So what is positioning all about?
In a nutshell, positioning refers to the point within the market where you place your products and / or services. What I regularly find is that where a formal positioning strategy does not exist, businesses tend to take a reactive approach to the market as opposed to a proactive one. When dealing with a client that is operating within a price sensitive market the result is often a predictable one; An overall reduction in price, leading to lower margins and reduced profitability.
Are you positioned correctly within the market..? Ask yourself these questions…
1) In simplistic terms are you a high, mid or low quality provider?
2) Do you price at the high, mid or low end of the market?
With regards to the first question, clients more often than not answer that their offering is of a high quality. I have a theory on this in that often businesses are started by individuals with a real passion for a product or service and that this passion is manifested as a high quality output. Unfortunately, the answer to the second question is often mid or low end pricing and this is prevalent within price sensitive markets where a lot of buyer power exists and this is where a potentially serious problem lies…
From my perspective, there is no right or wrong answer to the first question. It may give you a great feeling as a business owner if, for example you produce a disposable razor where the blade is of such high quality that it remains sharp for 200 shaves. Within the disposable market however, such a blade is an intangible benefit as the razor will be thrown out after two or three uses anyway. The consumer will not pay for benefits or enhancements that they cannot see, touch, taste, hear or smell.
The point that I’m trying to make here is that the only correct answer to the second question is the one that corresponds to the first (for example high quality = high price, mid quality = mid price, low quality = low price).
In the example of the razor manufacturer an option could be to consider moving away from the disposable market altogether and into the one where the high quality blade becomes a tangible benefit for prospective consumers of the product. Alternatively, realigning the manufacturing processes to produce a high volume / lower quality blade (thus reducing cost) and remaining within the existing market may be a strategy worthy of consideration. In other words, do yourself a favour and “Don’t try to sell what you want to produce, sell what your customers want to buy”.
Thus far I have focused on high end positioning however as a mid or low quality producer, positioning is equally important…
If for example you are a manufacturer of low quality / high volume household furniture and selling it through high value resellers at a premium price, the likelihood is that your product won’t meet customer expectations and you’ll end up with a factory where the machines sitting idle and a warehouse full of stock (and returns) that you can’t shift. If the products are appropriately positioned within the market however, the result may be completely different.
Try taking the 15 minute exercise below by asking yourself these questions;
1) What end of the market do I operate within?
2) Am I positioned correctly (strategically)?
3) Am I trying to sell what I want to produce or what customers want to buy?
Answering the questions above may help you to determine whether or not you are positioned correctly and if not, provide some ideas as to what needs to occur to bring the two elements into alignment. Don’t forget, positioning your market offering correctly can be the difference between turning a profit and going broke slowly!