Tuesday, October 04, 2005

Developing a Brand Position

"The best way to hold your customer is to constantly figure out how to give them more for less" -- Jack Welch

Today, most peole do not think much about branding. For many, branding is mearly a selection of a good brand name, advertise it carefully and la viola a brand is developed. But in reality branding involves many painstaking steps, which can be broadly classified into two major tasks:

  1. Develop the Value proposition
  2. Build the brand

Developing the Value proposition

Developing the value proposition consists of 4 main steps:

  1. Selecting a broad positioning for the brand product
  2. Selecting a specific positioning for the brand
  3. Selecting a value positioning for the brand
  4. Developing a total value proposition for the product

Broad positioning a brand

No company can be good at everything. Firms have limited resources and funds, so they must concentrate their limited resources towards one or two areas where there are better than their competition. Broadly stated, positioning strategy can be:

  • Low Cost Leader
  • High Quality Leader or product differentiator
  • Niche market provider

A firm can therefore concentrate on one of the positioning strategy. A low cost leader cannot afford to match the quality of the high quality leader or a Niche market provider. To understand this better, consider this example: Hotel Chain Best Western is pursuing a low cost leader positioning, but it cannot provide the same quality of service as Ritz-Clarton.

To quote another example in technology sector, Reasearch In motion's Blackerry cell phones are the top of the line handsets - but they cannot be a low cost leader, that position is occupied by Nokia.

Prof. Michael Porter in his book "Competitive strategy" stress that a firm must focus on being a low cost leader or product differentiator or niche market provider. He warns firms that try to be good in all three ways, but not superior in any way will lose out to firms that would be superior in one way. The middle way is a trap.

Trying to be best in all three ways will not work because: Firms do not have sufficient resources and mainly because each positioning strategy requires a different organizational culture and management system.

Note: Few firms have excelled in more than one positioning strategy. For example, Toyota has established itself as a low cost leader with its Corolla brand and with its Lexus brand, Toyota has extablished as a high quality leader.

Intel is another example, In low cost segment - Intel dominates with its Celerion brand of CPUs, but at high end performance market, Intel dominates with its Pentium-4 Extereme edition brand of CPUs.

Firms that have succeeded in more than one positioning strategy usually have their core competency in manufacturing, have deep pockets, and have developed a multiple brands to cater to different market segments.

However for most firms developing multiple brands for each segment and to be a leader in that segment is a tough task. The three positioning strategies require different cultures and management attitudes that often conflict. For companies which excel in manufacturing operations, it is difficult to excel in customer intimacy - i.e., they cannot alter their product to meet individual customer needs. Neither can firms which excel in customer initimacy match the low prices offered by a cost leader.

To be successful with limited resources, a firm should follow four rules of sucess:

  1. Become the best at one of the three value segments
  2. Achieve comparable parity in performance level in the other two positioning segments
  3. Keep improving one’s superior position in the chosen positioning strategy so that they remain the undisputed leader in that category.
  4. Maintain parity or atleast keep up with competitor in other two positioning segments

Broad positioning exercise provides a starting point for the overall brand positioning. To effectively communicate the brand value one needs to select a specific brand positioning which will be explained in the next posting.


Saraswathi Bhat said...

Arun, this one was neat. Could understand easily :) May be also because there are good examples one can associate with. Good article. Made a lot of sense.

Henry Jakson said...

Brand position among customer is very important.
Building trust regarding to you product/service is the main factor and one of the biggest target of marketing strategy is establishing a place in customer’s mind.
Thank you so much for sharing this article.
Business Consultant