Positioning for Competitive Advantage

Beyond deciding which segments of the market it will target, the company 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. 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, the Toyota Echo and Ford Focus are positioned on economy, Mercedes and Cadillac on luxury, and Porsche and BMW on performance. Volvo positions powerfully on safety. At Subway restaurants, you "Eat Fresh." At Olive Garden restaurants, "When You're Here, You're Family."

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, services, and companies into categories and "position" them 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.

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.

Porsche positions powerfully on performance and the freedom it generates: "The engine launches you forward with its distinctive growl. Any memory of life on a leash evaporates in the wind rushing overhead. It's time to run free."

The positioning task consists of three steps: identifying a set of possible competitive advantages upon which to build a position, choosing the right competitive advantages, and selecting an overall positioning strategy. The company must then effectively communicate and deliver the chosen position to the market.

The key to winning and keeping target customers is to understand their needs better than competitors do and to deliver more value. To the extent that a company can position itself as providing superior value, 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.³¹ 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.

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, clothing, 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 positions its speakers on their 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, BankOne 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 services. Some companies differentiate their offers by providing customer training service or consulting services—data, information systems, and advising services that buyers need. 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 first-rate service. Amazon.com, Dell Computer, and Avon distinguish themselves by their high-quality direct channels. And Iams pet food achieved 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 Get It. People Who Get It Done." 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 cheerfully, and responding quickly to their requests and problems. Each is carefully trained to "make people happy."

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 the McDonald's golden arches, the Prudential rock, the Nike swoosh, the Intel Inside logo, 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 and Tiger Woods golfing products. Some companies even become associated with colors, such as IBM (blue), Campbell (red and white), or UPS (brown). The chosen symbols, characters, and other image elements must be communicated through advertising that conveys the company's or brand's personality.

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 differentiator. This may be necessary if two or more firms are claiming to be 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. 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.

In general, a company needs to avoid three major positioning errors. The first is underpositioning—failing ever to 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 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 two decades, Burger King has fielded a dozen separate advertising campaigns, with themes ranging from "Herb the nerd doesn't eat here" to "Sometimes you've got to break the rules," "BK Tee Vee," "Got the Urge?" and "Have It Your Way." This barrage of positioning statements has left consumers confused and Burger King with poor sales and profits. Similarly, Kmart has not fared well against more strongly positioned competitors. Wal-Mart positions itself forcefully as offering "Always low prices. Always!" Target has positioned itself as the trendier "upscale discounter." But most consumers have difficulty positioning Kmart favorably on any specific differentiating attributes.

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."

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 most 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.

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.

Figure 8.3 shows possible value propositions upon which a company might position its products. In the figure, the five green cells represent winning value propositions—positioning that gives the company competitive advantage. The red cells, however, represent losing value propositions. The center yellow cell represents at best a marginal proposition. In the following sections, we discuss the five winning value propositions upon which companies can position their products: more for more, more for the same, the same for less, less for much less, and more for less.³²

MORE FOR MORE.    "More-for-more" positioning involves providing the most upscale product or service and charging a higher price to cover the higher costs. Ritz-Carlton Hotels, Mont Blanc writing instruments, Mercedes-Benz automobiles—each claims superior quality, craftsmanship, durability, performance, or style and charges a price to match. Not only is the marketing offer high in quality, it also offers prestige to the buyer. It symbolizes status and a loftier lifestyle. Often, the price difference exceeds the actual increment in quality.

Sellers offering "only the best" can be found in every product and service category, from hotels, restaurants, food, and fashion to cars and kitchen appliances. Consumers are sometimes surprised, even delighted, when a new competitor enters a category with an unusually high-priced brand. Starbucks coffee entered as a very expensive brand in a largely commodity category; Häagen-Dazs came in as a premium ice cream brand at a price never before charged.

ACTIVE FIGURE 8.3	Possible value propositions

In general, companies should be on the lookout for opportunities to introduce a "much-more-for-much-more" brand in any underdeveloped product or service category. Yet more-for-more brands can be vulnerable. They often invite imitators who claim the same quality but at a lower price. Luxury goods that sell well during good times may be at risk during economic downturns when buyers become more cautious in their spending.

