What key words come to your mind when you think about companies such as Apple, Walmart and Disney? Most consumers would say that innovative products, competitive pricing and excellent service are synonymous with these companies. An important step in developing key operational strategies depends upon how a company positions itself in the marketplace. Every company can’t satisfy every customer and also be competitive in areas like quality, cost, flexibility, speed, innovation and service.
A positioning strategy is when a company chooses one or two important key areas to concentrate on and excels in those areas. A firm’s positioning strategy focuses on how it will compete in the market. An effective positioning strategy considers the strengths and weaknesses of the organization, the needs of the customers and market and the position of competitors. The purpose of a positioning strategy is that it allows a company to spotlight specific areas where they can outshine and beat their competition.
Let’s examine the requirements needed for a company to compete in the following areas: quality, cost, flexibility, speed, innovation and service. We will take a look at different manufacturing and service companies to identify examples for each and how they use their positioning strategy from an operational standpoint.
Cost Positioning Strategy
Bigmart is not known for excellent customer service. In fact, it is almost impossible to find help in the stores. Bigmart is the biggest retailer in the world because they have aligned their operations to embrace a cost positioning strategy. Following this strategy, they focus on ways to eliminate any wasteful procedures within the company and pass the savings on to their customers.
Bigmart has invested large amounts of money into operational processes that fully automate inventory, ordering and delivery procedures. Today, the entire cost structure is examined for reduction potentials, not just direct labor costs. Bigmart is successful because the operation cost savings allow the stores to offer lower prices to their customers. In order to remain cost competitive, Bigmart consistently invests in updating their equipment, software and training of their employees, as well as applications and procedures to streamline operations even more and stay the leader in their market.
Quality Positioning Strategy
Most companies worry about quality in a reactionary way by chasing after problems and defects. This can destroy a company’s credibility in the marketplace by alienating customers and suppliers. Some smart companies choose to focus on a quality positioning strategy as a way of differentiating themselves from their competitors by using exceptional parts and materials and committing to minimal defects.
Precision Auto Manufacturer heavily invests in their operations and procedures to create a high quality product. The company is known for only using top suppliers for their parts and utilizing high-grade material for their cars. The results are automobiles that garner an expensive price tag due to excellent quality materials and performance.
Flexibility Positioning Strategy
Consumers embrace companies that are able to change products and services based on their needs. Most companies, however, find change a challenge to their operation and product design. Every change to a manufacturer results as an increase in production costs. The ability of manufacturing to respond to change has created a new level of competition. A flexibility positioning strategy is another way for companies to differentiate themselves from their competition by being able to produce a wide variety of products, introduce new products or modify old products quickly and respond to customer needs immediately.
DigiFilm and Filmback are two companies that manufacture camera and film products. DigiFilm quickly realized that consumers’ needs were changing, and they became the leader in providing digital cameras, cloud storage for photos and wearable photo technology. On the other hand, Filmback was slow to realize that traditional cameras and film were being replaced by new technology. DigiFilm’s ability to be flexible and change their products, operations and method of delivery allowed them to prosper, while Filmback closed their doors in 2009.
Many companies have embraced new technology to provide flexibility for their products. For example, a well-known sneaker manufacturer now allows customers to create their own sneaker designs online, and their state-of-the-art production facilities capture the request and create custom foot apparel in the blink of an eye.
Speed Positioning Strategy
Another source of competitive advantage for companies is to use a speed positioning strategy. Fast food and delivery companies all compete on delivering their products and services quickly to their customers. For example, Glasses R Us prides itself on having operations in stores that allow one hour delivery of eyeglasses. Companies such as Prodazon ship product orders the same day to offer one- and two-day delivery.
Many companies establish sophisticated logistical operations to offer immediate delivery of the products in order to beat their competition. The latest trend is for companies to develop drones that they hope to use to deliver orders to customers within hours, once air traffic regulations allow it.
Innovation Positioning Strategy
Pear Products has remained the industry leader in providing technology products in the marketplace through adopting an innovation positioning strategy. The company offers a constant flow of leading edge, advanced products to consumers for a fair price. Pear Products spends enormous amounts of money on hiring the best talent to design innovative products quickly. They are known to launch a new technology product every six months. Consumers will spend a hefty amount on their laptops, tablets, smartphones and smart watches in order to own the latest and greatest in communicative technology.
Service Positioning Strategy
Companies can also select a service positioning strategy in order to differentiate themselves from others by providing superior customer service. Small Potatoes is a niche supermarket that offers only their private label food products. They charge fair prices and offer unique, high quality products.
Small Potatoes really distinguishes themselves by providing amazing service to their customers. The staff roams the stores asking customers if they need assistance. They provide free samples of any product while special ordering if the customer requests something they don’t carry. Children receive a free balloon at checkout and even adults having a birthday get a recycled canvas bag. Finally, the store is legendary in how they have gone out of their way for their customers.
Small Potatoes has created an operational environment where the staff is able to take the initiative to cater to any customer request. One such staff member fulfilled a request to deliver food to a sick elderly man during a snowstorm. The store has no delivery service, but he fulfilled the request anyway and did not even charge the customer. Now that’s customer service.
Every company can’t satisfy every customer and also be competitive in all areas like quality, cost, flexibility, speed, innovation and service. A positioning strategy is when a company chooses one or two important key areas to concentrate on and excels in those areas. A firm’s positioning strategy focuses on how it will compete in the market. A company can adopt the following strategies by focusing their operations on specific competitive areas:
- A cost positioning strategy is where they focus on ways to eliminate any wasteful procedures within the company and pass the savings on to their customers.
- A quality positioning strategy is a way of differentiating themselves from their competition by using exceptional parts and materials and committing to minimal defects.
- A flexibility positioning strategy is another way for companies to differentiate themselves from their competition by being able to produce a wide variety of products, introduce new products, modify old products quickly and respond to customer needs immediately.
- A speed positioning strategy allows companies to compete by delivering their products and services quickly to their customers.
- An innovation positioning strategy offers a constant flow of leading edge, advanced products to consumers for a fair price.
- A service positioning strategy can be used by companies in order to differentiate themselves from others by providing superior customer service.
Once you’ve completed this lesson, you should be able to:
- Define positioning strategy and identify its importance
- Describe different types of positioning strategies