Rethinking Positioning Wrap-up

RETHINKING POSITIONING MODULE OVERVIEW This note outlines the content of a marketing module that is designed to introduce non-traditional approaches to positioning. The classical positioning paradigm defines positioning as a process by which a firm markets its product or brand to occupy a distinctive position in the consumer’s mind. It is based on the idea that positioning derives from a holistic set of consumer impressions that can be influenced by everything from a product’s features to its price. These perceptions are typically represented in a perceptual map – an n-dimensional graph showing the attributes consumers care most about. Under this model, the positioning challenge for any firm can be summed up as follows: 1. To identify a desirable position on this map (positioning strategy) 2. To develop a marketing plan to capture and dominate this desired position vis-à-vis

other competitors in the category (execution of the positioning strategy) However, if differentiation means doing what the competition is not, then the fundamental paradox in the classical positioning approach is that it can lead to predictability with respect to competitive behavior, thereby inhibiting (preventing) the opportunity for firms to create true differentiation from each other. Because all firms are jockeying within the same categorical space – ie, competing along a shared set of dimensional attributes with a highly-tuned sensitivity to the behaviors of other players within the space – even firms that execute well under this paradigm are limited, not only in how much separation they are able to create from competitors, but in how sustained this separation is likely to be. The alternative approach to positioning presented in this module suggests a way out of this paradox. In this alternative approach, the challenge for the firm is to step back from the positioning map and look for ways to achieve differentiation from the category as a whole rather than from specific competitors within the category. The module suggests that some of the most high-profile consumer marketing success stories in the recent years have exactly this in common – they involve firms that were able to create psychological separation from their categories in the aggregate (eg Swatch, IKEA, Sony etc) - in effect, positioning themselves as existing apart from their respective categories. This type of positioning is disruptive because when a firm is able to successfully execute on such an approach, the outcome results in a disequilibrium that can end up being category-transforming. Note that the disruptive impact has little to do with any technical breakthrough with respect to the product’s functional attributes; instead, it occurs primarily as a result of positioning.

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CLASSICAL POSITIONING PARADIGM In a series of articles published by Al Trout and Jack Ries (in early 1970s) noted the rise of an “overcommunicated society” in which traditional mass-market messaging strategies no longer worked. The answer to this development was “positioning”, defined as the marketing of a product to occupy a distinctive place in the target consumer’s mind. The idea was appreciated, and today positioning is widely regarded as one of the most useful and fundamental tools in the marketing manager’s toolbox. The fundamental element of positioning is the notion that positioning derives from a holistic set of consumer impressions that are ultimately subjective in nature, and can be influenced by everything from a product’s features to its price. In executing a positioning strategy, the firm essentially attempts to influence consumers’ subjective perceptions to its best advantage. Of course, just because a firm decides to position its offering in a certain way does not mean it will necessarily succeed. The consumer is the ultimate arbiter of whether, for instance, Subway’s food really is perceived as “fresh” relative to the food at other fast-food outlets. These perceptions are typically aggregated in a “category positioning map” or perceptual map—an n-dimensional perceptual graph anchored by two or more key attributes. A perceptual map is powerful because it dramatically simplifies consumer perceptions in several distinct ways. First, a perceptual map breaks consumer perceptions down according to a limited number of attributes, plotting the overall product offering across the dimensions and attributes that mean most to consumers. Second, a perceptual map aggregates perceptions across a large number of consumers to create a general picture of how a market perceives an offering. Third, because a perceptual map captures the relative competitive position of product offerings within a category, it becomes a potent tool for competitive strategy. By placing all of the product offerings within a category on a single map, managers can compare and contrast the positioning of various offerings in relation to one another. They can then determine which position their product should occupy on the map, before coming up with a marketing plan to imprint this positioning in the minds of consumers.


