How to Nail Product Positioning

Product positioning is one of the most powerful startup tools, yet is a deeply misunderstood concept.

Whether founders are in the early stages of a startup or just grappling with the challenges of their own business, there will likely come a time when they have to ask themselves what their product is and how it fits in the marketplace. Unfortunately, as simple as this sounds, countless entrepreneurs and marketers struggle with answering these questions. Moreover, these questions are hard to answer because many founders focus on market penetration and product differentiation without truly understanding what they mean at their core.

Suppose founders want to create a new market space for the business. It's an essential step that must come early on: figuring out where and how the product will fit into the market without being overly similar to others.

In this article, April Dunford, a globally recognized leader in positioning and author of best-selling book: “Obviously Awesome”, will explain product positioning and how to do it in every business effectively.

Misunderstanding Positioning

If product positioning is so crucial, how do startups achieve it? Founders should know first what not to do. Many were taught that positioning is like a fill-in-the-blank exercise. The blanks include market category, value, competitors, etc.

Product positioning is sometimes treated like a fill-in-the-blank exercise.

This exercise is not only pointless, but it could also be dangerous. The practice assumes that there is only one correct answer for each blank and that leaders should "know" what it is. On the other hand, most products could easily be positioned in multiple market categories with different competitors, providing additional value to different customers.

What is Positioning?

Product positioning describes how the product is the best in the world in providing a specific service that best-fit customers deeply care about.

Product positioning also describes how the product wins business in today's market and forms the basis of the current sales pitch. It explains why a specific customer should choose the product over any other solution to the problem.

April shared, "Positioning defines how your product is a leader at delivering something that a well-defined set of customers cares a lot about." Product positioning in the market can help customers find the business and convey helpful information. The positioning context triggers a robust set of assumptions about the competitors, the product's features, who it is intended for, and even how much it should cost.

A change in positioning can completely alter our perception of a product and mean the difference between success and failure. It's impossible to be 100% unique always, but there are still things businesses can do. The most obvious thing is to determine what makes the product so distinct that it deserves its own category—and then find other ways of marketing the product while keeping its spotlight.

Key Components of Positioning

One of the most important aspects of product positioning is understanding what the customers want and need from the business. By understanding who the customers are and their needs, leaders can begin to craft a unique value proposition that will resonate with them!

Below are the key components to better position products in the market:

  • Competitive Alternatives: These include the competitors' products, services, and prices. The company must know what each of its competitors offers, how they compare, and how they might affect the product or service. An effective positioning plan will include complete competitive landscape analysis, including competitors' strategies and tactics.
  • Differentiated "Features" or "Capabilities": Features differentiate a product from its competitors. It is one of the most important components for positioning products in the market. Customers get attracted to products that offer unique features and capabilities as these are additional benefits that make them stand out from other products in the market. If a new product comes with unique features, it becomes a powerful tool for differentiation and positioning in the market.
  • Value for Customers: A company's value proposition to its customers is vital for positioning products in the market. It helps them understand better what they need from the product they buy and how much they can gain by buying it. The value proposition is what the customers get out of using the product. It is also known as a value proposition map where companies can understand how their products meet customer needs which ultimately helps them position their products in the market better than others.
  • Target Customer Segmentation: A company must target customers to position products. In addition, it is important to know who the customers are, their needs and wants, the type of products they will be willing to buy, and how much they will pay. Target customer segmentation is important because it helps determine what products should be sold and what prices should be charged. It also helps create an appropriate marketing strategy for the company, which includes advertising, sales promotion, and distribution channels.
  • Market Category: Market category is another important component of product positioning. Market categories are products with similar characteristics such as functionality, price, size, or usage pattern that are used together without competition from similar products.

Components are Dependent on Each Other

When looking at the pieces, one can quickly realize that each component is connected to the others. For example, the distinct value the business can offer customers depends entirely on the distinguishing features. Differentiated features are only "differentiated" when compared to competitors. Customers who care deeply about unique value are the best-fit target customers. Finally, the best market category is the context in which the business placed the product so that the exceptional value is evident to the target customers. So, where to begin if every piece is related to every other element?

