This week, we continue our series on marketing and positioning. There can be nothing more important in your business planning that selecting the proper pricing niche, making your story clear using that niche, and the defending your position against the competition. So, here comes the lesson and your challenge.
The five major niches
There are five major classes or niches a company should examine and make its own in calculating positioning in the marketplace. They are:
- Price
- Quality
- Service
- Innovation
- Elegance
Your challenge: to find, position, and defend your niche
Think about your positioning. Companies that compete on price rarely compete against others who emphasize service or quality. There are exceptions, based upon cost of sales. For example, Internet resellers have a better chance to combine price and quality than those with much more fixed overhead occupying a bricks-and-mortar physical presence in the community.
Assume that you are not an Internet retailer with many competing products to sell. For you, it is important for the image of the company to be known for one of the above attributes above others.
Here are a few examples to help you
[Email readers, continue here…] Wal-Mart is known for lowest prices, often for identical merchandise found in other stores for more. But few go to Wal-Mart for quality brands, understanding that they accept Wal-Mart as the low-priced leader. Nordstrom’s competes on service above all, quality second and price a distant third. We enter a Nordstrom’s store expecting superior service and know we will pay a price for this. Apple charges a premium for innovative products, with quality second and service third. Mercedes offers a premium automobile with its customers expecting luxury first, quality second, service third, and price a distant fourth. If Apple released a $229 notebook computer, it would damage the brand and reduce the value of owning an Apple computer in the minds of existing customers.
Your niche selection drives everything else you do
The very image of a company is influenced by your niche decision, as is every decision following it. In many markets, there are poorly defended niches, even markets with dominant players. For example, the tech company, Asus, found this golden opportunity in the notebook market and moved in quickly to overtake all other manufacturers with low prices.
The danger of competing on price
Competing on price alone is the most dangerous strategy of all, since other well-capitalized players can easily join the competition merely by dropping prices upon existing products, of course at the expense of its previous positioning as described above. In our past example above, Asus was able to grab the mantle of price king while maintaining reasonable quality and even provide a bit of innovation worthy of applause by those of us market-watchers looking for examples of good strategic price positioning.
Questions for you and your team
Where do you this you can excel within these five positioning alternatives? What competition would you face? Can you defend your offering against that competition? Can you select and defend several of these at once, such as quality and elegance? Or quality and service? These are worth a team discussion, even for mature companies, with other decisions such as pricing, positioning, advertising and which market segments to concentrate upon – all following that choice.
Images created using DALL-E3 with prompt: “A young entrepreneur in an office environment dressed in miliary style with a rifle in a defense posture. Hyper-realistic image. Edges of image should be ragged and fade to white.”
Dave,
As usual, lots of wisdom in your blog. As an inherent complexifier (in pursuit of competitive advantage) I’d add the following three to your list of five issues. (Issues a “company should examine and make its own in calculating positioning in the marketplace”). They are communications, credibility, and distribution (some might combine the first two and call them “branding”).
If I’m on a customer journey, with a job to be done in a B2B situation, I’d probably first check with others in the organization and credible distributor(s). And my questions to the distributor (s) would include asking what they know about the attributes I care about, including your five, plus my other two (assuming you have credible and knowledgeable distribution). If I can’t get the answers I need, I’d check communication channels I trust, and in the process, the website of the potential supplier. In any event, I’d also ask my A I Bot to scan and find out what customers, and others are saying about the particular product/service offerings and the company. Of course, I’d also note who distributes it. It comes with more credibility if its Costco, but Amazon and Walmart also imply some credibility.
In a B2C situation, I’d ask friends, and also check ratings and reviews, possibly now have my A I Bot do this too.
In either scenario, it will likely be a be a gamechanger if your product/service offering is more universally trusted and respected for a similar job to be done.
Bob,
Your additions are worth considering. As I replied to William Hill below, my viewpoint was from the eye of the customer, not the producer. But as a customer, I would consider these too. Food for thought.
Dave
Dave,
I disagree with Quality as a differentiator. This is an important point because Quality should be defined as meeting customer requirements. Any product regardless of cost should meet customer requirements. This recognizes that requirements change along with price point. Phil Crosby in his book “Quality is Free” uses a buffet restaurant as an example. In an all you can eat buffet, you don’t expect avocados, but you do expect lettuce to be fresh and crisp.
I suspect you mean performance. Apple competes on the performance benefits of their ecosystem – security and interoperability. They also have a cool factor that may be captured in your definition of elegance.
Bill, yours is a thoughtful comment. I was thinking with the mind of the consumer. You describe the position of the provider. It is the marketing of quality perception that the consumer reacts to. And you’re right about the cool factor. Think of a Gen Z definition of “cool” clothing brands or social media sites which is quite different from earlier generations. To a Gen Z, I can see how “cool” is elegant. Thanks for making us all think twice!
-Dave