Example of Perceptual Map EMERGENT CATEGORY DYNAMICS But if the classical positioning approach has empowered managers by enabling them to develop coherent competitive strategies, it has also constrained them in important but less obvious ways. Although the conventional model can certainly lead to strategies that create differentiation in the short-term, it can also give rise to a number of market rhythms that can be self-defeating from a differentiation standpoint in the long-term. Ironically, these dynamics tend to emerge, not because firms are executing poorly under the classical positioning model, but because firms are behaving exactly as would be expected under this model. Specifically, the classical positioning mentality has the potential to lead to two, interrelated firm tendencies. The first is a hyper-sensitivity to competitive positioning tactics. Positioning strategies are driven by the firm’s need to differentiate itself from competitors in the category. One of the ways firms achieve this is through innovation—by rounding out their offerings with new features and benefits. Yet firms often discover that these differences are difficult to sustain. The reason for this is simple: Because the


conventional positioning model conditions firms to be highly attuned to the positioning tactics of other firms in the category (particularly those firms closest to them on the positioning map), it not only encourages firms to create differentiation, it also makes it easy for firms to identify and thwart attempts by the competition to do the same. Thus, if Citibank in Pakistan offers rewards program for its credit cards, it is not long before MCB, UBL and HBL will also follow suit. Because of this, to the extent that firms are able to identify new attributes along which to differentiate, the resulting competitive advantage tends to be short-lived; replication of these attributes is typically unavoidable as competitors jockey to establish “points of parity” along these same attributes. Over time, this kind of myopic counter-positioning at the firm level tends to create competitive clustering at the category-level. The end result is that the offerings within the category become more, not less, similar over time. One example of this kind of competitive herd mentality can be found in the “augmentation trend” that is characteristic of so many mature consumer product and service categories. In these categories, competitive pressure creates a scenario in which firms must constantly augment their value propositions simply to keep pace with the competition. In toothpaste category, for instance, it is no longer enough for a toothpaste to simply “clean teeth” and “fight cavities”, it must now do everything from freshen breath to “fight gum disease”. In the hotel category, it is no longer enough for a hotel to offer cable television and room service; it must now offer high-speed internet access. Laundry detergent, credit cards, cable television service: What all of these categories have in common is that the overall value proposition in the category has cumulatively expanded over time. Meanwhile, the overall level of differentiation in the category has diminished due to this relentless competitive emulation. Note, too, how easily this kind of competitive momentum can become self-reinforcing. Once a particular competitive trend gathers steam, the pressure on an individual firm to keep pace with the competition becomes all the more overwhelming. Put another way, once a firm finds itself on the competitive treadmill, it becomes increasingly hard to get off, for to do so is to risk losing ground to the rest of the category. A second firm tendency that can emerge out of the classical positioning mentality is a hypersensitivity to consumer expectations and behaviors. In today’s market environment, it is hard to imagine how a firm could be considered too consumer-centric. Consumer-centricity, after all, is typically considered to be a sign that a firm has its priorities in order. And yet here again, while a responsivity to consumer expectations and behaviors can certainly pay off at the firm-level, it can lead to a less propitious phenomenon at the category-level. To understand why this is so, consider what happens when a category matures over time. Not only does the overall expected value proposition in the category tend to go up, but firms tend to grow more savvy in their marketing behavior, particularly as they begin utilizing market research tools to deepen their understanding of how consumers think, feel, and behave in the category. The more firms learn about consumer expectations,


