Choosing the target market is critical for any company. It is not enough to choose a segment to penetrate; the task is to identify the competitive advantage that the company will gain in a particular market segment. This is the axis of differentiation. The choice of market, the segments, and the axes of differentiation constitute “strategic positioning.”
Strategic positioning is the set of actions implemented by a company with the aim of occupying, in the customer’s perception, a position that is clear, distinct, and solid vis-à-vis the competition. This detail is important: the battleground for positioning is the client’s mind.
This concept was originally presented by Ries and Trout at Advertising Age in 1972. At the time the author stated, “The name of the marketing game in the 1970s is ‘positioning.’”
The concept of positioning originated in an approach advocated in the 1950s by the marketing professional Rosser Reeves. He called this approach the Unique Selling Proposition, Unique Sales Proposition, or Unique Sales Argumentation.
Since then it has been widely used to explain the success and failure of numerous products and brands.
One of the main theories that addresses the issue of positioning was proposed by Treacy and Wiersema in their book The Discipline of Market Leaders. They discuss three possible positioning alternatives that companies can embrace: operational excellence, product leadership, and customer intimacy.
Figure 1 illustrates three possible positioning alternatives that companies can embrace.
If the choice is operational excellence, the company should focus on efficiency in the production process, scale of production, minimizing advertising expenses, technical assistance, and distribution.
The company starts from the premise that value in the eyes of the customer is price, quality, and convenience.
In this case the company rejects variety, offers no-frills services to the middle of the market, the “average” customer in the segment, where demand is higher and customers are more focused on cost than on choice. The key word is standardization.
Think of Southwest, Positive Computer, and Formula 1 Hotel.
If the choice is product leadership, the focus will be to seek recognition in product functionality, product or service innovation, and the reputation as best-in-class.
Here the company starts from the premise that customer value is continuous innovation, reduced development time, and functionality.
We can think of 3M, Apple, Sony, Embrapa, and Pfizer as examples.
If the positioning choice is customer intimacy, the focus should be on deep knowledge of customers, differentiation through service, database marketing, relationship, and customization of solutions.
The assumption is that value for the customer derives from relationship, solutions, and customized services.
Examples are IBM and Marriott Hotels.
When developing a positioning approach, the company should avoid the temptation of not prioritizing any one alternative. That is, when trying to be everything for all customer profiles, the company runs the risk of being nothing to anyone.
For Treacy and Wiersema it is very difficult for a company to be simultaneously the best in all three dimensions – even in two – because the three value disciplines, as they call them, require different management systems that, as a rule, conflict with one another.