The newsletter now has 1000+ subscribers 🙌 Before we start on the topic, quick announcement

Next Saturday, we are going to have the online session to wrap up the positioning of a product. The session would start with brief introduction and will focus primarily on case studies from Indian B2B, B2C segments. An interesting topic I am going to cover is How to Position You and Your Career :)

Register here for the session — https://us02web.zoom.us/webinar/register/WN_wkQ09nK6SqiJo8q2VGtzLA

Off to the topic at hand,

Positioning is a difficult topic to master in 3-4 weeks, so I took an approach to go 80/20. Write 20% which can be applied to 80% of cases. This is with a hope that once you start applying it, you will learn the rest on the go. As one of my fav quotes goes:

“In theory, there is no difference between theory and practice. But, in practice, there is.”

We started out with defining positioning, why it’s important and how to test your product positioning.

We then moved on to discuss the framework and examples of positioning a product.

This week, let’s discuss the golden rules of positioning a product. You can remember and apply these rules in most of the situations, or violate them at your own risk 😉

Ready? Go

Rule # 1: It’s better to be first than it is to be better.

The ultimate objective of any product is to get into user’s mind. The easy way to get into a user’s mind is to be the first product that serves a particular need. The hard way? Try second.

Being first establishes strong brand recognition, which serves as a competitive advantage. Please note that you should be first to get into a threshold number of users’ minds, not the first one to enter market.

Music Players Industry

Music Players? Sony Walkman was first portable music player in the industry and maintained its leadership until a much better tech came in the form of iPod. Between 1979 and 2010, Walkman sold 200 million devices.

iPod then went on to became the best-selling digital music player in history, with 300m sold in the first 10 years.

Exceptions

It should also be noted that the first mover advantage doesn’t work in all cases. It depends on two factors:

the pace of market evolution
the pace of tech evolution

Get ready for a 2x2 analysis 😊

If both market evolution and tech evolution is slow, the first mover advantage is immense. This is the case of FMCG products.

If market evolves fast but the tech evolution is slow, the first mover advantage is time-bound and depends on the resources the company has. If the company has the resources to expand quickly as the market expands, it gains a long-term advantage. But if that doesn’t happen, someone else will launch a similar product and reach consumers’ mind.

If market evolves slow but the tech evolution is fast, the first mover advantage isn’t there. It becomes very hard for the first mover to survive as they don’t get enough cash flow and they also have to keep investing in R&D to catch up with tech.

If market evolves fast and the tech evolution is fast, it’s again very hard to gain any durable advantage. Think about Blackberry and Nokia in smartphone market. Both were giants in smartphone market before 2010, and are non-existent today.

So if you are in an industry where tech evolution is slow, try to be the first into your users’ minds.

Rule # 2: If you can’t be first in a category, set up a new category you can be first in.

Never go head-to-head with a category leader. As Al Ries writes in ‘Positioning’ book

When you launch a new product, the first question to ask yourself is not “How is this new product better than the competition?” but “First what?” In other words, what category is this new product first in?
This is counter to classic marketing thinking, which is brand oriented: How do I get people to prefer my brand? Forget the brand. Think categories. Prospects are on the defensive when it comes to brands. Everyone talks about why their brand is better. But prospects have an open mind when it comes to categories. Everyone is interested in what’s new. Few people are interested in what’s better.

So how do you do it?

“Look for the hole and fill it” through your product. Spend advertising dollars suggesting “You have filled a hole” and magic happens :)

Intercom vs Zendesk

Zendesk started in 2007 in the customer support software segment. By 2011, the company had more than 10,000 enterprise customers and was preparing for an IPO.

In 2011, enterprise software giant Salesforce, valued at $15 B at that time, entered in this segment by acquiring Desk.com. One would think that Intercom would perish over time. Zendesk went on growing, did the IPO and today it’s valued at $9B. Remember rule #1 - it’s better to be first than it is to be better.

In 2011, Intercom was founded. Here is how Intercom positioned itself

Intercom is a customisable live chat messaging system for teams to seamlessly assist customers.

Here is what Zendesk says about them

Customer Support Ticket System & Support Platform

See the hole that Intercom found around live chat. It has now grown to a valuation of $1.125 B in the last funding round in 2018.

Possible holes to fill

So what are the possible holes that you can fill?

Size - Think Smartphones 📱Companies like Samsung entered the market by launching bigger smartphone screen. Cnet wrote a story about why you should thank Samsung’s Original Galaxy Note for bringing bigger phone trend in market.
Packaging
Distribution - Dell established it’s unique positioning by delivering directly to the home of customers, as opposed to other giant computer retailers like IBM
Price - multiple examples from automobile industry and smartphones shared in the last post - how to craft your positioning.
Gender or Age - Marlboro started just as other cigarette companies targeting both men and women. But when it finally launched its campaign just targeted at males, the company went on to become one of biggest around the world.

Country - Swiss watches? Italian clothes?
Any other attribute that defines the products in your market.

Sounds good? If more case studies come to mind, leave them in comments.😊

Rule # 3: If nothing works, reposition the competition.

Positioning and marketing in general, is not a battle of product, but of perception.

Find a weakness in the competition
Weakness must resonate with consumers
Make this weakness your strength

I love this scene from the sitcom ‘The office’ where two salesman from a small paper company pitch to a business why they should buy from them even if the bigger company can offer bigger discounts.

So what do they do?

