What is strategic positioning - Video 1
Transcript
Strategic positioning means that your firm does something different from its rivals in a way that adds value to their customers. So, the idea is operational effectiveness was about basically lowering cost. You can increase your profits by lowering your costs, we can automate, we can do things faster, we can improve the quality, lower the number of defects, all the stuff that we focus on in operations. With strategic positioning it’s saying we are going to do something better and we are going to do something different and you can do this in a variety of ways. One is you can specialize in what’s called “a market niche” right? You can say we are only going to serve students. We specialize in this whereas ours competitors are generalized right? Maybe I saw there was a company in Provo Utah that was wisdom teeth only. All they did was pulled out wisdom teeth why? Because in Provo there's a lot of young people going on missions who need their wisdom teeth removed so that they don’t worry about impacted teeth while they are in the mission field. So they were specialize, and not only were they specialized but they were able to then focus their resources on doing that specific job better than anyone else okay?
An example you are going to learn about in your textbook. I’m going to give you some examples. Okay the example you will learn about in your textbook is Fresh Direct. Fresh Direct decides to do something different and that they are not trying to compete there in the grocery store business in New York, but instead are trying to increase their profit margins by lowering cost in a industry with an already very low return on invested capital. They went ahead and said, “look we are gonna do something different instead of having storefronts, we are gonna have a web store. Instead of having inventory that we have to distribute to our stores and then sell to our customers, we are gonna have everything centralized in a central warehouse and distribute it from there. We are providing the same service to our customers, we are filling that same need but we are doing it in a fundamentally different way. Yeah! so you are going to look a this Southwest Airlines when they first came out they were competing lots of airlines had built their networks of airplane routes based on what they call the hub-and-spoke model which means you get some major cities: Chicago, Dallas, Los Angeles and then those are the hubs, the central points and then you go out from there to the smaller areas largely, okay? So, southwest says, “you know what first of all we are not going to focus on a nationwide approach. Second, we are not going to have a hub, so we are going to develop tools that allow us to basically bounce around the country, and have these paths that we can use, not only that. So we are gonna go no hub and we are also going to go local”. They focused their original strategy was focusing on local commuters in the Texas area. So, they were focused, they were on a specific market niche, and they were doing something different in that they weren't using this traditional hub and spoke model. That was able to lower costs, add value to their customers, and allow them to focus in way that they could gain a strategic competitive advantage, sustainable competitive advantage against their rivals.
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Positioning, Segmentation and Differentiation - Video 2
Transcript
Positioning is the foundation on which we build the entire commercial plan and we define what we are going to sell and to whom we are going to sell it. How do we arrive at the concept of positioning? Through our product, services, and briand. So that they occupy a distinctive place in our customers minds. We arrive to positioning through the concepts of segmentation and differentiation.
Segmentation. This is to group clients according to the characteristics they have in common. On one hand, socio demographic (sex, age, marital status, religion, type of family), take note, it isn't always the most effective method. On the other hand, psychographics, such as (lifestyle, or values). Psychographic characteristics the most effective when the time comes to segment and are more used than socio demographics. The third important criterion for companies are the behavioural characteristics (levels of use, levels of loyalty, or moments of use). These are the three criteria to segment we analyze therefore the market and the customers and through these criteria we look for what segments are the ones we can add value to. This would be our valuable customer or group of valuable customers.
How do we reach our customers? Through differentiation. Through the characteristics of the product itself such as: physical characteristics (attributes, and values). Through the image (the brand). Through our employees (customer relations). And through channels (the distribution). Through segmentation we have the (to whom, the valuable customers). Through differentiation we have (the what, the value proposition), and this is the positioning.
Once the value proposition and to whom we are going to aim our product at is decided we can begin with the marketing mix. What is my product going to be like? What price am I going to sell it at? Through which channels am I going to distribute it? How am I going to promote it? It’s as easy as thinking about the what and to whom. If companies have a good positioning it is much easier to create a good marketing plan.
