1-1-3-market-positioning

Market positioning and market mapping

• Market positioning refers to the process a business goes through when launching a new product or service

  • The business decides where it wants to position its product in the market with regard to price, quality, branding and customer perception

• Market mapping is a tool for identifying the position of a product within a market

  • A market map refers to a two-dimensional diagram that shows the attributes or characteristics of a product in comparison to rivals’ products

  • Only two criteria can be chosen: price and quality, age and income, etc.

Market map analysis

• If there were no spaces left on the market map, it indicates that the market is saturated

  • This means that there are no opportunities to exploit a market niche in the market

  • Competition is likely to be high and profits low

• However, the existence of a space on the market map may indicate the existence of a market niche

  • This needs to be researched carefully before the business commits. E.g. it looks like there is a gap in the market in the high price / low quality area in the map above

  • However, this gap does not represent a worthwhile market, as the business would find it impossible to build and maintain a loyal customer base

The usefulness and limitations of market mapping

Competitive advantage of a product or service

• Competitive advantage refers to the features of a business and its products that are perceived as superior to its rivals by customers

• It is how a firm’s product is made both distinctive and defensible

  • Distinctive means that the product is different from those of competitors

  • Defensible means that the business can prevent competitors from copying the product

Source of competitive advantage

• There are many ways a firm can gain a competitive advantage, including:

  • Innovation and reputation (branding)

  • Building strong relationships with stakeholders

  • Adding value

  • Differentiation

  • Market segmentation

  • Price leadership

• Examples of the source of a business’s competitive advantage include:

  • Quality; e.g. Audi is well known for the exceptional quality of the finishing inside its cars

  • Delivery times; e.g. Amazon Prime delivers products within 24 hours of ordering

  • Low price; e.g. Primark is considered to provide the best value / low price combination

  • Reliability; e.g. Apple Macs have an excellent reputation for long life and reliability

  • Ethical stance; e.g. Tony’s Chocolonely only uses cocoa in its chocolate, which is 100% free of slave/child production

  • Design; e.g. Dyson vacuum cleaners stand out from the crowd with their original design

The purpose of product differentiation

• Product differentiation is an attempt by a business to distinguish its products from those of competitors

  • This involves creating functions or features of the product (or firm) that help it to stand out from its competitors

  • Strong product differentiation helps the firm develop its competitive advantage

  • The development of product differentiation often helps a firm create a unique selling point for its product, which can be used in marketing

  • Product differentiation may be tangible (clearly visible), or it may be a perception that is created about the product in the consumer’s mind

• Successful product differentiation helps the business to increase demand for its products, increase brand loyalty and allow the business to charge higher prices

• Examples of successful product differentiation include:

  •  In 2014, Hyundai in Singapore introduced a three-year warranty on all its new cars, when the industry standard was one year

  • Green & Black’s uses Fairtrade cocoa and sugar in the production of its chocolate

Adding value to products/services

• Adding value is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service

  • E.g. customers are prepared to pay more for potatoes when they are packaged as oven chips than they would be willing to pay for a bag of whole potatoes

Methods of adding value

• The methods of adding value overlap with some of the features of product differentiation:

  • Marketing and branding
    Building brand identification and customer loyalty to the brand allows a firm to charge a higher price for its products, thus increasing the added value

    • E.g. Yeezy 350 V2 sneakers sell for $250 a pair

  • Functions and features
    Adding unique features allows a firm to charge a higher price for its products, thus increasing the added value

    • E.g. The Samsung Galaxy Watch5 has robust health tracking tools built into it, along with an amazing screen

  • Customer service
    Businesses that ensure they have a good reputation for customer service can charge a higher price for their products, thus increasing the added value

    • E.g. John Lewis is considered to provide the best customer service amongst department stores in the UK

  • Customisation
    Allowing customers to design or create their products allows a firm to charge a higher price, thus increasing the added value

    • E.g. Moonpig birthday cards can be completely customised

  • Packaging
    Apple products are well known for their superior packaging, which creates an exciting opening experience for the customer. This allows the firm to charge a higher price for its products, thus increasing the added value