. Such products can be differentiated on features, performance, or style and design. Thus, Volvo provides new and better safety features; Whirlpool designs its dishwasher to run more quietly; Bose speakers are positioned on striking design characteristics. Similarly, companies can differentiate their products on such attributes as consistency, durability, reliability, or repairability.

Beyond differentiating its physical product, a firm can also differentiate the services that accompany the product. Some companies gain services differentiation through speedy, convenient, or careful delivery. For example, BancOne has opened full-service branches in supermarkets to provide location convenience along with Saturday, Sunday, and weekday-evening hours. Installation can also differentiate one company from another, as can repair services. Many an automobile buyer will gladly pay a little more and travel a little farther to buy a car from a dealer that provides top-notch repair service. Some companies differentiate their offers by providing customer training service or consulting services—data, information systems, and advising services that buyers need. For example, McKesson Corporation, a major drug wholesaler, consults with its 12,000 independent pharmacists to help them set up accounting, inventory, and computerized ordering systems. By helping its customers compete better, McKesson gains greater customer loyalty and sales.

Firms that practice channel differentiation gain competitive advantage through the way they design their channel's coverage, expertise, and performance. Caterpillar's success in the construction-equipment industry is based on superior channels. Its dealers worldwide are renowned for their top-notch service. Dell Computer and Avon distinguish themselves by their high-quality direct channels. Iams pet food achieves success by going against tradition, distributing its products only through veterinarians and pet stores.

Companies can gain a strong competitive advantage through people differentiation —hiring and training better people than their competitors do. Thus, Disney people are known to be friendly and upbeat. Singapore Airlines enjoys an excellent reputation largely because of the grace of its flight attendants. IBM offers people who make sure that the solution customers want is the solution they get: "People Who Think. People Who Do. People Who Get It." People differentiation requires that a company select its customer-contact people carefully and train them well. For example, Disney trains its theme park people thoroughly to ensure that they are competent, courteous, and friendly. From the hotel check-in agents, to the monorail drivers, to the ride attendants, to the people who sweep Main Street USA, each employee understands the importance of understanding customers, communicating with them clearly and cheerfully, and responding quickly to their requests and problems. Each is carefully trained to "make a dream come true."

Even when competing offers look the same, buyers may perceive a difference based on company or brand image differentiation. A company or brand image should convey the product's distinctive benefits and positioning. Developing a strong and distinctive image calls for creativity and hard work. A company cannot plant an image in the public's mind overnight using only a few advertisements. If Ritz-Carlton means quality, this image must be supported by everything the company says and does. Symbols—such as McDonald's golden arches, the Prudential rock, or the Pillsbury doughboy—can provide strong company or brand recognition and image differentiation. The company might build a brand around a famous person, as Nike did with its Air Jordan basketball shoes. Some companies even become associated with colors, such as IBM (blue), Campbell (red and white), or Kodak (red and yellow). The chosen symbols, characters, and other image elements must be communicated through advertising that conveys the company's or brand's personality.

Choosing the Right Competitive Advantages

Suppose a company is fortunate enough to discover several potential competitive advantages. It now must choose the ones on which it will build its positioning strategy. It must decide how many differences to promote and which ones.

How Many Differences to Promote?

Many marketers think that companies should aggressively promote only one benefit to the target market. Ad man Rosser Reeves, for example, said a company should develop a unique selling proposition (USP) for each brand and stick to it. Each brand should pick an attribute and tout itself as "number one" on that attribute. Buyers tend to remember number one better, especially in an overcommunicated society. Thus, Crest toothpaste consistently promotes its anticavity protection and Volvo promotes safety. A company that hammers away at one of these positions and consistently delivers on it probably will become best known and remembered for it.

Other marketers think that companies should position themselves on more than one differentiating factor. This may be necessary if two or more firms are claiming to be the best on the same attribute. Today, in a time when the mass market is fragmenting into many small segments, companies are trying to broaden their positioning strategies to appeal to more segments. For example, Unilever introduced the first three-in-one bar soap—Lever 2000—offering cleansing, deodorizing, and moisturizing benefits. Clearly, many buyers want all three benefits, and the challenge was to convince them that one brand can deliver all three. Judging from Lever 2000's outstanding success, Unilever easily met the challenge. However, as companies increase the number of claims for their brands, they risk disbelief and a loss of clear positioning.

