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Summary

Product positioning is the art of tailoring the image and presentation of a product or service to appeal to a selected market segment. It is closely related to market segmentation. This is a process in which potential customers are divided into smaller groups based on demographic and psychographic characteristics.

Although product positioning strategies have existed for decades, the proper positioning of a product is now considered essential for marketing success. In today's diverse marketplace, multiple advertising messages are often required to appeal to potential customers with dissimilar needs and requirements.

Product positioning is the art of tailoring the image and presentation of a product or service to appeal to a selected market segment.

At its best, product positioning enables marketers to draw a direct link between an existing product attribute and a specific customer need. Rather than a crafting a general appeal highlighting a new car's innovative engineering, for example, product positioning enables marketers to pitch the car's fuel efficiency as a hook to attract suburban workers looking to cut their gas expenses.

Product positioning is not new. An advertisement for the Holeproof Hosiery Company in 1910 contained the following headline:
   
    "To The 5,196,267 Unmarried Men Of America"
   

The appeal was a long-lasting pair of socks. Unmarried men were assumed to be either not capable of, or not interested in, darning socks.

Product positioning is closely related to market segmentation. This is a process in which potential customers are divided into smaller groups based on demographic and psychographic characteristics. The 1910 hosiery ad grew out of a specific marketing niche.

Although product positioning strategies have existed for decades, the proper positioning of a product is now considered essential for marketing success. In today's diverse marketplace, multiple advertising messages are often required to appeal to potential customers with dissimilar needs and requirements.


Mass Marketing Is No Longer Effective

Although not a widely used technique at the time, General Motors increased sales by using product positioning as early as the 1920s. The company capitalized on Ford's mass marketing mistake of continuing to appeal to the "one automobile for everyone" concept.

Even prior to this General Motors example, some automobile manufacturers had targeted specific subsets of the overall market. The rational and logical buyer, for example, was persuaded to purchase an automobile with dollars-and-sense arguments:
   
                          "Board for a horse one year: $180;
                                Gasoline one year: $35
                               - The economy is evident"
                                      (1901 Oldsmobile)

Other marketing strategies appealed to perceived gender differences:
    
           "The final word in a car--for the man whose word is final"
                                         (1926 Studebaker)


However, even as recently as the 1960s, most products were positioned to appeal to the mass market. Forty years ago, married couples with children were the predominant consumer market. Advertising was aimed at this market:
   
                       "Suddenly, all America aspires to this car"
                                   (1958 Chrysler Imperial)
   
                             "The car everybody would like to own"
                                       (1960 Ford Thunderbird)

Marketing and advertising strategies have changed dramatically in the past few decades. Today's mixture of alternate life-styles makes mass marketing substantially less attractive. Generic advertising geared to the typical or average consumer is no longer considered effective for most products. A product must be positioned to appeal to distinct segments of the population.  The beginnings of this sweeping change could be observed in the middle of the 1960s:
   
                 "Buick makes all kinds of cars because there
                      are all kinds of people in this world."
                                         (1965 Buick)

The trend accelerated so that the target market concept was embedded directly in advertising by the end of the 1980s:
   
                    "A car designed for one driver in a thousand"
                                          (1989 Nissan Z)

The Relationship Between Product Positioning and Marketing Costs


Effective product positioning reduces the costs of ineffective marketing and advertising.

Product positioning, however, cannot be justified on the basis of cost reduction alone. Numerous marketing appeals using diverse media will increase expenditures. Additional product features that appeal to individual subgroups will create additional costs associated with research, production, marketing, advertising, distribution and inventory.

The justification for product positioning is remaining competitive in an increasingly complex marketing environment.

A few decades ago, popular magazines such as "Life", "Look", "Colliers" and "The Saturday Evening Post" were geared to mass market audiences. Today, over 10,000 magazines are in print. Most of these magazines have a specialized, targeted audience. Here are just 15 examples that can be found in stores offering a larger selection of magazines:
   
    ●Adoptive Families
    ●Bride Again
    ●Digital Piano
    ●Home Office Computing
    ●Home Schooling Today
    ●Log Home Living
    ●Private Pilot
    ●Romantic Homes
    ●Senior Golfer
    ●Sesame Street Parents
    ●Sister
    ●Skateboarding
    ●Twins
    ●Working Mother
    ● Women's Cycling

Television has experienced the same fragmentation of its viewership.

