IBMS / University of Applied Sciences. Raymond Reinhardt. 3R Business Development 3R POSITIONING

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1 IBMS / University of Applied Sciences Raymond Reinhardt 3R Business Development raymond.reinhardt@3r-bdc.com 3R 1 Identifying consumer groups & positioning M Core strategy: the identification of a group of customers for whom the organization has a differential advantage, and then positioning itself in that market. Core strategy is the hub of marketing: where the organization s strengths meet market opportunities. What are we capable of doing / what should we do, in order to get customers to start buying our products or services? 2 Identifying consumer groups & positioning M Positioning: an organization s intentional endeavor at establishing a certain relative position in the market, of the organization, a division, a brand or a product, in the perception of customers, with regard to similar competitors. M The key to winning and keeping customers is, of course, to understand their needs and buying processes better than competitors do, and to deliver more value. 3

2 Identifying consumer groups & positioning M Competitive advantage: happens when an organization can position itself as providing superior value to selected target markets, either by offering lower prices, or by providing more benefits to justify higher prices. M Positioning begins with differentiating the organization s marketing offer, so it will give customers more value than competitors offers do. 4 BCG matrix & competitive advantages M Not all organizations are able to find many opportunities for differentiating their offers and gaining competitive advantages. This may depend on what type of industry is involved. The Boston Consulting Group advantage matrix (not to be confused with the BCG growth-share matrix) explains several types of industry based on the number of competitive advantages and the size of those advantages. 5 BCG matrix & competitive advantages 6

3 BCG matrix & competitive advantages M The 4 industry types according to BCG: F Volume industry: an industry characterized by few opportunities to create competitive advantages, however, each advantage is huge and gives a high pay-off (Hitachi, Unilever). F Fragmented industry: an industry characterized by many opportunities to create competitive advantages, however, each advantage is relatively small (services, fastfood restaurants) 7 BCG matrix & competitive advantages M The 4 industry types according to BCG: F Specialized industry: an industry where there are many opportunities for organizations to create competitive advantages that are huge or give a high pay-off (pharmaceuticals, nutraceuticals). F Stalemate industry: an industry that produces commodities and is characterized by a few opportunities to create competitive advantages, with each advantage being small (steel, bulk chemicals). 8 BCG matrix & competitive advantages M More differentiation opportunities: F Differentiation may seem to be harder in some industries than others, but creative organizations have shown that any market can be differentiated. F The solution for organizations facing loss of their advantages is to keep identifying new potential advantages and to introduce them one by one to keep competitors off balance (Sony, Apple, Intel, Microsoft, Gillette). 9

4 Products, services, personnel, image M Differentiation possibilities: A company or market offer can be differentiated along the lines of product, services, personnel or image. F Product differentiation: although some companies offer highly standardized products that allow little variation (steel, aspirin), often meaningful differentiation is possible, for instance, based on product features (cars, computers) or product performance (washing machines). 10 Products, services, personnel, image (cont d) M Differentiation possibilities: F Services differentiation can be established through, for instance, reliable delivery, installation of machinery or equipment, customer training, consulting services, etc. F Personnel differentiation: organizations can gain a strong competitive advantage through hiring and training better people than their competitors do. 11 Products, services, personnel, image (cont d) M Differentiation possibilities: F Image differentiation: although competing offers may often look the same, buyers may perceive differences based on company or brand images. A company or brand image should convey a singular and distinctive message that communicates the product s main benefits and positioning. Symbols can provide strong company or brand recognition and image differentiation (Mercedes star, the Michelin man, Ferrari s red color) 12

5 Value positioning M Other differentiation possibilities: F Value positioning: involves a range of positioning alternatives based on the value an offering delivers and its price. As consumers typically choose products and services that give them the greatest value, marketers will want to position their brands on the key benefits that they offer relative to competing brands, thus trying to answer the consumer s question: Why should I buy your brand?. 13 Value positioning (cont d) M 5 winning value propositions companies can use to position their products: F More for more: involves providing the most upscale product or service and charging a higher price to cover higher costs (Ritz- Carlton Hotels, Mercedes-Benz, etc.). F More for the same: companies can attack a competitor s more for more positioning by introducing a brand that offers comparable quality, but at a lower price (introduction of Toyota s Lexus as Mercedes s competitor). 14 Value positioning (cont d) M 5 winning value propositions companies can use to position their products: F The same for less: involves selling a certain product for a lower price (Amazon.com s books in comparison with regular bookshops). F Less for much less: involves meeting consumers lower performance or quality requirements at a much lower price. For instance, the various low-cost airlines. 15

Value positioning (cont d) M 5 winning value propositions companies can use to position their products: F More for less: as -successfully- being done by companies such as Dell computers.

Offering more usually costs more, making it difficult to deliver on the for less promise. Companies that try to deliver both may eventually lose out to more focused competitors.

competing products. M And yet, consumers are overloaded with information about products and services.

6 Value positioning (cont d) M 5 winning value propositions companies can use to position their products: F More for less: as -successfully- being done by companies such as Dell computers. This may seem the winning value proposition, however, most companies will have great difficulty sustaining such a best-of-both proposition. Offering more usually costs more, making it difficult to deliver on the for less promise. Companies that try to deliver both may eventually lose out to more focused competitors. 16 Product positioning Product position M 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. M And yet, consumers are overloaded with information about products and services. To simplify buying decision making, consumers organize products into categories: they position products, services and companies in their minds. 17 Product positioning Product position M As such, consumers tend to remember brands in the form of a product ladder, such as: McDonald s -> Burger King -> Wendy s In such a ladder, the second firm often has half of the business of the first firm, and the third firm obtains approx. half the business of the second firm. Above all, the top firm is remembered best, hence the reason why companies fight for the number 1 position. 18