needs, and behaviors, the more precisely they are able to refine their marketing mix variables to meet these expectations, fulfill these needs, and conform to these behaviors. However, this also has the effect of reinforcing these same expectations and behaviors over time; indeed the more firms cater to consumer habits, the less incentive consumers have to change those habits in any dramatic way. In the short run, this entrenchment of consumer expectations and behaviors may serve a firm well, enabling effective segmentation and target market selection processes. After all, what renders both segmentation and target market selection useful as marketing tools is the recognition that people don’t change overnight. The marketing strategy of Rent-A-Car is dependent on the assumption that frequent travelers will use rental cars more often than non-travelers. In each of these cases, the predictable nature of consumer behavior is ultimately what makes target groups both meaningful and worth marketing to. And yet an over-sensitivity to consumer expectations and behaviors—and the corresponding self-reinforcing feedback loop that can result—can also have the unintended effect of generating excessive conservatism on the part of firms. As firms become increasingly competent at using market intelligence to fine-tune their marketing tactics in conformance with consumer habits, less energy may be devoted to exploring ways to influence or alter those habits in anything more than an incremental fashion. It is in fact interesting to note that rapid shifts in consumption patterns would likely be disastrous for such firms, destroying the rationale underlying their tightly calibrated segmentation and positioning strategies. When incrementalism becomes the focus of a firm’s marketing expertise, a steady degree of consumer inertia can be a blessing. In sum, just as competitive trends can emerge within a category, so can consumption trends. In some cases, firms not only reinforce these trends, but their positioning strategies rely upon on their slow-moving nature. When this occurs, the category may continue to evolve and mature, but in a manner that is neither bold nor inspired; if anything, the evolutionary trajectory of the category can be marked by a growing predictability. Disruptive Positioning The alternative view of positioning presented in this module suggests a framework for how a firm might challenge this predictability. Underlying this alternative approach is the idea that sometimes, true differentiation requires a willingness on the part of the firm to resist the momentum of the category, in part by defying both competitive trends and consumption trends within that category. In this alternative approach, the firm’s positioning objective is to create psychological separation from the category in the aggregate—i.e., to be perceived as existing apart from the rest of the competition. Implicit in this kind of disruptive positioning approach is a key proposition: That when viewed holistically, it is possible to conceptualize categories as having personalities of their own, marked by a set of category-level characteristics that transcend the characteristics of the individual offerings within them. These characteristics include both structural elements, which are reflective of the way the competition is aligned or


organized within the category, as well as identity elements, which are reflective of the functional and image-related associations that are connected to the category. (Note that while marketing practitioners are well accustomed to thinking about individual brands having identities, they are less likely to consider the possibility that overall categories have identities as well) And yet, the successful implementation of a disruptive positioning strategy requires, first and foremost, a strong understanding of the nature of the category itself. B

Category Structure Category structure refers to the way the competition within a category is organized or clustered. Perhaps the most easily recognized formation would be a hierarchical structure, with high-end, mid-tier, and low-end clusters. In categories structured in this manner, the high-end cluster typically consists of brands offering a superior value proposition in exchange for premium prices; these brands can usually be found leading the augmentation trend described earlier in this note. The low-end cluster typically consists of brands offering an inferior value proposition targeted at price-sensitive consumers; they tend to lag in the augmentation race. In the hotel category, the former would include such brands as the PC and Marriott; In some categories, no clear hierarchy exists and brands instead cluster into horizontal sub-segments. In the breakfast cereal category, offerings can be broken down into horizontal clusters such as adult cereal (e.g., Special K), children’s cereal (e.g., Cocoa Puffs), and healthy cereal (e.g., Healthy Choice Granola), to name a few. In still other categories, the structure is more complicated than simple hierarchy or clustering. Fashion brands may be divided into hierarchical tiers, yet within these tiers clustering occurs – say, into the conservative (eg Polo Ralph Lauren) versus the trendy (eg Alessi, Gucci). Such structural distinctions are important because the more coherent, static, and well-established the category structure, the greater the opportunity for disruptive positioning tends to be. Conversely, the more diffuse, amorphous, and fluctuating the category structure, the less disruptive potential there tends to be. A good example of this can be seen in the toy category, which has a highly complex, constantly evolving competitive structure. There are literally dozens of sub-categories in this category (ranging from Lego-like construction blocks, to Barbie-like dolls, to small vehicles, to Monopoly-like board games), and within each of these sub-categories, firms must compete on entirely different sets of attributes. In addition, the competitive structure within the category is constantly in flux—new sub-categories will often emerge overnight (e.g., the fantasy trading card sub-category), new product introductions will often defy categorization, booming one year and then busting the next (e.g., electronic pets), and even established products will undergo frequent metamorphoses (e.g. Barbie). In other words, it is a market full of widely-divergent offerings and perpetually restless firms; as a result, there is considerable product churn, lots of experimentation, and a manifest degree of unpredictability with respect to what manufacturers will come up with next.


