The Right Place
Of all the ways to separate yourself from the competition, strategic positioning might be the most powerful weapon you have. Here are eight questions to trump the competition.
BY PHIL BOLSTA
In 1972, Al Ries and Jack Trout wrote a three-part series in Advertising Age that introduced their strategies on how to position a product in the mind of the consumer. Nine years later, the pair published Positioning: The Battle for Your Mind. It was a book the business world couldn’t refuse, and became an instant best-seller. Virtually overnight, it reshaped the marketing and advertising landscapes in this country and throughout the world.
One key reason why: The book drew key distinctions between traditional marketing programs and positioning programs. And what exactly is the difference between the two? “A traditional marketing program starts with the product,” explains Ries, now the chairman of Ries & Ries, an Atlanta-based marketing strategy firm that he runs with his daughter, Laura Ries. “You ask: ‘What is the product good for?’ and then you communicate those features and benefits to the consumer. A positioning program starts exactly the opposite. Forget yourself. Start with the mind of the consumer. Ask: ‘What position do we own in the consumer’s mind?’”
QUESTION#1:
What position does your company own in the customer’s mind?
Volvo owns “safety.” FedEx owns “overnight.” Western Union owns “telegram.” Owning a word in the consumer’s mind can be a license to print money—if you stay on message. Get greedy, and pay the price. “Years ago, we worked for Western Union,” Ries recalls. “They wanted to get in the telephone business. From their perspective, it made perfect sense. They had a terrific telephone operation and had been the first company to launch a privately owned communications satellite into space. But we argued against it, because in the mind of the consumer, Western Union was a telegram company. Sure enough, consumers totally ignored their massive advertising campaign. The reaction was: ‘What does a telegram company know about telephones?’ They finally shut down the telephone operation and wrote off $600 million. And that was when $600 million was $600 million!”
But hold on. While this first question is indeed the foundation of high-level strategic positioning, it assumes that a company has already answered some other critically important questions. That, of course, is not always the case.
QUESTION#2:
What is our core competency?
A company needs to identify what it does better than anyone else. “We had a client that was excellent at product development and had a competent sales team,” recalls Dean Bachelor, chairman of the Platinum Group, a Twin Cities based turnaround management firm. “But it had positioned itself as a manufacturer—even though its plants were antiquated, the equipment was breaking down, and it had never developed the manufacturing skills needed to compete in today’s marketplace. The company would develop wonderful products, but the plants could not produce high quality products on a timely basis. That caused unhappy customers, a large backlog, and serious financial stress.”
In desperation, the company handed over the management reins to the Platinum Group. Once Bachelor’s team assessed the situation, it wasted no time in shutting down both manufacturing plants and outsourcing everything. “It had been in manufacturing for many years and just had never excelled at it,” Bachelor says. “It was then able to focus on its core competencies. The result was a doubling of sales within a year and a half, because the company could hand off the manufacturing to people who knew what they were doing. A large element in many of our turnarounds is simply getting people to focus on what they do really well.”
QUESTION #3:
What business are we in?
Companies often develop marketplace myopia. They focus on the products they have to sell, rather than the solutions those products can deliver. Expanding that focus can create all sorts of profit-enhancing opportunities.
Taking a step back and looking at your offerings with fresh eyes is a good start. “I worked with a Twin Cities company that makes pediatric examination tables and devices in the shape of animals,” says Laurie Radmer, marketing lead for the Minneapolis office of Deloitte & Touche LLP, a professional services firm. “The purpose was to keep children calm and distracted during doctor visits.”
Where company leaders saw themselves as selling tables and accessories, Radmer took a more expansive view. “When we got done working together, they saw themselves as selling ‘healing environments,’” she says. “That means that instead of just selling one or two products they could sell entire rooms, which was a lot more profitable.”
The realization changed everything. The company began developing new products such as wall decals and exam table paper. That expanded focus also expanded its customer base. Rather than selling only to clinic owners, it could also sell to architects, health care consultants, and other audiences. “That’s the difference between looking at yourself as a product sell and looking at yourself from the standpoint of what benefit you can bring to consumers,” Radmer says.
QUESTION #4:
What is your market niche?
Very few businesses are generalists these days. Trying to be all things to all people is a recipe for disaster. “One of the ways to increase your competitive advantage is to narrow your competitive focus,” says Jim Pancero, a sales trainer and consultant who founded Minneapolis-based Jim Pancero Inc. “For example, AOL has done a spectacular job of repositioning itself in the last year. Up until then, it was known for being a closed community—you could only instant-message other AOL members, for example. Its focus was on the content it provided. But that approach was losing its appeal because there was so much available for free on the Internet.”
AOL then chose to promote itself as the family ISP. “Its value proposition was that if you had young children, you ought to have AOL because it will do a better job than anyone else to protect your child from the evils of the Internet,” Pancero says. “The problem was, that wasn’t giving them a large enough market.”
Back to the digital drawing board. “They’ve done a brilliant job in repositioning themselves once again,” Pancero says.
“What they’re advertising now is: ‘We will be the safest place on the Internet—not just for your kids, but for you.’ The message is that AOL has solved all your concerns about viruses, spam, and hackers. If you’re an advanced computer user, I doubt you’ll have any interest in what AOL has to offer. But your mother, who’s scared to death of computers but wants to e-mail her grandchildren, will happily pay AOL’s premium price. Her assumption is: ‘If I go with AOL, they’ll take care of me.’”
QUESTION #5:
What does my customer want?
