5_Easy_Crafting a Customer Value Proposition and Positioning

• Companies should develop a value proposition and positioning strategy to explain how their offering satisfies customer needs relative to alternatives.

Defining the Value Proposition

• A company's offering satisfies customer needs across three domains.
• Functional value refers to the practical benefits tied to the performance of the offering, like reliability, durability, and efficiency.
• Psychological value is the emotional and self-expressive benefits tied to how the offering makes customers feel, such as pride, status, or a sense of belonging.
• Monetary value refers to the financial benefits or costs tied to the offering, such as price, discounts, or long-term savings.
• Customer Value = (Functional + Psychological + Monetary Benefits) - (Functional + Psychological + Monetary Costs).
• Steps for Customer Value Analysis:
  • Identify the attributes/benefits of the offering that matter most to customers.
  • Assess the relative importance of these attributes/benefits.
  • Compare performance on these attributes/benefits vs. competitors.
  • Monitor changes over time in customer needs and market conditions.

Developing a Positioning Strategy

• The goal is to occupy a distinctive place in the minds of target customers through the design of the offering and brand image.
• Positioning is like a value proposition, but focuses on the key benefits or differences customers should remember.
• Key steps include:
  • Clarifying the brand's essence by asking what the brand stands for and which needs it fulfills.
  • Rational + Emotional: Performance advantages like reliability and safety, plus emotional appeal like pride and self-expression comprise what the brand should do.
• Brand Substitution Test: If you replace your brand's name with a competitor in marketing and it still works, positioning is not truly distinctive.
• Leverage Two Key Elements:
  • Frame of Reference: Identify the target market and competitors.
  • defines where in the customer's mind your brand competes.
  • Points of Difference & Points of Parity:

Points of Difference & Points of Parity

• Points of Difference (PODs) are the benefits that set a brand apart that customers strongly associate with it, that they value and that competitors can't match.
• Points of Parity (POPs) are the basic features necessary to be considered a legitimate option.

Choosing a Frame of Reference

• Customers compare offerings against reference points like rival brands, product categories, or substitute options to judge its value.
• Marketers shape the buyer's perceived value by defining comparison brands and categories.
• Aspects of Frame of Reference:
  • Defining Competition depends on identifying the company's target market, often revealing likely established or emerging competitors.
  • Consumer Usage: Target customers' product/brand usage leads to natural comparison points ("competitive frame").
  • Category Membership: Identify products that function as close substitutes in customers' minds. -An offering can compete in multiple categories or subcategories.
  • Brands broaden or narrow the frame based on growth intentions to enter new markets or aspire to grow, for a broader or more aspirational competitive frame.
  • Fragmented Markets: Subcategories emerge, with original products often not being the best match for all niches.

Identifying Points of Parity and Points of Difference

• PODs consist of attributes or benefits that uniquely set a company's offering apart from the competition.
• Identifying PODs: Look at functionality, emotional associations, or brand authenticity (e.g., design, performance, brand story).
• Three criteria determine if a brand association can truly function as a point of difference:
  • Desirable to consumer: Target customers value those attributes with a compelling reason to believe in the offering.
  • Deliverable by the company: Feasibility of providing this benefit reliably and profitably via product design or marketing approach.
  • Differentiating from competitors: The benefit is distinct and superior to competitors' offerings in the eyes of consumers.
• POPs are attributes or benefits shared with other brands, being required for the offering to be seen as a legitimate option.

Types of POPs

• Category POPs: Basic features needed to belong to a product category like a travel agency being able to book flights and hotels.
• Correlational POPs: Counteract negative associations arising from having a positive association elsewhere, as when a "strong" product is viewed as "expensive".
• Competitive POPs: Designed to neutralize a competitor's point of difference, your brand must at least be "affordable" if a rival promotes "low price".
• Achieving POPs=> Zone of Tolerance: Consumers don't require absolute equality on every dimension but "good enough" so the brand can then shine with unique PODs.
• The brand fails to meet basic category expectations (POP); customers may reject it before even considering its points of difference.

Balancing POPs and PODs

• Approaches include: Meeting the "Zone of Tolerance" for POPs.
• Choosing only 2 or 3 clear PODs to dominate so customers have a simple reason to pick you.
• Straddle Positioning (If Appropriate): A brand in one category turns a POD into a POP in another, and vice versa.

Creating a Sustainable Competitive Advantage

• It is the ability of the company to perform in ways competitors cannot or will not match.
• A sustainable edge requires continuous improvement because most advantages are copied.
• Core Strategies:
  • Differentiate on an Existing Attribute: Improve on a quality or benefit customers already value.
  • Introduce a New Attribute: Highlight an attribute neglected by competitors.
  • Challenges depend on competitors often quickly copy any new, successful attribute.

Building a Strong Brand

• Brand Power: A robust brand shapes customer perceptions of quality and reliability beyond product features.
• Top-of-Mind Awareness: Brands invest heavily to be the first option customers recall, anchoring perceptions and discouraging switching.

Communicating a Company's Positioning

• Crafting a Positioning Statement includes a clear expression of the target customers and the key benefit they will receive.
• Prioritize ultimate benefit: A consumer product attributes are reasons to believe, but benefits are more compelling
• Example Statement: “For busy professionals (target), Hertz provides a fast, convenient way to rent the right type of car (benefit).”
• Conveying Category Membership: Customers must first understand what the product is (category membership) before they can assess why it's better.
• Announce Category Benefits: Emphasize essential features.
• Compare to Exemplars: Associate with well-known category leaders to confirm legitimacy like designer labels.
• Use Product Descriptors: Provide concise label to clarify category origin.

Addressing Conflicting Benefits

• Many benefits that a customer would like, such as low cost, high quality etc, are negatively correlated.

Approaches to Soltution

• Offer True Innovation: Develop technology or design to deliver on both benefits.
• Separate Campaigns: Highlight each benefit in different marketing to avoid confusion.
• Reframe: Show that there isn't a trade-off.

Storytelling

• Narrative Branding: Narratives can be more memorable and emotionally engaging than a list.
• Setting: Context or environment in which the brand exists.
• Cast: Brand as a character, plus its relationships and history.
• Narrative Arc: Events and customer experiences that unfold.
• Language / Symbols: Voice, metaphors, and imagery that convey the brand's identity.