Part 1

Strategic Position Is More than Advertising Don’t be confused: A true strategic position is not the same as an advertising campaign or slogan. Advertising and marketing are means to achieving your strategic position — they help you create the image consistent with your position and get your message to potential customers. Defining a strategic position is about creating a meaningful place for yourself — a position — in the market.

How does Coca-Cola differentiate itself from Pepsi? Very little of the difference is based on the qualities of the products or the market segment they are targeting. The two companies may have incorporated some operational differences, but they differentiate themselves primarily on the basis of advertising — not strategic positioning. When Snapple came along, it created a totally different position for itself in the market. Snapple didn’t try to compete head-to-head with Coke and Pepsi; instead, it looked for a different segment of the soft drink market: the non-cola, non-carbonated soft drink.

“With the consolidation of department stores, we knew our margins were going to be squeezed. They’re doing a lot of their own products, putting their products in the best display spaces. We knew we had to change our strategic direction.”

Kay Koplovitz Chair, Kate Spade

If a luxury car company that has sold primarily to older consumers decides to market to younger drivers, it won’t be enough to take the same kind of car they’ve been making and devise a clever advertising campaign. The product itself — in this case a car — has to be redesigned to fit the tastes of their target market. It may have to be smaller, sportier, faster, with more electronic gadgets. Not only will the marketing materials need to be geared toward a younger audience, but the salespeople will have to be trained to learn that the 20-something kid in the rock band T-shirt may not be just killing time with a test drive but may actually be a techie millionaire ready to buy.

What Kinds of Strategic Positions Are There? What makes a company different? Is it the nature of its products or services? The quality or cost? The geographic area or type of customers served? Perhaps the company has proprietary products customers can’t find elsewhere.

There are many ways to distinguish yourself from your competitors, including:

■   Customer Perception Factors ■   Market Segment ■   Market Share ■   Operational and/or Technological Advantages ■   Proprietary Products, Technology, Abilities, or Relationships ■   Sales Channels ■   Business Model ■   First-Mover Advantage ■   Lean Start-Up ■   Branding

Each of these strategic approaches offers opportunities but also poses pitfalls. And they may be related: If you are positioning your company on the basis of low price, you’ll also need operational efficiencies to reduce costs or else you won’t be able to survive against competitors with higher profit margins.

Customer Perception Factors This is the “better, faster, cheaper” approach, based on how customers distinguish your company and its products and services from the competition. Some key customer perception factors are below:

WHAT SETS YOU APART?

Concentrating on customer perception factors is the most typical method of attempting to differentiate yourself from the competition. They seem the simplest, most straightforward way to compete. Surprisingly, they may be the most difficult to achieve and maintain. For instance, competing on the basis of price is often perilous. While it is easy — in the short run — to attract customers on the basis of low price, highly price-sensitive customers are the most fickle, quickly tempted away by the next company offering a lower price. Once you appear to be attracting a significant portion of the market, well-funded established competitors can lower prices (even if they have to take a loss) to compete temporarily until you are no longer able to sustain your losses.

Other perception factors may be harder to “prove” to the market. You may have to spend a lot of money on marketing and advertising to get customers to realize that you offer additional features, more convenience, or higher quality. Once you do, however, you may be able to build a loyal and committed customer base that appreciates the differences between you and your competition.

“You have to understand the consumers’ need. What’s their pain? Why do they need to change? Solve that pain, and then get that message out.”

Andrew Anker Venture Capitalist