By comparison, in other categories—soap, ketchup, hotels, etc.—the category structure is more neatly organized, such that the boundaries around the category are obvious and easy to describe, and there is a higher degree of predictability with respect to how the category is likely to evolve over time. Again, it is in the former case that the potential for disruptive positioning is least apparent. When the category’s competitive structure is complex, incohesive, and constantly mutating, it is a strong indication that firms are regularly surprising customers with novel offerings and that consumers are accustomed to being taken off-guard. A disruptive positioning approach would not appear to make much sense in these markets since it is not precisely clear what the firm would be trying to disrupt. On the other hand, categories with simple and coherent competitive structures tend to be ones in which competitive trends and consumption trends have become entrenched. In these markets, the potential for disruptive positioning derives from the fact that, because it is possible to conceive of the category holistically, it is reasonable to consider how a firm might create separation from it. Another way to put this is to say that the more unambiguous and entrenched the category structure, the more likely it is that the category has a well-defined identity associated with it. CATEGORY IDENTITY In addition to possessing structures, categories also possess identities. There are different components of a category’s identity; one of these components is what is referred to as category conventions. A category’s conventions consist of the various norms, rules, and standards that have evolved by implicit consensus within the category. In the hotel category, they include such competitive norms as not allowing guests to check into an establishment until 3pm and yet asking that they depart by noon the next day; they also include such competitive standards as allowing guests to make use of the soap and shampoo for free, but charging them for the use of the telephone. Note that as these conventions develop among firms, they come to reflect the functional expectations that consumers bring to the category regardless of the particular brand they may choose to consume. Consumers expect all banks to offer 24-hour online banking, for example, but they don’t expect any bank to keep its branches open into the evening hours. Consumers expect all computer manufacturers to offer some kind of warranty, and yet they don’t expect any manufacturer to offer a free upgrade policy. In both cases, well-established competitive conventions have become embedded into the expected value proposition that consumers associate with the overall category. A second component of a category’s identity is what is referred to as its image. A category’s image is reflective of the more abstract traits and associations that consumers bring to the category. A category like insurance might conjure up a response along the lines of “necessary but boring.” Car workshops might conjure up a response along the lines of “not to be trusted.”


Because these abstract associations are reflective of the various affective associations that consumers attach to the category, they tend to affect the attitudinal stance that consumers adopt when they approach the category. In the case of a car workshop, this might result in a consumer asking specifics with a bit of skepticism or even suspicion. DISRUPTIVE POSITIONING: POSITIONING AGAINST VULNERABILITIES IN CATEGORY IDENTITY Just as it is possible for a firm to position itself against the individual brand identities of its competitors within the category, it is also possible for a firm to position itself against the category’s holistic identity. Again, this is the core idea behind disruptive positioning: To create separation from the category as a whole by exploiting vulnerabilities in the category’s overall personality. There are a range of ways in which firms can execute such a strategy. Three such approaches are explored in this module: (1) a reverse positioning approach, (2) a breakaway positioning approach, and (3) a stealth positioning approach. Each of these is examined in turn. REVERSE POSITIONING: BUCKING CATEGORY TRENDS The first type of disruptive positioning strategy is a reverse positioning approach. A firm that adopts a reverse position is able to create separation from the rest of the category by taking advantage of weaknesses in the category identity, becoming a magnet for consumers who are disillusioned with certain elements of the category’s conventions and/or image. Typically, the approach involves two elements. First, a firm that adopts a reverse positioning strategy decides not to offer its customers the expected value proposition offered by most of its competitors. That is, even if the leading players in the market are caught up in a competitive augmentation race, a firm that adopts a reverse position makes the decision to strip down its value proposition, eliminating those attributes that the rest of the industry considers necessary to compete; it thus defies competitive trends within the category, most saliently with respect to the top end of the market. Second, a firm that adopts a reverse position defies competitive trends at the low-end of the market as well. How? By supplementing its stripped-down value proposition with a few carefully selected attributes that would typically be associated with a highly-augmented offering, attributes that are traditionally unheard of when it comes to low-end players. It is this creative bundle of attributes— this striped-down value proposition combined with these unexpected augmentations – that leads to the firm’s unique positioning within the category. Please refer to IKEA case learning given at the end of the class for an example of reverse positioning. BREAKAWAY POSITIONING: STRETCHING CATEGORY BOUNDARIES


