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McGraw-Hill/Irwin©2008 The McGraw-Hill

Companies, All Rights Reserved

CHAPTER

SEVENDifferentiation Differentiation

and and PositioningPositioning

7

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What is Positioning?

The place a product or brand occupies in customers’ minds relative to their needs

Refers to competing products or brands

Comprises both competitive and customer need considerations

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Differentiation

Differences in scope–Broad or narrow competitive scope

Different ways in which companies can compete for target markets Differentiation in Business Strategies

Differentiation among Goods and Services

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Lower Cost Differentiation

Broad TargetCost

Leadership Strategy

Differentiation Strategy

Narrow TargetFocus

Strategy

Focus Strategy (Differentiation

Based)

Competitive Advantage

CompetitiveScope

Source: Adapted from Michael Porter, Competitive Advantage,New York: The Free Press, 1985, p. 12.

Exhibit 7.1

Generic Competitive Strategies

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Physical and Perceptual Positioning

Physical positioning Assessing product offering based on a set of

objective physical characteristics

Perceptual positioning Includes product presentation, past

experiences and opinion of others

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Exhibit 7.3

Comparison of Physical and Perceptual Positioning Analysis

Physical Positioning Perceptual Positioning

Technical orientation Consumer orientation

Physical characteristics Perceptual attributes

Objective measures Perceptual measures

Data readily available Need for marketing research

Physical brand properties Perceptual brand positions and positioning intensities

Large number of dimensions Limited number of dimensions

Represents impact of product specs

Represents impact of product specs and communication

Direct R&D implications R&D implications need to be interpreted

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Kinds of Attributes

Simple physically based attributes Directly related to a single physical

dimension

Complex physically based attributes Used by consumers to evaluate competitive

offerings

Essentially abstract attributes Are influenced by physical characteristics,

but not related in any direct way

Price Implies high or low quality

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Exhibit 7.4 (1 of 2)

Steps in the Positioning Process

1. Identify relevant set of competitive 1. Identify relevant set of competitive products serving a target market.products serving a target market.

2. Identify the set of determinant attributes that define 2. Identify the set of determinant attributes that define the “product space” in which positions of current the “product space” in which positions of current

offerings are located.offerings are located.

3. Collect information from a sample of 3. Collect information from a sample of customers and potential customers about customers and potential customers about

perceptions of each product on the perceptions of each product on the determinant attributes.determinant attributes.

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Exhibit 7.4 (2 of 2)

Steps in the Positioning Process

4. Determine product’s current location 4. Determine product’s current location (positioning) in the product space and intensity (positioning) in the product space and intensity

thereof.thereof.

5. Determine customers’ most preferred 5. Determine customers’ most preferred combination of determinant attributes.combination of determinant attributes.

6. Examine the fit between preferences of 6. Examine the fit between preferences of market segments and current position of market segments and current position of

product (market positioning).product (market positioning).

7. Write positioning statement or value 7. Write positioning statement or value proposition to guide development and proposition to guide development and implementation of marketing strategy.implementation of marketing strategy.

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Tools used to understand the positioning of products

Positioning grid Also called perceptual maps

Value curve

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Neiman Marcus

Saks Bloomingdale’s

Hit or Miss

The Limited

Macy’s

Nordstrom

Garfinkels

Kmart

Casual corner

Britches

Sears

L&T Marshall’s

Hecht’s

Woodward&

Lothrop

JC Penny

Talbots

The Gap

Dress BarnT.J. Maxx

Sassafras

Loehmann’s

Worst value Best valueWomen’s-wear value for the money

Wo

me

n’s

-we

ar

fas

hio

na

bil

ity

Co

ns

erv

ati

ve

ve

rsu

s c

urr

en

t v

ers

us

ve

ry l

ate

st

Washington 1990 Women’s fashion market

Source: Adapted from Douglas Tigert and Stephen Arnold, “Nordstrom: How Good Are They?” Babson College Retailing Research Reports, September 1990. as shown in Michael Levy and Barton A. Weitz, Retailing Management (Burr Ridge, IL: Richard D. Irwin, 1992) p. 205.

Perceptual Map of Women’s Clothing Retailers in Washington, D.C.

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Guiding Development of Marketing Strategy

Two common approaches: Positioning statement

Identifies the target market States unique benefits of the product

Value proposition Similar to positioning statement Includes information about pricing relative

to competitors

Both approaches reflect the unique selling proposition (USP) of the product

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Positioning Statement for Volvo in North America

For upscale American families, Volvo is the family automobile that offers maximum safety

Generic format for positioning statements: For (target market), (brand) is the (product category) that (benefit offered)

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Value Proposition for Volvo in North America

Target market: Upscale American families

Benefits offered: Safety

Relative price: 20% premium to domestic family cars

Generic format for value propositions:

Target market

Benefits offered (and sometimes not offered)

Relative price

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Some Key Questions Concerning Positioning Decisions

For whom are they written?

In what sort of language?

Should they focus on features or benefits?

How many differentiating attributes should anchor them?

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A Useful Tool for Positioning Decision Making: Perceptual Maps

Where would you plot your favorite cereals? Your kids’ favorites? Your grandma’s?

Nutritious Not Nutritious

Sweet

Not Sweet