Competitive positioning is an important marketing strategy which refers to the way a firm can differentiate their firm from their competition. The competitive position of a firm usually relies on the way that the firm valuates the service it offers to its customers relative to the services of other firms in the same market. It also relies on how much control a firm has over the distribution channels that it uses. Competitive positioning may also take the form of price, quality, availability, accessibility and the firm’s brand name.
Competitive positioning considers the importance of knowing three important factors – audience, value and structure. The audience refers to those customers who would be most likely to buy the product or service that a firm offers. The value refers to the customers who will be most likely to buy the service, but also includes the cost of those purchases. The third component, structure, refers to the overall sales mix of a firm. Typically, firms will have one product that they distribute through all their distribution channels and another product that they distribute as part of a larger distribution process. Competitive positioning considers these three components because each component influences the other.
One way a firm can distinguish itself from its competition is to build a distinctive value proposition which is communicated across the distribution channels. The value proposition may also vary by channel. Some firms create a unique selling point by offering something that no competitor can provide. A firm’s unique selling proposition (USP) is not necessarily the best product and service available but rather one that make other firms look bad. Other competitors’ USPs are the very features that make other firms appear far better.
Another strategy for competitive positioning involves looking for competitive comparisons. Comparing one firm to another is usually referred to as competitive analysis. In competitive analysis, a comparison is made between the products and services offered by the various competitors as well as other factors such as pricing, market reach and customer service. Some firms use market size and customer data in their analysis; however, this should be a very limited factor as market size is rarely correlated with profitability.
A more holistic strategy for competitive positioning involves evaluating whether or not a firm has a clear strategy of how it will maintain or gain market dominance. This strategy could include a long-term strategy focused on sustaining competitive advantage over time. It could also include a short-term strategy designed to achieve share within a specific target industry in a relatively short amount of time. This strategy may also include an integrated strategy where a number of strategies are coordinated to provide the most effective results. This type of strategy is referred to as synergistic strategy.
Each of these strategies has distinct advantages and disadvantages. The best way for a firm to identify its competitive positioning strategy is to develop and implement a comprehensive strategy to identify its target customers and analyze competitors as well as key market factors. This approach allows firms to evaluate and compare their competitors as well as key industry indicators. Once a firm has developed and implemented a winning strategy, it must be able to consistently apply that strategy through a holistic way. In addition, new strategies should be developed and implemented in order to remain at or improve its competitive position.