Beyond Strategic Convergence
The Art of Strategic Positioning
While browsing through options for switching/upgrading my broadband connection, I was flooded with bundled offers of leading OTT players viz., Netflix, Hotstar, Amazon Prime, etc.
I do understand that the OTT brands are piggy backing on the internet service provider and it also provides consumer an opportunity to experience these platforms. Many of the consumers wouldn’t really opt in for another platform unless, they see a compelling value proposition.
Before we deep-dive, let’s take a step back and understand the business model? Every business model rests on three key questions:
- Who is your customer?
- What value are you creating for them?
- And how do you make money from the value exchange?
It is a reality, that we live in a highly commoditized market, where brands/businesses compete with each other for the consumer’s mind share/wallet share. The question which businesses often deal with is:
How can we achieve higher prices or lower costs?
Strategic Convergence
If we look at the books, especially in the business and management domains. They make it easier for people to replicate the best practices of the successful businesses. That leads to a situation where all the firms start operating alike.
As a Strategy Consultant, I have encountered a lot of instances wherein the businesses are as lean as possible and are operating at a very high level of efficiency — but they always complain about their profitability.
So, the question is — Is being operationally effective a good strategy?
Being operationally effective is surely a good strategy (tactical), as it helps improve the operational efficiency of a business, which has a direct impact on the bottom-line. And this also improves the quality of the product/services.
But this is not sufficient. Businesses who choose this strategy inevitably fail in the long run, because their market is bound to change sooner or later, at which stage they will be trapped.
Let’s look at the case of music industry. For decades, record companies just mimicked each other, producing near-identical products, with similar labelling, packaging, and positioning. But when the technological landscape changed, with the advent of MP3 and the rise of peer-to-peer platforms (Napster), the music industry faced it’s moment of reckoning.
The Art of Strategic Positioning
The need is to position products/services strategically, by focusing on creating a true differentiator. So, how can this be achieved?
If we look at the word ‘positioning’, it is a process by which brands can establish a product’s/service’s identity in the eyes of the buyer. A brand’s positioning strategy is affected by a number of variables to include, consumers’ motivations and needs and what it’s competitors are doing.
Every business has a short-term and a long-term roadmap in place outlining their growth trajectory, along with a product/service roadmap. There is a critical piece, which at times is not given utmost attention and that is — changing consumer preferences/needs.
This is where the winning/challenger brands succeed, as they are tuned in with the changing consumer needs and are able to craft a winning proposition.
Avis, the no.2 brand
An excellent case of positioning which comes to my mind is the one created by Avis, an American car rental company. It was a challenger brand in the rent a car business and the leader at that point in time was Hertz (it recently filed for bankruptcy). Their positioning was simple -
“Avis is only no.2 in rent a cars. So why go with us? We try harder.”
The simple positioning statement clearly demonstrated their underdog status and they would do everything to please their customers.
Let’s look at a few more examples in detail.
1 | Lemonade is the oldest new idea in insurance
Insurance is not an investment product. Its objective is to make good on the loss. Consumers make premium payments on an ongoing basis with nothing been paid, if things go well. In case there is a pay-out request, there are lot of hardships associated with it. Insurance suffers from misaligned incentives as, every dollar paid comes out from the company’s pockets. And the company has all the reason to deny or reduce the claim pay-out.
Then comes, Lemonade (the disruptor). It’s a startup that offers crowdfunded, “peer-to-peer” property insurance via a smartphone app. It charges a flat fee of 20% on premium payments. Policyholders designate that their payments go into pools of peers, built around charitable causes that they choose. Any money that isn’t paid out to the peer group in claims goes to the charity, not to Lemonade.
Lemonade created a differentiation, by being transparent in terms of how it makes money and keeping the customer at the centre.
2 | Apple the ASOCIAL network
Sharing with everyone is passé and more than a little bit scary these days. We want to send photos to friends without posting them publicly. We want to reminisce without being permanently defined by our timelines. And we want the utility of apps without giving away our personal information to the developers.
The problem is that this philosophy is hard to monetize for a social network that needs to maximize broadcasted content and engagement to score ad views. But it’s easy to monetize if you sell the phone and then let people be as private as they want on it. At WWDC 2019, Apple showed off changes that turn iOS into the asocial network — software that mimics the tools of Facebook but without the pressure to overshare.
Apple showed off changes that turn iOS into the asocial network.
Within the rising chorus around data privacy, Apple is truly positioning itself with the users, giving them the power to decide how and when their data will be used.
To sum up
As you can see from the examples of Lemonade and Apple, they positioned themselves while taking a truly differentiated approach in offering their products/service.
It’s not merely a marketing campaign, but goes beyond it.
The need to craft a compelling positioning becomes more and more relevant in today’s time due to changing demographics, consumer preferences, better access to technology and the availability of data. Not to forget, this is one of factors and not the only factor. There is a larger premise of Customer Experience at play, which is the holy grail. But that’s for some other day.
So what’s your strategic positioning story? Would love to know them.
Until next time!
~ Sajid
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