Unilever positioned its best-selling Lever 2000 soap on three benefits in one: cleansing, deodorizing, and moisturizing benefits. It's good "for all your 2000 parts."

In general, a company needs to avoid three major positioning errors. The first is underpositioning—failing to ever really position the company at all. Some companies discover that buyers have only a vague idea of the company or that they do not really know anything special about it. The second error is overpositioning—giving buyers too narrow a picture of the company. Thus, a consumer might think that the Steuben glass company makes only fine art glass costing $1,000 and up, when in fact it makes affordable fine glass starting at around $50. Finally, companies must avoid confused positioning—leaving buyers with a confused image of a company. For example, over the past decade, Burger King has fielded six separate advertising campaigns, with themes ranging from "Herb the nerd doesn't eat here" to "Sometimes you've got to break the rules" and "BK Tee Vee." This barrage of positioning statements has left consumers confused and Burger King with poor sales and profits.

Which Differences to Promote?

Not all brand differences are meaningful or worthwhile; not every difference makes a good differentiator. Each difference has the potential to create company costs as well as customer benefits. Therefore, the company must carefully select the ways in which it will distinguish itself from competitors. A difference is worth establishing to the extent that it satisfies the following criteria:

• Important: The difference delivers a highly valued benefit to target buyers.
• Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way.
• Superior: The difference is superior to other ways that customers might obtain the same benefit.
• Communicable: The difference is communicable and visible to buyers.
• Preemptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay for the difference.
• Profitable: The company can introduce the difference profitably.

Many companies have introduced differentiations that failed one or more of these tests. The Westin Stamford hotel in Singapore advertises that it is the world's tallest hotel, a distinction that is not important to many tourists—in fact, it turns many off. Polaroid's Polarvision, which produced instantly developed home movies, bombed too. Although Polarvision was distinctive and even preemptive, it was inferior to another way of capturing motion, namely, camcorders. When Pepsi introduced clear Crystal Pepsi some years ago, customers were unimpressed. Although the new drink was distinctive, consumers didn't see "clarity" as an important benefit in a soft drink. Thus, choosing competitive advantages upon which to position a product or service can be difficult, yet such choices may be crucial to success.

Selecting an Overall Positioning Strategy

Consumers typically choose products and services that give them the greatest value. Thus, marketers want to position their brands on the key benefits that they offer relative to competing brands. The full positioning of a brand is called the brand's value proposition—the full mix of benefits upon which the brand is positioned. It is the answer to the customer's question "Why should I buy your brand?" Volvo's value proposition hinges on safety but also includes reliability, roominess, and styling, all for a price that is higher than average but seems fair for this mix of benefits.

Communicating and Delivering the Chosen Position

Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to target consumers. All the company's marketing mix efforts must support the positioning strategy. Positioning the company calls for concrete action, not just talk. If the company decides to build a position on better quality and service, it must first deliver that position. Designing the marketing mix—product, price, place, and promotion—essentially involves working out the tactical details of the positioning strategy. Thus, a firm that seizes on a "for more" position knows that it must produce high-quality products, charge a high price, distribute through high-quality dealers, and advertise in high-quality media. It must hire and train more service people, find retailers who have a good reputation for service, and develop sales and advertising messages that broadcast its superior service. This is the only way to build a consistent and believable "more for more" position.

Companies often find it easier to come up with a good positioning strategy than to implement it. Establishing a position or changing one usually takes a long time. In contrast, positions that have taken years to build can quickly be lost. Once a company has built the desired position, it must take care to maintain the position through consistent performance and communication. It must closely monitor and adapt the position over time to match changes in consumer needs and competitors' strategies. However, the company should avoid abrupt changes that might confuse consumers. Instead, a product's position should evolve gradually as it adapts to the ever-changing marketing environment.