Home Electrical Contractor Free Electrical Contractor Business Strategy Questionnaire 5.2 Positoning Analysis Questionnaire
What is the meaning of positioning and why is it important for a business like Lights On Electrical, Inc.?
Positioning is about strategy. How a small business like Lights On Electrical, Inc. positions its products and services is critical to its longer term success. Small business owners like Andy Powell often do not consider this critical element when they are writing out their business plans and we often have to remind them that if they don't have a well thought out positioning strategy in the market place for their product and services, they may succeed but the chances of them doing so are very slim.
The positioning of a product or service deals with strategically selecting where in the value chain your product or service will be placed. Will you be looking to market to the high end or low end, be a high margin or low cost provider of products and services. Thus you can see that where you decide to position yourself determines your pricing and marketing strategy and not the other way around. If you are in financial services and have decided that you are going to position yourself to go after the affluent market, then it won't make any sense for you to reduce the price on your product - instead you will have to focus on providing a high value added service to be able to justify the added cost.
How does positioning work in a service business?
How a service business positions itself can often make the difference between success and failure for that business - for example if you are a realtor and there is a ton of competition with a whole bunch of realtors offering realty services for the residential market, you may choose to postion yourself as a specialist that works only on commercial property of co-ops or rentals. The advantage of this is that while you will certainly be able to pick up other realty business you will be percieved as a commercial or co-op or rental specialist.
Remember from our dicussion about competitive edge, there are three elements in product or service positioning and a small business like Lights On Electrical, Inc. can choose to focus on any two but never all three:
Positioning strategy has to take into account if you will be focusing on Cost and Quality or Cost and Time or Tme and Quality. This in turn will determine your sales and pricing strategies.
What about manufacturing and retail - how does positioning work here?
Positioning in manufacturing is more about understanding your marketplace and then making an attempt to go after one segment of the market. For example if you manufacture strollers here in the United States, you will find out very quickly that is almost useless to try and compete in the lower priced segment of the stroller market - cheap imports have decimated this sector of the industry. However if you choose to enter into the high end stroller market where strollers can retail for almost $1000, you will find that there is plenty of room and you may be able to make a niche for yourself. Thus by choosing that end of the market you have positioned yourself there and all your manufacturing and marketing effort will be directed towards a client base that appreciates and wants your product and is willing and able to pay up for it.
Retailing is almost all about positioning. Brand perception is completely tied with marketing and or other elements of the retail business. In the big box retail world you can see how this works - you will notice that Wall Mart has made a niche for itself by positioning itself as a low cost provider; Sears has a niche with tools and appliances, Macy's is stlightly more upscale and as you go up the food chain there is Nordstrom and so on. Thus the entire philosophy, merchandizing and marketing of a retail business is based on what segment of the retail market they choose to position themselves in.
Why can't a small business like Lights On Electrical, Inc. position itself in multiple markeg segments?
You can't be in two places at the same time. Its as simple as that. Trying to position yourself as both the high end and low cost provider of goods or services runs the risk of not being able to get adequate perception and respect in either market segment. Do you expect to buy a $250 shirt at Wallmart or a $15 shirt at Nordstroms - of coure not. In fact even if the same identical shirts were to be sold at these two stores they would be sold at vastly different prices.
A very famous story in advertising goes like this - a large and upscale fashion house was having a very tough time selling its new low cost parfume. After repeated price drops they could not get the product to move. After much consultation and market study they decided to reintroduce the product under a different packaging and charge a much higher price - they sold like hot cakes! The lesson learned here is that this company had positioned itself as a high end fashion house and for them to be selling a relatively cheaper product was not being accepted by the market - that is positioning for you!
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