Find a weakness in the competition — poor customer service of the bigger company
Weakness must resonate with consumers — Jim asks how important is the customer service for him.
Make this weakness your strength — they then call their company and the company immediately picks up.

Avis vs Hertz

In 1962, Avis was in search of a new advertising campaign. Since its inception, the car rental company had trailed behind the market leader, Hertz. So the company decided to use Avis’ second-place status as a way to amplify the brand’s customer service. “When you’re only No. 2, you try harder,” went the new tagline. “Or else.”

The “We Try Harder” ads were an instant hit. Within a year, Avis went from losing $3.2 million to earning $1.2 million. It became profitable for the first time in more than a decade. Here is the campaign in print back in 1962.

Rule # 4: To win a new category, go with a new name.

Any well-known name stands for something. In fact, very strong brands become substitute name of the product. For example “Get me a Coke."

So brand extension (using brand name as prefix) can dilute the positioning of the brand because people can no longer use your brand name in the generic sense, they have to remember the product name too.

This reminds people that “Coke” is a brand name and destroys the belief that “Coke” is a superior soft drink. So it can cause the brand to lose market leadership in the existing category.

This is a key reason why Apple hesitates so much with launching an iPhone which is low-to-medium cost. It will destroy the brand.

BBK Electronics

The company that has successfully done so is BBK Electronics. They have launched four different smartphones - Oppo, Vivo, Realme and OnePlus.

Realme (10k-15k) targets price sensitive masses and competes with Redmi from Xiaomi, whereas Oppo and Vivo position itself as a mid-budget brand (15k-35k).

OnePlus (35k-55k) is for people who care about tech specs and have been massively successful in doing so.

By being present in all segments, they have been able to capture 40% of India’s smartphone market.

The Allure of Brand Extension

The allure of brand extension is quite high because it gives you short term benefits without any significant ad spend. If you launch 3 separate brands, you have to triple your advertising spend.

The point people don’t realise soon enough is that it’s hard to have same brand in two or three categories as a market leader. Same brand in 3 categories confuses users and they go for an option that are crystal clear.

As an example, if someone asks me what phone to buy in 30k-40k, I just have to recommend OnePlus. I don’t have to remember the models of Xiaomi. Word of mouth requires a crystal clear positioning.

It’s not that brand extensions are not useful. I am going to talk about places where you can use brand extensions in next rule.

The Case of Enterprise Softwares

The rule also doesn’t hold that strongly with enterprise softwares. In enterprise software, the decisions are made in a longer period of time with a lot of thought, so putting a brand name helps.

AWS, Azure and Paytm

AWS and Azure have use their parent company names like Microsoft and Amazon because enterprise software decisions are multi-dimensional and complex, unlike consumer products. Having a brand name establishes credibility and gets you foot in the door.

Paytm on the other hand, has tried multiple categories like e-commerce, travel, entertainment etc. It hasn’t been able to establish itself as a category leader in any of these categories because of Flipkart/Amazon, MakeMyTrip, BookMyShow which are established brands in these categories.

Conclusion

Remember that being all things to everybody doesn’t work.

Rule # 5 : Brand extension works provided…

Rule #4 is hard to accept for us because it’s so counterintuitive. After all, the entire point of building a brand is so that we can use that to launch other products and benefit from it.

Al Ries writes

One of the keys to understanding the line extension issue is to separate the short term effects from the longterm effects. Is alcohol a stimulant or a depressant? Actually, it's both. In the short term alcohol is a stimulant; in the long term alcohol is a depressant. Line extensions generally work the same way.
Easy come, easy go. Line extension names are forgettable because they have no independent position in the mind. They are satellites to the original brand name. Their only contribution is to blur the position occupied by the original name. Often with catastrophic results.

So what do we do?

You can always extend the concept behind the product. Here is where you can use the brand extension:

Expected volume is low — When you are trying to get a small pie of the market, your product should carry the name. It helps them. If you are trying to win the category, don’t use brand extension.
Competition is high — If the competition is high, carry the name. If you are launching a new product without any competition, don’t.
Advertising support is low
Commodity product — Commodity products such as chemicals should carry the name.
Sold by sales reps — A product sold by sales reps should carry the name. Items sold by off-the-self should not.

Tata

Brand Extensions

Consumer products — Tata Tea and Tata Salt are commodity products and competition is high in these segments (#2, #4).
Tata steel and chemicals — Steel and chemicals are commodity products with high competition (#2, #4).
TCS — TCS is one of the largest outsourced software consulting projects. It carries the Tata name because it gets their foot in the door at a lot of companies. The services are sold by partners at the firm (#5), don’t have much differentiator from other service providers like Infosys (#2)
TISS and TIFR — Education sector is all about brand names and highly competitive.

Not Brand Extensions

Titan — They don’t carry the Tata name and have become category leaders in watches.
Voltas — Market leader with 25% market share in AC
Taj Hotels — They again don’t carry Tata name and have built a category leadership in luxury hotels segment.

Look at this ad from Voltas, you will see no mention of Tata.

With this, let’s wrap up this post.

Register here for the session on positioning in case you haven’t yet— https://us02web.zoom.us/webinar/register/WN_wkQ09nK6SqiJo8q2VGtzLA

Other Sources

Sincerely,

Deepak

Thank you Al Ries for writing the seminal book on positioning.

Thank you Priya for reviewing this patiently. 🙏

Feedback link - https://sdeepakgg.typeform.com/to/yJas0x

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