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Strategic Positioning - Video 3
Transcript
Hi everyone! today we are going to discuss on the topic “strategic positioning”. What is strategic positioning? Strategic positioning is to study and analyze the way a business distinguishes itself in a valuable way from its competitors. The main objective is to achieve competitive advantage. According to Michael Potter, there are three strategies to create competitive advantage which are cost leadership, differentiation, and focus. One of the benefit of applying these strategies in the company is the direction of the company can be established and a key review of the company's goal can be seen. Therefore, effective decision-making can also be achieved.
The first strategy is cost leadership. Cost leadership strategy focuses on creating the lowest cost of producing a product or service in an industry in order to establish competitive advantage. If the company is the lowest cost producer in the industry, the company can bring down the price of a product or service and gain a market share in the industry. This means that the company will try to find ways to reduce cost so they can offer a product at lower price than the other competitors. However, the company can also be the lowest cost producer in the industry, but not offer the lowest price so that the company can gain higher average profit. This means that the company can set their price at the level of competitors price and maintain profitability. Cost leadership might be affected in the business by offering the lowest prices provided that the quality satisfies the customers and enough customers are attracted to be profitable. There are several benefits on implementing cost leadership strategy.
The first one is it creates barriers to enter industry. This is because the new firms are discouraged to enter the industry and be competitive as the new firms will try to figure out efficient way to lower operation cost.
Another benefit is it increases efficiency in the operation. Companies become good at making the most efficient operation in order to serve cost, meanwhile the challenges to apply cost leadership strategy is customers might have a bad perception due to the low price as they might assume that the product or service provided has lower quality than other competitors. Besides that, cost leadership is also a difficult strategy to achieve at the market as it involves a lot of brand loyalty. Therefore the need of high sales volume is a critical disadvantage.
For example, AirAsia is one of the companies that uses cost leadership strategy. AirAsia has the ability to charge L fare at lower price and still make profit in the airline industry. There are a few ways on how AirAsia are lower the cost of operation. First, AIrAsia operated single class service without frills and at substantially lower price. For example, short distance flight such as: coaching to quell the passengers will not receive meals. Secondly, AirAsia has an efficient operation as the point-to-point services kept flights not more than four hours and minimizing the turn grounds time. Third, AirAsia utilizes information technology by providing the system called IT as it eliminates the need for expensive reservation systems. It saves the cost of issuing physical ticket. Lastly, Air Asia offer salaries lower than the arrivals but employees were offered a wide range of incentives based on the employee's performance.
The next strategy is differentiation. Differentiation means creating high value for the customer for a higher price. The goal is to create a premium position for customers who are willing to pay more. Yes, this can be done by ensuring high satisfaction of the customers. The attraction can be from its function which is to have different types of functions that can ease everyday life. Next, the product durability may become one of the attraction, this is because people opt to use expensive things for a longer time as the saying goes, “you get what you pay for”.
The next one is features. Features is the product design and its additional interesting ability. last but not least is support a product is considered valuable if the seller or manufacturer can provide a guarantee and after sell service in a period of time. How exactly the companies achieve this? Firstly, by having good research and development to make people crave for its next innovation, and then, companies must make sure that they have high quality products, this is to ensure that their products are always on the top of people's satisfaction.
Finally, is the effective strategy of sales and marketing. Sales strategy can be in the form of gaining competitive advantage by focusing on target market customers.
