What is Market Positioning and Why Is it Helpful for Building a Business?

September 9, 2022

I don't drink coffee, but 154 million adults in the U.S. (roughly 75% of people over the age of 20) in the United States do.

That's a lot of people drinking bitter bean juice.

Yet not all 154 million people who drink coffee drink it for the same reason. For some, coffee is the life-giving elixir that helps blast the sand out of their eyes before heading into the office. For others, the taste of coffee is horrendous, but it's the only thing getting them through a graveyard shift. Still, for others, a beautiful ritual is practiced every month: getting together with a close friend over a caffeinated beverage.

Our relationship with coffee ebbs and flows with our life stage, workplace culture, and even social setting. These factors make a great case study that can help us understand market positioning.

At its most basic form, market positioning explains your customer's relationship with your business. How does your brand stack up against its competitors? What makes your company unique? What industries are associated with your business? These fundamental questions paint a picture that allows you to understand your business from a customer's perspective, ultimately creating incredibly effective sales and marketing efforts.

Market Positioning is About Perception

Coffee has many competitors: water, tea, and soda. Interestingly enough, our list of associated competitors quickly shifts depending on our perception of the purpose of coffee.

If coffee is an energy substitution, sleep now becomes a high-flying competitor. Or perhaps a cold shower. If coffee is simply a means for gathering with a friend, a meal could quickly become a substitute — even a phone call.

The reason that we seek out any product is often because of the problem that we perceive and are looking to solve. For this reason, a market is simply a group of solutions. Companies operating within a market often offer a solution for a set of problems that many people have encountered. As consumers, we judge solutions based on how effectively they solve our problems and for how costly the solution itself is. When we find the right solution, it feels like it was tailor-made for our situation.

For a solution to be effective, it must address the problem that plagues its market.

Let's say you're a college student prepping for finals: you've got a long night of studying and need to stay awake. Your local coffee shop has started offering a special to support learning students: new early morning hours and 50% off all herbal teas!

It's clear that this would be a massive failure in understanding what the local coffee shop's customers need. The solution provided utterly misses the mark! This offer is a better fit for a completely different market. Sure, some students may try getting up early and mainlining pots of tea in the hopes that it improves their test scores, but the new offering will turn off most.

A product or solution that doesn't fit a market properly creates friction.

As entrepreneurs, we often create new businesses thinking that our companies and products are great fits for a particular market. As time passes and your solution evolves, things change. If we truly take the time to understand our customers, you may be surprised that your product needs repositioning.

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Repositioning a Product

In her book, Obviously Awesome: How to Nail Product Positioning So Customers Get It, Buy It, Love It, April Dunford lays out an obvious strategy for identifying holes in the positioning strategy for a product. There are ten steps:

  1. Understand the customers who love your product.
  2. Form a positioning team
  3. Align your positioning vocabulary and let go of your positioning baggage
  4. List your true competitive alternatives
  5. Isolate your unique attributes or features
  6. Map the attributes to values
  7. Determine who cares a lot
  8. Find a market frame of reference that puts your strengths at the center and determine how to position in it
  9. Layer on a trend
  10. Capture your positioning so that it can be shared

The ultimate goal of each of these steps is to create a clear picture of the most effective market for your product. Instead of guessing how customers perceive your company's product or service, you can use accurate data-driven information about your current customers.

By defining a story of how your product is perceived, you can create an effective sales and marketing strategy to highlight the strengths of your offering. Identifying the market or sub-markets your company's solution is an ideal fit for helps reduce friction in your sales process and increase your lead velocity over time.

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Jeremy Millar
Written by:
Jeremy Millar

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