Selecting an Overall Positioning Strategy
- Pages: 5
- Word count: 1193
- Category: Strategy
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The full positioning of a brand is called the brand’s value proposition—the full mix of benefits on which a brand is differentiated and positioned. It is the answer to the customer’s question “Why should I buy your brand?” Volvo’s value proposition hinges on safety but also includes reliability, roominess, and styling, all for a price that is higher than average but seems fair for this mix of benefits. The figure shows possible value propositions on which a company might position its products. In the figure, the five green cells represent winning value propositions— differentiation and positioning that gives the company competitive advantage. The red cells, however, represent losing value propositions. The center yellow cell represents at best a marginal proposition. In the following sections, we discuss the five winning value propositions on which companies can position their products: more for more, more for the same, the same for less, less for much less, and more for less.
More for More. “More-for-more” positioning involves providing the most upscale product or service and charging a higher price to cover the higher costs. Four Seasons hotels, Rolex watches, Mercedes automobiles, SubZero appliances—each claims superior quality, craftsmanship, durability, performance, or style and charges a price to match. Not only is the market offering high in quality, but it also gives prestige to the buyer. It symbolizes status and a loftier lifestyle. Often, the price difference exceeds the actual increment in quality. Sellers offering “only the best” can be found in every product and service category, from hotels, restaurants, food, and fashion to cars and household appliances. Consumers are sometimes surprised, even delighted, when a new competitor enters a category with an unusually high-priced brand. Starbucks coffee entered as a very expensive brand in a commodity category.
When Apple premiered its iPhone, it offered higher-quality features than a traditional cell phone with a hefty price tag to match. In general, companies should be on the lookout for opportunities to introduce a “more-for-more” brand in any underdeveloped product or service category. Yet “more-for more” brands can be vulnerable. They often invite imitators who claim the same quality but at a lower price. For example, Starbucks now faces “gourmet” coffee competitors ranging from Dunkin’ Donuts to McDonald’s. Also, luxury goods that sell well during good times may be at risk during economic downturns when buyers become more cautious in their spending. The recent gloomy economy hit premium brands, such as Starbucks, the hardest.
More for the Same. Companies can attack a competitor’s more-for-more positioning by introducing a brand offering comparable quality at a lower price. For example, Toyota introduced its Lexus line with a “more-for-the-same” value proposition versus Mercedes and BMW. Its first headline read: “Perhaps the first time in history that trading a $72,000 car for a $36,000 car could be considered trading up.” It communicated the high quality of its new Lexus through rave reviews in car magazines and a widely distributed videotape showing side-by-side comparisons of Lexus and Mercedes automobiles. It published surveys showing that Lexus dealers were providing customers with better sales and service experiences than were Mercedes dealerships. Many Mercedes owners switched to Lexus, and the Lexus repurchase rate has been 60 percent, twice the industry average.
The Same for Less. Offering “the same for less” can be a powerful value proposition— everyone likes a good deal. Discount stores such as Walmart and “category killers” such as Best Buy, PetSmart, David’s Bridal, and DSW Shoes use this positioning. They don’t claim to offer different or better products. Instead, they offer many of the same brands as department stores and specialty stores but at deep discounts based on superior purchasing power and lower-cost operations. Other companies develop imitative but lower-priced brands in an effort to lure customers away from the market leader. For example, AMD makes less expensive versions of Intel’s market-leading microprocessor chips.
Less for Much Less. A market almost always exists for products that offer less and therefore cost less. Few people need, want, or can afford “the very best” in everything they buy. In many cases, consumers will gladly settle for less than optimal performance or give up some of the bells and whistles in exchange for a lower price. For example, many travelers seeking lodgings prefer not to pay for what they consider unnecessary extras, such as a pool, an attached restaurant, or mints on the pillow. Hotel chains such as Ramada Limited, Holiday Inn Express, and Motel 6 suspend some of these amenities and charge less accordingly. “Less-for-much-less” positioning involves meeting consumers’ lower performance or quality requirements at a much lower price. For example, Family Dollar and Dollar General stores offer more affordable goods at very low prices. Sam’s Club and Costco warehouse stores offer less merchandise selection and consistency and much lower levels of service; as a result, they charge rock-bottom prices. Southwest Airlines, the nation’s most consistently profitable air carrier, also practices less-for-much-less positioning.
From the start, Southwest Airlines has positioned itself firmly as the no-frills, low-price airline. Southwest’s passengers have learned to fly without the amenities. For example, the airline provides no meals—just pretzels. It offers no first-class section, only three-across seating in all of its planes. And there’s no such thing as a reserved seat on a Southwest flight. Why, then, do so many passengers love Southwest? Perhaps most importantly, Southwest excels at the basics of getting passengers where they want to go on time and with their luggage. Beyond the basics, however, Southwest offers low prices, with no extra charges for checked baggage, aisle seats, or other services. No frills and low prices, however, don’t mean drudgery. Southwest’s cheerful employees go out of their way to amuse, surprise, or somehow entertain passengers. One analyst sums up Southwest’s less-for-much-less positioning this way: “It is not luxurious, but it’s cheap and it’s fun.”
More for Less. Of course, the winning value proposition would be to offer “more for less.” Many companies claim to do this. And, in the short run, some companies can actually achieve such lofty positions. For example, when it first opened for business, Home Depot had arguably the best product selection, the best service, and the lowest prices compared to local hardware stores and other home improvement chains. Yet in the long run, companies will find it very difficult to sustain such best-of-both positioning. Offering more usually costs more, making it difficult to deliver on the “for-less” promise. Companies that try to deliver both may lose out to more focused competitors. For example, facing determined competition from Lowe’s stores, Home Depot must now decide whether it wants to compete primarily on superior service or on lower prices.
All said, each brand must adopt a positioning strategy designed to serve the needs and wants of its target markets. “More for more” will draw one target market, “less for much less” will draw another, and so on. Thus, in any market, there is usually room for many different companies, each successfully occupying different positions. The important thing is that each company must develop its own winning positioning strategy, one that makes it special to its target consumers.