The second type of disruptive positioning approach is breakaway positioning. In this approach, a firm introduces a product that is deliberately designed to reach outside of its category to “borrow” the identity of a different category, with the objective of getting consumers to mentally categorize the product differently than they otherwise would. A breakaway product is thus one that breaks down traditional category boundaries. Why would a firm adopt a breakaway positioning strategy? There are at least two benefits associated with the strategy. First, it provides a different way for a firm to distance itself from many of the consumption trends associated with the old category, even as it leverages the consumption trends associated with the new. Second, it provides a different way for a firm to sidestep competitive trends in the old category. This is an important point: A firm that adopts a breakaway position is not trying to compete head-to-head against category incumbents. On the contrary, by breaking down category boundaries, it seeks to communicate that it is offering a different kind of product altogether. And how does a firm accomplish this “breaking away”? Well, there are various ways in which a firm communicates its product’s category membership to consumers, including product design (what the product looks like), channel design (how the product is sold), marketing communications (how the product is promoted), and pricing (how the product is priced). As a group, these marketing mix variables serve as referential cues that encourage consumers to categorize (or “frame”) the product offering a certain way. By manipulating these referential cues, a firm can affect this process of mental categorization; in other words, by establishing an alternative frame of reference for the product offering, a firm can signal to consumers an alternative category membership and thereby alter how consumers respond to the product. Moreover, when a breakaway product succeeds in making the leap out of its category, it often ends up transforming it, particularly if copycats begin to emulate the breakaway strategy. The end result is that the original category boundaries “stretch” to accommodate the new offerings. Please refer to Swatch case learning given at the end of the class for an example of breakaway positioning. STEALTH POSITIONING: ADOPTING AN ALTERNATIVE CATEGORY The success of a breakaway positioning strategy is dependent on clear, unambiguous execution; in order for the strategy to be effective, it is important that every element of the marketing mix—the product design, the promotion plan, etc.—communicate the product’s breakaway positioning to consumers in an unequivocal manner. In contrast, in the third type of disruptive positioning strategy (a stealth strategy), a firm deliberately adopts a covert approach. Rather than transparently position its product outside of traditional category boundaries, the firm conceals or disguises the true nature of its product by affiliating it with a different category. In so doing, the firm tries to take advantage of consumers’ lack of knowledge about what the product actually is – as well as what the firm’s long-term intentions for the product are – by diverting consumers’ attention away from the product’s true nature.


Why would a firm play this kind of category shell game? It is sometimes the case that an entire product category is tainted in some way; in fact, there is so much negative psychological baggage associated with the category’s identity that consumers are inclined to reject just about any product offering within the category outright. However, by disguising the product within a different category—in effect, opting for a Trojan horse approach in lieu of a full-frontal assault—the firm is able to sneak the product into the market and thereby overcome consumer resistance. Please refer to Sony AIBO case learning given at the end of the class for an example of Stealth positioning.

A REVIEW OF POSITIONING APPROACHES CLASSIC REVERSE BREAKAWAY STEALTH

Strategic objective is to differentiate

from specific competitors within

the category

Differentiate from the category as a whole by defying

the rest of the category

Differentiate from the category as a

whole by borrowing from another

category

Differentiate from the category as a

whole by adopting an entirely new

category The target market

consists of an identified segment

of consumers within the category

The target market consists of consumers

disillusioned by certain aspects of

the category’s identity

The target market consists of

consumers jaded by the category, who

are ready for something

altogether new

The target market consists of

consumers who would otherwise

avoid the category altogether

Execution requires an ability to pace with competitive

trends by conforming to

consumer expectations

Execution requires a willingness to buck competitive trends

by defying consumer

expectations in some areas, while delighting them in

others

Execution requires a commitment to creating new

competitive trends by changing the expectations and

behaviors consumers bring to

the category

Execution requires a commitment to

avoid competitive trends by avoiding

the negative associations

consumers bring to the category

If successful, the effect on the rest of

the category is incremental

If successful, the result is a disruption

of the category’s existing structure

If successful, the result is a non-

incremental expansion of

category boundaries

If successful, the result is category

redefinition

Meanwhile, the firm must continue to

struggle to differentiate itself

from the competitive pack

Meanwhile, the firm establishes itself as a category maverick

Meanwhile, the firm establishes itself as first-mover in a new

market space

Meanwhile, the firm lays the foundation for becoming the

category-builder of the future


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Rethinking Positioning Wrap-up