Meanwhile, marketing is an important tool to attract the market to pay for the product. Without marketing the sales will be suffering. Now, what are the benefits of differentiation? Of course to reduce competition, the competition can be reduced when the products offered are something that is unique and no other competitors can follow. This can create a barrier of new entry. Next, by applying this strategy companies will have a broader reach. Broader reach means when a cheap product offers a certain area of features to match its cost. Meanwhile, differentiation insurance product satisfaction making in the needs and wants of the people fulfilled. There are many challenges when applying this strategy. One of them is brand loyalty. Brand loyalty can actually be considered as benefit if the product have met customer satisfaction. However, if their loyalty is to other products then it will be a risk as they have already considered other products for their needs. Another challenge is premium products are always being imitated for customers who look for fame than quality. It will be a real problem when the real customer is being deceived making both loss for them and the pioneer. Think different that is what Apple is trying to tell us. All of us are familiar with the logo and associated it with a renowned brand. Apple offers unique and attractive products, for example the smartwatch can be used as health monitoring as well as replacing the smartphone function. Other than that, Apple offers a lot of applications that the Apple user can find in the Apple store. It works from kids to adults application that is daily life. Not only that, Apple has produced several videos to record their products durability. Currently, Apple products are sold all over the world. This show their successfulness. Apple has a lot of workers from different ethnics and nationalities. This is to encourage innovative and creative ideas from different people perspective. So how do Apple managed to catch people's attention? By using creative advertisement. Apple jumps out from reality and is daring to produce innovative advertisement that makes people want their products. Next, Apple implements strategy that ensure all Apple stores are providing the same price which is fixed by the headquarters over the country. So, anyway you buy it, the price will be the same. This is to prevent any price wars between the stores and fairness.
The third approach of generic strategies by Michael Porter is focused strategy. This strategy concentrates on developing products or services for niche market. The firm that uses this strategy chooses small parts of market segments and focus only on those parts. In focused strategy the key to success is choosing a market niche where buyers have distinctive preferences, special requirements, or unique needs. However, they will have to decide whether to pursue cost leadership or differentiation. The term costs focus means emphasizing minimization within a focused market. Meanwhile, differentiation focus means pursuing strategic differentiation within a focused market.
One of the benefits of using focus strategy is the firm can contribute to reduce cost through the knowledge of specialist suppliers and they can increase differentiation through deep understanding of customers needs. The challenges are consumer preferences and needs may shift and a competitor may find a smaller segment and fast up focus the focuser.
One of the firms that uses costs focus is IKEA, a furniture retail company. IKEA targets on younger customers as they offer home furnishing with a good design and function and acceptable quality at lower prices to young buyers. In order to keep the firm's cash flow IKEA’s engineers design low-cost modular furniture that customers can easily assemble. Next, it is found that Victoria’s Secret is pursuing a focused strategy with differentiation. Victoria’s Secret’s differentiation is its quality of conformance and it prizes its various products higher than many other laundry companies. Most of the customers are loyal to their products as they are innovative always come up with new and unique design and well known as very sexy. That's all for today, thank you for listening.
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Market Segmentation, Targeting and Positioning - Video 4
Transcript
Hi there! in this business topic video we are going to introduce you to an important and widely used model of marketing strategy called “STP” which is all about segmentation, targeting, and positioning. Now, when businesses make decisions to how to develop their marketing strategy and decide how to try to create value for customers, there are essentially two issues they have to consider. Firstly, of course they have to choose which customers they want to target, which customers they want to to sell to, and the challenge here is to segment the market, define the different parts of the market that are most attractive, and then to target, which segments do they want to focus on in order to have the best chance of success? And having identified the market segments and which are the ones they want to target, the next question is: how best to compete in that market? How to serve the customers in the target market segment? And the issue here is around market positioning, how do you identify the right positioning for your product in terms of the features that the target customers want? So all of this we will look very briefly at each of these things market segmentation, targeting, and positioning. We are looking more detail at them in separate topic videos, but for now let's just have an overview of each the parts of this model segmentation, targeting, positioning which is often shorter than shortened to STP.
Market segmentation is about identifying the different parts of the market where customers have similar needs and wants. Of course the segments can be very large where nearly all the consumers in the markets have similar needs and wants or it could be very specialist, a niche segment. Our different ways as we will see in a later video of segmenting a market perhaps based around how to link them so (income segmentation). Perhaps based around age or gender (demographic segmentation). Where people live (geographic segmentation). All the ways in which consumers behave (behavioral segmentation). So, we will look at those in more detail in a late video, or you need to offer this stage though is that there are ways of segmenting markets not just one.
