How to Craft Your Product Positioning: Framework and Examples

Issue 8

Jun 14, 2020

Hello and welcome to the essay #2 about positioning your product - How to Craft Your Product Positioning : Framework and Examples

Last week, I wrote about Understanding Positioning Through a Practical Lens where we discussed how to define positioning and how to test whether the positioning of your product is clear.

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The pretext of this essay was set in one of my earlier essays “The Myths of Product-Market Fit”,

Unless you are building a product that creates a new market, you will have to compete with another product in any existing market. While analysing the market, we often feel that if there is a product getting the job done, we should look at another market.
However, you will find big companies in the same market getting the same job done, especially for enterprise software. For example in email marketing, there are multiple billion dollar valuation products:
Marketo : Large companies
HubSpot : Mid-size businesses
Mailchimp : SMB
These products have been successful in serving unique needs of different segments.

The important point to highlight here is, when we are building a product similar to one that already exists, we often make the mistake of going after the same audience/segments.

Whereas what we should actually do is go after an under-served segment of the same market and become a market leader in that segment. This requires a conscious effort to build a ‘product and positioning’ for that segment. Doesn’t look so hard, right?

Why is it Hard?

When we think of building a product in a market, we start by reading about existing product and customers. Our first instinct in most of the cases is to outcompete the existing product because we can think of few better features. We feel that their users are underserved.

It stems from how we are taught about competition.

Generally speaking, competition is defined as winning over others. It is most widely used in sports, which is a zero sum game, i.e. one person has to lose in order for other to win, and the sum is always zero.

So we often take this zero sum, warfare mindset to business. Companies build a similar product and start going after the segments other players are going after. This warfare can continue for years, eroding profits and investments.

So How do We Avoid This?

Michael Porter wrote 10+ books about competitive strategy in business. Many of you might have read him in business schools.

If I were to sum what Porter says about competition, in two lines, this is what comes out:

“Instead of competing to be best, companies can — and should — compete to be unique. Strategic competition means choosing a path different than others “

The first step to avoid wrong kind of competition is to believe that business is a positive sum game, where multiple players can exist in same market.

Okay, I am Convinced. Tell Me What to Do?

There are four steps to craft your positioning- Research, Segment, Target, Position. The section below briefly talks about the four steps and we will move to the examples. While you read these, think about any market and come up with a product that can be launched in that market without going for a head-on competition with an existing player.

Research

Market research reveals that customers differ greatly in terms of their needs and preferences. They also have different paying capacity. You will need to understand your market on these two dimensions - consumer needs and paying capacity.

Segment

So while analysing a market, we should divide it into different customer segments basis two factors:

Customer needs and preferences
Cost a customer is willing to pay

Target

Most products can’t serve all segments because they will have to diversify to an extreme extent to serve all. So they have build their product and positioning according to target segments that they can serve well.

You should look at the target segments of different brands in your market, and identify which segments are underserved in needs/preferences, cost or both.

Positioning

Now that you know the cost and needs of your target segment, come up with a positioning. What would appeal to this segment? Write the copy and make creatives that appeal to this segment. Need inspiration? 😊

Examples of Positioning

Automobiles

To start with lets pick two extreme examples. In the automaker market, Audi caters to luxury/premium segment, whereas Maruti Suzuki caters to mass market (low cost, high utility) segment. See the ads below.

Audi’s Ad is all premium, whereas Maruti Suzuki talks about Saving, Savings, Savings!

In fact, automobile industry is a masterclass in segmentation, targeting and positioning.

Here is how it looks on a cost versus quality (needs/preferences) chart.

Please note that quality can be tangible like speed, engine capacity as well as intangible such as social status.

Smartphones

Smartphones market is similar to automobiles.

It is not to say that features and cost are only decision making criteria. But they are the most important ones when it comes to any segment.

If you are reading this on iPhone, you may wonder why you made the decision? Social Status, Coolness, Privacy — all of that is positioning, part truth, part perception Apple has creating in your mind.

If you are reading this on OnePlus, you may be judging the iPhone guy. You might feel you are a more rational decision maker. Well, that’s the perception with which OnePlus attracts you — it’s a phone for rational person who also cares about tech specs.

Consumer Internet Businesses

A good example to study would be Snapchat vs Facebook. Both are social media companies, and Snapchat would have died if it was not positioned it differently.

Facebook started in an era where connecting with other people online was a big thing. So they build their positioning around it. If you look at the FB tagline, they promise you to connect with your friends and see their updates in NewsFeed.

Snapchat was built when smartphone and camera became a norm. Snapchat opens with camera.

First time I used Snapchat, I felt old because I didn’t like it. Juniors from college loved seeing their face, snapping an image and sending it to a friend. 😮

It positions itself as “The fastest way to share a moment”. Teens loved it 🔥 Look at their creatives, it appeals to younger audience.

Source: Snapchat Play Store

Because of the different target groups, both Snapchat & Facebook can co-exist. It will be hard for Facebook to take a full-revamp of their UI to make teens happy, because they will risk annoying the existing billions of users.

In Lack of Positioning

Lack of positioning leads to players fighting for the same segments. This means that lower cost/pricing or incentives becomes the only way to bring users. This game isn’t pretty and often lead to a loss-loss outcome

E-Payments B2C Market

Look at the payments B2C market — Google, PhonePe, FB, Paytm — all have entered into this market but there is no distinction in the offerings. So no one has any distinct positioning, and everyone is burning cash to provide consumers incentives with no end in sight.