November 26, 2011

Marketing Strategy - Differentiating and Positioning the Market Offering




Marketing Strategy

 
Philip Kotler discussed five issues of marketing strategy in his 9th edition of Marketing Management

Differentiating and Positioning the Market Offering
Developing New Products
Managing Life cycle Strategies
Designing marketing Strategies for Market Leaders, Challengers, Followers, and Niches
Designing and Managing Global Marketing Strategies
   
These issues are covered in different knols by me. 

 (Author's personal note: Management Theory Revision, a new blog will have all the management articles published by me on Knol and will be come MBA Revision Guidebook, the project that I started on Knol. 


This knol describes differentiating and positioning. 
 
Differentiating and Positioning the Market Offering

The issues discussed in the area of differentiating and Positioning the market offering are:

  • Tools for Competitive Differentiation
  • Developing a Positioning Strategy
  • Communicating the Company’s Positioning

Tools for Competitive Differentiation

Differentiation - Definition: is the act of designing a set of meaningful differences to distinguish the company's offering from competitor's offerings.

Boston Consulting Group's differentiation opportunities matrix: Actually it is a competitive advantage matrix applicable to differentiation opportunities.
Four types of industries identified by BCG matrix are:
Volume industry: only a few but very large competitive advantages are possible. The benefit of the advantage is proportional with company size and market share. Example given - construction industry
Stalemated industry: in this type there are only few opportunities and the benefit from each is small. The benefit is also not proportional to the size or market share.
Example: Steel industry - It is hard to differentiate the product or decrease its manufacturing cost.
Fragmented industry: in this type, there are many opportunities, but the benefit of each of them is small. Benefit does not depend on size or market share.
Specialized industry: in this type, the opportunities are more and benefit of each opportunity is high. The benefit is not related to size or market share.
Kotler mentions, Milind Lele's observation that companies differ in their potential maneuverability along five dimensions: their target market, product, place (channels), promotion, and price. The freedom of maneuver is affected by the industry structure and the firm's position in the industry. For each potential competitive opportunity or option limited by the maneuverability, the company needs to estimate the return. Those opportunities that promise the highest return define the company's strategic leverage. The concept of maneuverability brings out the fact that a strategic option that worked very well in one industry may not work equally well in the other industry because of low maneuverability of that option in the different industry and by the firm in consideration.

Five Dimensions of Differentiation


Regarding the tools of differentiation, five dimensions can be utilized to provide differentiation.
Product
Services that accompany marketing, sales and after sales services.
Personnel that interact with the customer
Channel
Image
 
Differentiating a Product

Features
Quality:  performance and conformance

Performance - the performance of the prototype or the exhibited sample,
Conformance - The performance of every item made by the company under the same specification

Durability
Reliability
Repairability
Style
Design

Services differentiation


Ordering ease
Delivery
Installation
Customer training
Customer consulting
Miscellaneous services
Personnel Differentiation
Competence
Courtesy
Credibility
Reliability
Responsiveness
Communication
Channel differentiation
Coverage
Expertise of the channel managers
Performance of the channel in ease of ordering, and service, and personnel
Image differentiation
First distinction between Identity and Image - Identity is designed by the company and through its various actions company tries to make it known to the market.
Image is the understanding and view of the market about the company.
An effective image does three things for a product or company.
1. It establishes the product's planned character and value proposition.
2. It distinguishes the product from competing products.
3. It delivers emotional power and stirs the hearts as well as the minds of buyers.
The identity of the company or product is communicated to the market by
Symbols
Written and audiovisual media
Atmosphere of the physical place with which customer comes into contact
Events organized or sponsored by the company.
 
Developing a Positioning Strategy

Levitt and others have pointed out dozens of ways to differentiate an offering(Theodore Levitt: "Marketing success through differentiation-of anything", Harvard Business Review, Jan-Feb, 1980)
While a company can create many differences, each difference created has a cost as well as consumer benefit. A difference is worth establishing when the benefit exceeds the cost. More generally, a difference is worth establishing to the extent that it satisfies the following criteria.
  
Important: The difference delivers a highly valued benefit to a sufficient number of buyers.

Distinctive: The difference either isn't offered by others or is offered in a more distinctive way by the company.
Superior: The difference is superior to the ways of obtaining the same benefit.
Communicable: The difference is communicable and visible to the buyers.
Preemptive: The difference cannot be easily copied by competitors.
Affordable: The buyer can afford to pay the higher price
Profitable: The Company will make profit by introducing the difference.
Positioning  
Positioning is the result of differentiation decisions. It is the act of designing the company's offering and identity (that will create a planned image) so that they occupy a meaningful and distinct competitive position in the target customer's minds.

The end result of positioning is the creation of a market-focused value proposition, a simple clear statement of why the target market should buy the product.
Example:

Volvo (station wagon)
Target customer-Safety conscious upscale families,
Benefit - Durability and Safety,
Price - 20% premium,
Value proposition - The safest, most durable wagon in which your family can ride.

How many differences to promote?
Many marketers advocate promoting only one benefit in the market (Your market offering may have many differentiators, actually should have many differentiators in product, service, personnel, channel, and image).
Kotler mentions that double benefit promotion may be necessary, if some more firms claim to be best on the same attribute. Kotler gives the example of Volvo, which says and "safest" and "durable".
Four major positioning errors
1. Underpositioning: Market only has a vague idea of the product.

2. Overpositioning: Only a narrow group of customers identify with the product.
3. Confused positioning: Buyers have a confused image of the product as it claims too many benefits or it changes the claim too often.
4. Doubtful positioning: Buyers find it difficult to believe the brand’s claims in view of the product’s features, price, or manufacturer.
Different positioning strategies or themes
1. Attribute positioning: The message highlights one or two of the attributes of the product.

2. Benefit positioning:  The message highlights one or two of the benefits to the customer.

3. Use/application positioning: Claim the product as best for some application.

4. User positioning: Claim the product as best for a group of users. - Children, women, working women etc.

5. Competitor positioning: Claim that the product is better than a competitor.

6. Product category positioning: Claim as the best in a product category Ex: Mutual fund ranks – Lipper.

7. Quality/Price positioning: Claim best value for price

Which differences to promote:


This issue is related to the discussion of worthwhile differences to incorporate into the market offering done earlier. But now competitors positioning also needs to be considered to highlight one or two exclusive benefits offered by the product under consideration.
 
Communicating the Company’s Positioning
Once the company has developed a clear positioning strategy, the company must choose various signs and cues that buyers use to confirm that the product delivers the promise made by the company.

References

Philip Kotler - Marketing Management

Related Articles

 
  • Marketing Strategy for New Industry Products
Pioneer in a Product - Issues When a product is new in the industry life cycle, the firm starting the production and sale ...
  • Marketing Strategies for Challenger Firms
Firms take the role of challengers when they make aggressive efforts to further their market share.
 
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