The key benefits of segmenting a market is it enables a business to be much more focused around where it places its marketing efforts, and in particular that useful lf you are developing new products and services designed to meet the specific needs and wants of the customers in that segment. Essentially the most important benefits of market segmentation is it enables the marketing mix, to be more accurate, to be better focused. One of the issues of course with segmentation is that this isn't a precise science. There is a lot of overlap between segments and just because you can identify what you believe to be a group of customers with similar needs and wants doesn't mean that you will be able to reach those customers. And another issue with market segmentation is that these segments are fast changing and very dynamic, so while you might be using some reasonably up--to-date information about these segments it could easily be out of date by the time you're able to action it. So market segmentation is all about identifying the different parts of the market.
The next issue is how do you target the customers in the segments that you want to compete in? There are three different ways of targeting a market, let’s just briefly look at those. Firstly, there is mass marketing which is sometimes known as “undifferentiated targeting” and the strategy here is that you target the whole market. You dont spend too much time trying to break the market down into different segments. You try to find ways in which all customers needs and wants can be met and try to deliver a product that meets all of those needs and wants. However, very few businesses are able to do that successfully and increasingly of course what they find themselves doing is trying to break the market down into segments and in some way to differentiate their product. So, the idea here, the strategy here is that you identify one or two or more target market segments or within the broad market and then you design products and services that hopefully will be hitting the needs of customers in each segment. What are the implications for this? is that you are going to probably need a separate marketing plan and a separate marketing mix for each of those segments. And a third approach of targeting is to really focus, really concentrate your marketing, concentrate your products on us both small part of the overall market is call initial, concentrate your marketing and the aim here of course is to try to identify a profitable niche where you can very quickly build a strong market position and hopefully maximize the returns.
And so, we have dealt with targeting now and we have dealt with market segmentation, let’s just spend a couple of minutes on what we mean by market positioning. So having chose which segments we want to target and which customers are in the segments what we now have to do is to decide how to compete effectively in that target market and this concept is called “the value proposition”. That’s the essential part of market positioning. The important thing here is to always remember that market positioning and that value proposition should be from the customer point of view not from the business’s point of view because ultimately it’s customers who buy products and services and if their view on what value is is different from yours, that’s tough. It’s that those the guys who are making the decisions. So the value proposition is all about the position the product takes on the market based around the dimensions that are important from the customer’s point of view and one way of mapping this position particularly compared to the competition is to put together what’s known as a market map or a positioning map. So, let’s just briefly look at what we mean by a positioning map.
Markets of course in terms of what customers want can be a defining in various different dimensions. Obviously the most obvious one I guess is low price to high price, and similarly customers also have differently to one based around their need for basic quality all the way through to high quality, but there are also lots of other dimensions. For example a product could be a necessity, or it could be at the other end of the scale and be a luxury it could be very low tech, it could be very high tech. So, what a market map or positioning map tries to do is to map the different positions of value propositions of products based around a selection of two dimensions and clearly those dimensions that are chosen are subjective as is the position of the product on the positioning map, so on the screen there is this an example on how you might position, a bunch of different chocolate products based around to traditional damage dimensions of quality and price and you might argue as to whether we have put those products in the right position, but that’s just one perspective on that product and that market from one customer’s perspective. That’s the idea of the positioning map to try to identify whether there may be some gaps in the market that may be successful.
Now, don’t forget with positioning, the key issue here is from the point of view of customers and what a business needs to do is to try to find a value proposition that gives it a competitive advantage. What this means is that from the customer point of view, the product is perceived as being offering superior value. However, the customer determines value, but there are lots of different ways in which value can be delivered. Let’s just have a look at four possible positioning strategies before we finish. One way of course is to offer much more value but for a lower price, lots of businesses try to offer that to stick that good quality, acceptable quality, but for very low prices where the perceived value is therefore high compared to the price. How about the third one down there? They are offering more for the same so the price stays the same but you reposition your product by maybe offering some new features, or a better performance for the same price, that might be a successful positioning strategy. The key issue here is that there’s more than one way of positioning a product for success, but it’s all about understanding how about how customers perceive value. So what we have done is we have just looked briefly there at this concept, this marketing concept called STP (segmentation, targeting, and positioning) and what we’ll do is we’ll look at each of those three elements of marketing strategy in more detail in a subsequent topic video.
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