Competitive alternatives should be the starting point. If it weren't, a business would end up with a positioning that sounded good in the office but didn't work with customers because it is not differentiated enough. The flow must be as follows:

The strategy should begin with competing alternatives or what customers would do if the solution did not exist. Once established, leaders can ask themselves, "What do we have that the alternatives don't?" It provides a list of differentiated features or key unique attributes. Then founders can go down that list and ask, "What's it for customers?" In other words, what value do those capabilities enable for the buyers? Once the differentiated value is known, businesses can move on to customer segmentation or determining which customers care deeply about their worth.

There are likely many buyers who care about that value, but some customers care far more than others. What customer characteristics cause them to be particularly concerned about the differentiated value? It helps companies to determine who the best-fit customers are. Finally, the last component is the market category. The best market category is the context in which the business positions the product so that the product's value is evident to the target customers. In other words, it defines the market intended to dominate.

An Example: Project Management Tool for Engineers

Imagine you're creating a new project management tool for engineers. Your main competitors are products like Asana and Jira.

The first step in positioning your product is to identify the specific market segments that your product is best suited for. In this case, it might be engineering teams at technology companies. 

Next, you need to understand the specific job that these engineering teams are trying to do, and how your product can help them do it better than the competition. For example, your product might have a unique feature that helps teams track and manage dependencies between different engineering tasks.

Finally, you need to communicate the unique value of your product to the specific market segments you've identified in a way that they will understand and care about. In this case, you might create messaging and marketing materials that position your product as the best choice for engineering teams that need to track and manage dependencies between tasks.

Overall, positioning your product well means understanding your target market, understanding the specific job that they are trying to do, and then communicating how your product can help them do that job better than the competition.

This is just a broad example, please note that actual positioning strategy may vary depending on the specific product and market. April Dunford writes extensively on this topic on her website,  best-selling book  "Obviously Awesome: How to Nail Product Positioning", and other public talks.

Common Mistakes in Positioning

Many mistakes can be made when it comes to product positioning. The following are the two most common traps:

1. Considering competitive alternatives to be any potential "competitor."

The most common mistake startups make is failing to define competitive alternatives in the first step. A better way to think about competitive options is to ask what a customer would do if the product or service didn't exist. The answer is sometimes "Do nothing," which means the customer will continue to solve the problem similarly. It may imply using a spreadsheet, a manual process, or hiring an intern. There is a typical loss of 25% of enterprise software deals due to "no decision," so if founders want to convince customers to act, the business must position itself against the status quo.

It isn't a test of internet research abilities, and the fact that a company could compete with the other doesn't mean it will. The product team may want to keep an eye on them as a potential competitive threat in the future, and if they start participating in deals, the business may want to adjust the product positioning at that time. Until then, businesses are weakening their position by attempting to position themselves against competitors that customers will never consider.

2. Assume you need to create a new market category to expand.

When deciding on a market category, there is an option of positioning the product in an existing market category or attempting to create a new class in customers' minds and then positioning the product as the leader in it.

The first option allows businesses to use what their customers already know and understand about a market to help them understand the product and what distinguishes it from the competition. For example, about the embeddable database for mobile devices, many customers already know what a database is. The words 'embeddable for mobile devices' narrow the field of alternative market niches. This product is not only distinct from the leaders in the more generic "database" market category but also significantly better for a specific type of buyer.

Unfortunately, history shows that companies that create market categories lose out to companies that gain a market foothold frequently after the hard work of creating the class has already been done.

90% of technology companies that went public in the last five years concentrated on existing markets rather than developing new ones. Many category creators began by establishing themselves in existing markets before expanding the boundaries of their category. Salesforce was a niche CRM player until it was worth hundreds of millions of dollars.

In the Last Word

Positioning is an important tool, especially for startups looking to grow their business. It requires an in-depth understanding of the customer and how they think about products and services. Good positioning sets off a set of true assumptions about the product. In contrast, bad positioning sets off a set of assumptions about the product that aren't true - leaving the sales and marketing teams to do the work of undoing the damage the positioning has already done.

If the company hasn't figured this out, it's time to start determining the product positioning. It's not enough to have great features or benefits; businesses should have something unique behind those features or benefits that will make people want them even more than they already do.

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