This article first appeared in the September, 2004 edition of the Jacksonville Business Journal
Every company has a market position. It may have happened by design or it may have evolved over time. A company's market position answers the question: Why should customers do business with us instead of our competitor? There are three strategic alternatives for answering this question.
Specialization
One positioning strategy is specialization. Specialization focuses on a particular market segment and is designed to attract a particular type of customer. For example, some travel agencies specialize in cruises. People who want cruises know that these agencies will have more knowledge - even though their pricing may be the same. Some housing developers specialize in affordable rental properties, others in luxury high rise condominiums. Some dentists specialize in working with children. Some grocery stores specialize in prepared foods targeted at working couples who will pay more for the convenience. Companies that use specialization design their product or service to meet the needs of a target market and provide superior value for that segment of the market.
Differentiation
Differentiation answers the question: What is the special value that causes your customers to choose your company rather than your competitor? Some companies differentiate based on quality of service, others based on speed and turnaround time, others on comprehensiveness of product scope. Still others differentiate on technical skills. Some companies use a special methodology or approach. Companies that differentiate make the case that they offer something unique that makes them different from their competitors.
Successful projects include commercial success
This statement ought to be self-evident. Yet, many project managers focus almost exclusively on the technical aspects of their projects while re-work, cost overruns, schedule delays, and other factors create commercial disaster. At the end of the project, success will be determined by three factors. First, did the project deliver what it promised? Second, is the customer satisfied? Third, did you achieve your financial goals?
The difference between specialization and differentiation can be confusing. Often they overlap. The distinction is that specialization always focuses on a specific market segment. Differentiation defines something that sets you apart from your competition - which may appeal to one or multiple market segments.
Low Cost Supplier
The third strategic alternative is low cost supplier. The basic proposition of companies that use this strategy is: We're all the same. We all sell the same product or provide the same service. But we're cheaper than everyone else, so buy it from us.
This is a compelling strategy if the product or service is a commodity - a product in which price and availability are truly the only difference. Companies that specialize in this strategy use pricing as their driving strategy.
However, this is not an easy strategy to implement. The low cost supplier must be relentless about driving all but the most essential costs out of the company. It often requires volume throughput and an extensive distribution network. It is the most challenging market strategy. In the end, if all of these company compete to be lowest price, only one can be the winner. In its worst case, companies compete so ruthlessly that they create price wars and drive their entire industry into negative profitability. They seek to drive out the weakest players and re-distribute the market share among the survivors. The airline industry brought itself to the brink of collective bankruptcy using this strategy.
The Key to Success
The key to success is simple. First, define your market positioning strategy. Then build your company, your business model and your marketing around it, and stick to it. Companies that remain true to their strategy attract the customers who want that particular value proposition. And that, after all, is the whole point of strategic positioning.
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