1.6 - Market Positioning
The concept of market positioning
Market positioning refers to how customers view a brand or product in relation to those offered by competitors.
Factors influencing market positioning
- Comparison with rivals - Positioning is based on how a product stands out against similar offerings.
- Use of market maps - These visual tools help illustrate a product's position.
Market mapping and its analysis
Market mapping involves creating a visual representation that compares products or brands based on two key characteristics important to consumers.
Creating a market map
A market map is typically a grid with two axes, each representing a spectrum of attributes (e.g., low price to high price on one axis, and low quality to high quality on the other). Products or brands are placed on the grid according to where they fit between these extremes.
Benefits of analysing market maps
- Identifying market gaps - Gaps on the map highlight unmet customer needs, allowing businesses to introduce new products.
- Assessing competitors - Shows which rivals are closest in positioning, aiding the development of targeted marketing strategies.
- Repositioning products - For products with falling sales, a map can guide changes to features or branding.
- Informing pricing - Reveals typical price expectations for certain positions, helping set competitive prices.
- Highlighting popular features - Indicates attributes of successful brands and what benefits target customers seek.
- Spotting anomalies - Some products may appear unusual, like a local shop charging high prices for basic items due to its convenient location.
Limitations of market maps
- Subjectivity - Positions are often based on opinions, which can introduce bias.
- Varying perceptions - Different customers or researchers might disagree on aspects like product quality, leading to inconsistent maps.
- Need for validation - Any identified gaps should be checked with market research to confirm real demand exists.
Competitive advantage and its types
Competitive advantage occurs when a business has features or strategies that enable it to outperform rivals, leading to higher sales or greater profits. Achieving this requires offering something distinctive that appeals to customers.
Ways to achieve competitive advantage
- Lower costs - Producing goods at reduced expenses allows for lower selling prices to attract more customers or standard prices for higher profits.
- Product innovation - Introducing novel features or entirely new items first to the market to gain an edge.
- Advertising and marketing - Building appeal through memorable branding, logos, or celebrity partnerships to create a strong image.
- Product differentiation - Highlighting a unique selling point (USP) that sets the product apart from others.
- Reliability and quality - Offering durable, high-standard products that justify premium prices and build customer loyalty.
- Good customer service - Providing helpful support throughout the buying process, with friendly and expert staff to encourage repeat business.
- Convenience - Simplifying the purchase experience, such as through fast delivery options or easy access.
Adding value in business
Adding value is the process of increasing the gap between what it costs to produce a product and the price at which it sells.
Formula for added value
Where:
- Selling price = The amount customers pay for the product (£)
- Cost of production = The total expenses involved in making the product (£)
Worked example - Calculating added value
A business produces a handmade candle with a production cost of £3.20. It sells the candle for £10.50. Calculate the added value.
Step 1: Identify the values
- Selling price = £10.50
- Cost of production = £3.20
Step 2: Apply the formula