Once you’ve identified your target customer, don’t assume you know what that customer wants and needs from you. Do whatever it takes to find out. “Technology companies often get in trouble with positioning when they think it’s all about developing the products with the most features,” says Alfred Marcus, professor of strategic management at the University of Minnesota’s Carlson School of Management. “The customer often doesn’t want the most advanced features. They want the best value for the money with the features that they need.”
Only when you look at the world from your customers’ perspective can you craft just the right value proposition. “In order to put together the right package of product, service, price, convenience, and image, you have to understand who your customers are and what their needs are very precisely,” says Marcus, author of the book, Big Winners and Big Losers: The 4 Secrets of Long-Term BusinessSuccess and Failure. “Whatever you provide, it has to be the best value at that price point for that particular market, at least as perceived by the customer.”
The better you know your customer, the better you’ll be able to craft a pitch-perfect positioning strategy. “You don’t want your customers to have a lot of choices,” Marcus says. “You want them to be locked in so that they can only get what they need from you. Dell Computer achieves that by customizing its PCs to the exact needs of each customer. The Family Dollar chain’s stores are conveniently embedded in neighborhoods where people don’t have the ability to go out and buy stuff at big-box stores. Best Buy offers a unique buying experience by creating different spaces within its stores to appeal to different customer categories.”
QUESTION #6:
Do we have the right infrastructure in place?
This operational and organizational assessment needs to be continually questioned. “Your strategy is of little value if you can’t execute it,” says Greg Steiner, assurance practice leader for the Minneapolis office of Grant Thornton, an international accounting firm. “You need the right operational infrastructure and the right people with the right skill sets to achieve the greatest rewards. For example, which is better for your business, being located in many cities, or in just one city but covering other territories?”
Evaluating your people is often the most difficult aspect of positioning. “Small to midsize manufacturers have a tendency to promote from within before they look outside,” explains Don Hayward, an MTI business services consultant. “That means they may have a vice president of marketing who started in the organization as a member of the customer service staff. That person probably won’t have the education or professional experience that a vice president of marketing would be expected to have.”
Part of Hayward’s job is to help companies assess human capital needs. “You have to determine what and who you’re going to need five years from now in order to make your repositioning work,” he says. “If you don’t already have the right people in place, then what’s your plan to get them? You can train your existing employees, hire more qualified people, or rent them as needed from a consulting firm.”
OK, now that the fundamentals have been taken care of, let’s gather again at the feet of the master. According to Ries, there are two more key questions to answer.
QUESTION #7:
What positions do our competitors own?
The key to positioning yourself in the consumer’s mind with respect to your competitors can be summed up in three words: Be the opposite. “When Pepsi wanted to increase market share, Coca-Cola already owned the cola position in the consumer’s mind,” Ries says. “So Pepsi’s thought process went something like this: ‘Well, what is Coca-Cola? It’s the first cola drink. It’s been around forever. That means your parents drank Coca-Cola.’ So Pepsi did the opposite. They said: ‘We’re the Pepsi generation. If Coke is for older people, we’re for younger people.’”
Similarly, Home Depot was the first home improvement warehouse. Consequently, it owned the home improvement position in the consumer’s mind. “Home Depot was a big warehouse, very masculine, and that appealed to men,” Ries says. “So Lowe’s said, ‘We’ll do the opposite. We’ll open a home improvement warehouse appealing to women.’ And that’s what they did. Lowe’s store have wider aisles, a cleaner atmosphere, lower ceilings, and better lighting. So even though Lowe’s is not as big as Home Depot, its stock has been doing terrific while Home Depot’s has been rather flat.”
QUESTION #8:
Is there an open hole in the mind of the consumer?
There always is. Your job is to find it, because that’s exactly where you should launch a new brand. “For example, [at one time] there were no expensive Japanese automobiles,” Ries says. “So Toyota introduced Lexus, which was more successful than Acura, even though Acura was the first Japanese company to introduce an expensive Japanese car. But Acura had mixed inexpensive four-cylinder cars with the more expensive six-cylinder cars at its dealerships. So people never got the impression that Acura was truly a luxury car like Lexus.”
And when hunting for an open hole, keep in mind the law of duality. “In almost every category, in the long-term, you wind up with two brands,” Ries explains. “And you wind up, in general, with two brands that are the opposite of each other. Coke and Pepsi. Home Depot and Lowe’s. That’s why a number three brand tends to be out of luck. If you’ve got a Coca-Cola for older people and Pepsi for younger people, guess where Royal Crown Cola is? Nowhere.”
When Ries and former partner Trout tried to work their marketing magic for a Twin Cities company years ago, their advice fell on deaf ears. “We were in Minnesota working with IDS (now Ameriprise Financial),” Ries remembers. “We said to them: ‘Where are all the financial companies located? New York City—at least perception wise. So you should be the opposite of that. You should play up the Midwestern approach to financial services.’ As a matter of fact, we suggested they do a newsletter called ‘West of Wall Street’ to communicate the thought that IDS is the opposite of all those greedy, scheming financial people in New York. But they didn’t listen, and eventually sold out to American Express.”
Clearly, strategic positioning is as much an art as it is a science. You can be ruthlessly logical. Your feet can be firmly planted in reality. But if you’re clueless about what’s going on in the consumer’s mind, chances are good that you’ll go down in flames. “Remember, it doesn’t matter what the reality is,” Ries cautions. “The only thing that matters is the consumer’s perception of reality.”