Is your company trying to be all things to all customers?
Think about any established market sector, cars, hotels, fashion or restaurants. In any large sector most are dominated by around four companies. However, these companies are usually not looking for or targeting the same customers.
Volkswagen and Ferrari are both car manufacturers, Premier Inn and Four Seasons offer hotel rooms, Gucci and Primark sell fashion clothing and MacDonald’s and The Fat Duck both serve food to their customers. However, in each case, each company positions itself to appeal to and attract different types of customers. All are successful.
Positioning – to influence customer perception regarding a brand or product relative to the competition. Ultimately, to establish the image or identity of a brand.
What these companies have done is understood the market they are aiming for and have developed their strategies to reinforce and strengthen their position. When companies want to break into new markets they need to change customer perceptions of who they are. Notice how car manufacturers purchase or build completely new brands, Nissan developing the Infiniti brand, Toyota with Lexus and Volkswagen acquiring Bentley.
How can this help us with our own SMEs?
In his brilliant book, Oversubscribed, Daniel Priestley illustrates how the whole of any market can be divided into four key drivers.
Using Priestley’s diagram, we can see that successful companies major on one of the key drivers and that a second supports their positioning. However, we need to recognize that each driver has an opposite and that there is incompatibility between them. You can’t be innovative and low cost because it costs money to be innovative. You can, however, be convenient and price driven.
Four years ago the Management Team of my company, Business Insight 3 (Bi3), made a decision to position ourselves differently. We realized that we were trying to be all things to all customers, that we were competing with lower cost, lower technology companies and that some customers “loved our products and services” but that we had to try and price match lower cost competition. Something had to give.
We took a close look at our business and analysed where we were and where we wanted to be. Using Priestley’s quadrant, what were our real key drivers? Once we had established that Innovation was our primary driver and relationships our secondary, we could build a strategy to reinforce those key drivers and position ourselves accordingly.
We articulated this to our customers, both new and existing, which was received well by exactly the type of customers we wanted to work with. We lost some customers but gained others that fitted our new strategy better. It also improved relationships with our suppliers who recognized us as specialists who sold on quality not price. Internally, this new understanding of our position brought clarity to our employees, in particularly the sales and support teams, who could focus their efforts on the right type of customers and applications for our business.
The change of strategy was successful for Bi3 and has continued to shape who we are and more importantly, how we are perceived by our customers.
Positioning is not what you do to a product. Positioning is what you do to the mind of the prospect. That is, you position the product in the mind of the prospect.” (Ries & Trout, 2001)