Management Theory Review: Marketing Strategy - Differentiating and Positioning the Market Offering

February 25, 2021

Marketing Strategy - Differentiating and Positioning the Market Offering

Browse Online MBA Management Theory Handbook

Marketing Management Revision Article Series

Marketing Strategy

Philip Kotler discussed five issues of marketing strategy in his 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 articles by me in Management Theory Revision,

This article describes differentiating and positioning the market offering.

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

To differentiate market offering, five dimensions can be utilized.

Product

Services that accompany marketing, sales and after sales services.

Personnel that interact with the customer

Channel

Image

Differentiating a Product

There is a continuum among products regarding ability to differentiate. In certain products, it is generally assumed that no differentiation is possible. At the other extreme are products capable of high differentiation such as automobiles, commercial buildings and furniture. The main differentiators used by companies are features, performance, conformance, durability, reliability, repeatability, style and design.

Features

Features are characteristics that supplement the product's basic function.

Quality: performance and conformance

Performance - Kotler states that products can be offered at four performance levels: low, average, high and superior.

In simple, the performance quality is exhibited by the prototype or the exhibited sample.

Conformance - The performance of every item made by the company under the same specification.

Conformance quality is the degree to which all the produced units are identical and meet the promised target specification.

If the production conformance quality is low, the product will disappoint many buyers.

Durability

Durability is a measure of the product's expected operating life under natural or stressful condition.

Reliability

Repairability

Style

Design

Services differentiation

Ordering ease

Delivery

The delivery characteristic associated with product includes speed, accuracy, and care with which delivery is made.

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 Differentiation 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.

Developing a Positioning Strategy

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