7 Product positioning Product position M Apparently, consumers tend to remember #1 positions best, and have great difficulty in remembering other positions. According to marketing-guru s Al Ries and Jack Trout the biggest marketing position can be held by only one brand (example: McDonalds hamburgers, Apple smartphones, etc.). So, what counts is to achieve a #1 position along some valued product attribute: Burger King flame grilled hamburgers, Panasonic s affordable audio, etc. 19 Product positioning Product position M According to Ries and Trout, there are 3 positioning alternatives: F Strengthening a brand s current position in the minds of customers. Example: Avis car rental stating they re #2, so they try harder. F Search for a new unoccupied position that is valued enough and grabbing it (hole in the market). Example: VW s introduction of the Beetle in the US, at a time when larger cars were popular, with their slogan Think small. 20 Product positioning Product position M Ries and Trout s, positioning alternatives:(cont d) F Depositioning or repositioning the competition. Example: BurgerKing stating it just tastes better (than McDonalds). Or Wise Potato chips (US) who repositioned Pringles in the mind of consumers by highlighting some of Pringle's non-natural ingredients that sounded like unhealthy chemicals, even though they were not. Wise potato chips of course, consisted only of potatoes, vegetable oil and salt. 21

8 Perceptual mapping Perceptual maps M Perceptual map: a product positioning tool that uses multidimensional scaling (MDS) of consumers perceptions and preferences to portray the psychological distance between products and segments. Multidimensional scaling (MDS) provides a visual representation of the pattern of, for example, perceived similarities between various car brands, as gathered through market research among consumers. 22 Perceptual mapping 23 Using associations to change perceptions M Product attributes: usually involve positioning technical products (technical features, originality, such as mechanical movements of exclusive Swiss watches). M Benefits offered: or the needs that they fill, can also position various products, such as toothpastes that reduce dental diseases, or candy bars that take away your hungry feeling, etc. 24

9 Using associations to change perceptions M Usage occasions: proposed moments or times to use a product, positions many products. After Eight mints suggest being an after-dinner mint; the Dutch Cup-a-soup suggests being a good soup-snack during office hours, etc. M Users: can help to position products, often by being associated with the consumers user class (Nescafé s instant coffees & romantic moments; Pepsi for the new generation, etc.). 25 Using associations to change perceptions M Personalities: can also help positioning, which often occurs with prestigious brands that use successful personalities to promote their products (Michael Jordan & Nike, George Clooney & Nespresso, Charlize Theron & Dior, etc.). M Origin: positions products by association with its place of produce (Renault s Créateur d automobiles ; Australian beers; Danish design by Bang & Olufsen, etc.). 26 Using associations to change perceptions M Other brands: can help position products, such as the case with the Czech car brand Skoda once it had been taken over by VW. M Competitors: provide 2 positioning alternatives: positioning directly against a competitor (Avis: we try harder ), or positioning away from competitors (7-Up s uncola image). 27

10 M How many differences should be promoted?: Advertising executive Rosser Reeves stated many years ago that companies should develop a unique selling proposition (USP) for each brand and stick to it. F Unique selling proposition: the unique product benefit that a company aggressively promotes in a consistent manner to its target market, usually focusing on best quality, best services, lowest prices, most advanced technologies, etc. 28 M As many companies have difficulty at keeping functional superiority (price, quality, service, etc.), more companies are focusing on having a unique emotional selling proposition: a nonfunctional attribute that has unique associations for consumers. Examples: exclusive brands such as Rolex, Ferrari and Chanel. 29 M As companies increase the number of claims for their brands, they risk disbelief and a loss of clear positioning. 4 typical positioning errors that can occur: F underpositioning F overpositioning F confusing positioning F implausible positioning. 30

11 M Typical positioning errors that can occur: F Underpositioning: refers to failure to position a company, its product or brand: the consumer knows little to nothing about it. Such has happened with spirits such as rums, whisky s, brandy s and gins, where younger drinkers had drifted away from them, until the producers started to focus on mixers. 31 M Typical positioning errors that can occur: F Overpositioning: refers to too narrow a picture of the company, its product or a brand is being communicated to target consumers: the consumer has a wrong over-exposed idea about it. For instance, when consumers are convinced that companies like Motorola or Nokia only make mobile Nokia s N1 Android tablet (2014) phones. 32 M Typical positioning errors that can occur: F Confused positioning: refers to a positioning error that leaves the consumer with a puzzled image of the company, its product or a brand. This may happen when marketers either change their position too often or emphasize benefits that contradict each other. O The 1985 introduction of New Coke (and scrapping the original Coca-Cola at the same time) lead to a lot of confusion (and anger) among most of Coke s customers. It proved that you can t simply replace the real thing with a new real thing! 33

12 M Typical positioning errors that can occur: F Implausible positioning: occurs when the positioning strategy stretches the perception of the buyers too far to believed. The consumer has the feeling that this is too good to be true, such as was the case when Toyota introduced their Lexus brand in the US. 34 M Differences to promote: A difference is worth establishing insofar it satisfies the following criteria: F Importance: the difference delivers a highly valued benefit to target buyers. F Distinction: competitors can or do not offer the difference. F Superiority: the difference is superior to other ways by which customers might get the same benefit. 35 M Differences to promote, criteria: F Communicability: the difference is communicable and visible to buyers. F Pre-emptive (preventive): competitors can not easily copy the difference. F Affordable: buyers can afford to pay for the difference. F Profitability: the company can introduce the difference profitably. 36

Principles Of Marketing _ MGT 301. Lesson 18

Principles Of Marketing _ MGT 301. Lesson 18 Lesson 18 Lesson overview and learning objectives: In last Lesson we studied the segmentation to day we will continue the same topic and market targeting, and market positioning MARKET SEGMENTATION (CONTINUED)