MORE FOR THE SAME.    Companies can attack a competitor's more-for-more positioning by introducing a brand offering comparable quality but at a lower price. For example, Toyota introduced its Lexus line with a "more-for-the-same" value proposition. Its headline read: "Perhaps the first time in history that trading a $72,000 car for a $36,000 car could be considered trading up." It communicated the high quality of its new Lexus through rave reviews in car magazines, through a widely distributed videotape showing side-by-side comparisons of Lexus and Mercedes automobiles, and through surveys showing that Lexus dealers were providing customers with better sales and service experiences than were Mercedes dealerships. Many Mercedes owners switched to Lexus, and the Lexus repurchase rate has been 60 percent, twice the industry average.

"Much more for much more" value proposition: Häagen-Dazs offers its superpremium ice cream at a price never before charged.

THE SAME FOR LESS.    Offering "the same for less" can be a powerful value proposition—everyone likes a good deal. For example, Dell Computer offers equivalent quality computers at a lower "price for performance." Discounts stores such as Wal-Mart and "category killers" such as Best Buy, Circuit City, and Sportmart also use this positioning. They don't claim to offer different or better products. Instead, they offer many of the same brands as department stores and specialty stores but at deep discounts based on superior purchasing power and lower-cost operations.

Other companies develop imitative but lower-priced brands in an effort to lure customers away from the market leader. For example, AMD makes less expensive versions of Intel's market-leading microprocessor chips. Many personal computer companies make "IBM clones" and claim to offer the same performance at lower prices.

LESS FOR MUCH LESS.    A market almost always exists for products that offer less and therefore cost less. Few people need, want, or can afford "the very best" in everything they buy. In many cases, consumers will gladly settle for less than optimal performance or give up some of the bells and whistles in exchange for a lower price. For example, many travelers seeking lodgings prefer not to pay for what they consider unnecessary extras, such as a pool, attached restaurant, or mints on the pillow. Motel chains such as Motel 6 suspend some of these amenities and charge less accordingly.

"Less-for-much-less" positioning involves meeting consumers' lower performance or quality requirements at a much lower price. For example, Family Dollar and Dollar General stores offer more affordable goods at very low prices. Sam's Club and Costco warehouse stores offer less merchandise selection and consistency, and much lower levels of service; as a result, they charge rock-bottom prices. Southwest Airlines, the nation's most profitable air carrier, also practices less-for-much-less positioning. It charges incredibly low prices by not serving food, not assigning seats, and not using travel agents.

MORE FOR LESS.    Of course, the winning value proposition would be to offer "more for less." Many companies claim to do this. For example, Dell Computer claims to have better products and lower prices for a given level of performance. Procter & Gamble claims that its laundry detergents provide the best cleaning and everyday low prices. In the short run, some companies can actually achieve such lofty positions. For example, when it first opened for business, Home Depot had arguably the best product selection and service and the lowest prices compared to local hardware stores and other home improvement chains.

Yet in the long run, companies will find it very difficult to sustain such best-of-both positioning. Offering more usually costs more, making it difficult to deliver on the "for less" promise. Companies that try to deliver both may lose out to more-focused competitors. For example, facing determined competition from Lowe's stores, Home Depot must now decide whether it wants to compete primarily on superior service or on lower prices.

All said, each brand must adopt a positioning strategy designed to serve the needs and wants of its target markets. "More for more" will draw one target market, "less for much less" will draw another, and so on. Thus, in any market, there is usually room for many different companies, each successfully occupying different positions.

The important thing is that each company must develop its own winning positioning strategy, one that makes it special to its target consumers. Offering only "the same for the same" provides no competitive advantage, leaving the firm in the middle of the pack. Companies offering one of the three losing value propositions—"the same for more," "less for more," and "less for the same"—will inevitably fail. Here, customers soon realize that they've been underserved, tell others, and abandon the brand.

Company and brand positioning should be summed up in a positioning statement. The statement should follow this form: To (target segment and need) our (brand) is (concept) that (point-of-difference).³³ For example: "To busy professionals who need to stay organized, Palm Pilot is an electronic organizer that allows you to back up files on your PC more easily and reliably than competitive products." Sometimes a positioning statement is more detailed:

Note that the positioning first states the product's membership in a category (Mountain Dew is a soft drink) and then shows its point of difference from other members of the category (has more caffeine). Placing a brand in a specific category suggests similarities that it might share with other products in the category. But the case for the brand's superiority is made on its points of difference. Sometimes marketers put a brand in a surprisingly different category before indicating the points of difference:

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—involves working out the tactical details of the positioning strategy. Thus, a firm that seizes on a more-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.