Three networks once dominated the choice of television programs. Today, cable and satellite services provide hundreds of alternatives for advertising messages. The ratings for secondary networks and cable programs may be lower, but these alternative choices tend to deliver audiences with more cohesive demographic and psychographic characteristics.

Whatever the product or service, an appropriate media outlet geared for that audience is probably available.  Before a product can be positioned, marketers must identify a target audience. This is the role of market segmentation.

As stated earlier, market segmentation involves partitioning a large market into smaller groups of potential customers with similar needs or characteristics. Statistical techniques are the basis for effective market segmentation.

Reasonably priced hardware and software packages have made segmentation procedures available to nearly all companies. Statistical techniques can effectively examine both historical data and information generated from market research studies. Trends, relationships and opportunities are pinpointed that would, otherwise, have been unrecognized.

Segmentation studies typically combine demographic, psychographic and product usage information. Quantitative techniques are used to develop statistically significant clusters that differentiate customers. These clusters are often given catchy sounding descriptive names, such as "achievers," "high roller," "traditionalists," or "tomorrow's leaders."

The following pages briefly describe two commonly used segmentation techniques: Perceptual Mapping and Decision-Tree Analysis.

Perceptual Mapping

Perceptual mapping is a tool used to discover how consumers differentiate products or organizations. The perceptual map on the following page was developed using data from a market research study.

Relationships are visually portrayed by the relative position of points on a two-dimensional map. The distance between the points represents the degree of relationship between the variables. Points that cluster together reveal characteristics that are closely related.

The following example is derived from actual research. However, the names have been changed to protect confidential information. 
    
---Second American Bank is most preferred by lower-income, non-white, urban residents. Verbatim comments collected during the survey interview indicated that the bank is perceived as doing the most to finance mortgages in the inner city. 
    
---First Security is most favored by older, middle-income adults. This bank was the city's only financial institution not to renege on payments during the Great Depression. 
    
 ---Middle-aged, white males tend to favor National Trust, while younger females prefer Guardian Bank. The verbatim responses did not provide clear-cut explanations for these preferences. 
    
 ---Federal Trust is most associated with upper-income suburban
residents, largely because their office locations are targeted for this market.
   
    If Federal Trust were interested in attracting new customers, the most logical segments to target would be the females and younger adults, rather than city residents or lower income individuals.

Decision-Tree Analysis

Decision-tree analysis uses cross-tabulations to examine results of a particular survey question based on sub-segments of the survey population.

For example, the output of a question that asks, "What brand of automobile do you own?" can be analyzed by looking only at the results for individuals in one particular income category, say those who have a household income of $25,000 or less.

Determining the specific categories of cross-tabulations that reveal differences among respondents can be very complex. Thousands of combinations can be generated even with a small survey. The analysis must identify as many potentially important combinations as is practical.

After the relationships have been isolated, a statistical test is necessary to reasonably ensure that the data conveys real insight rather than just a reflection of sampling variability. This process, if conducted manually, can be partitioned.

The example below illustrates the type of business most likely to be responsive to a training program called, "Applying Internet Technology To Business Marketing."

The research measured interest level in various training opportunities by using a 5-point scale where "1" indicated "not at all interested" and "5" indicated "very interested".

The four levels of the decision tree provide the following information:
    
Level 1: 
From a sample of 400 businesses, 63 respondents (15.8 percent) were "very interested" in receiving training in "Applying Internet Technology To Business Marketing."
    
Level 2: 
Among the 118 respondents who described their company as "mature," 14 (11.9 percent) were "very interested" in the Internet technology course.
    
Among the 282 other companies (deciding about expanding, actively expanding or start-up), 49 respondents (17.4 percent) were "very interested." 
    
Note also that the percentage of respondents "not at all interested" is almost double for the mature business group.
    
Level 3: 
Among the 282 non-mature companies with sales under $500,000, 36 (25.9 percent) were "very interested" in the training while only 13 (9.1 percent) respondents in the other groups were "very interested."
    
Level 4: 
Among the 139 non-mature companies with sales under $500,000, 19 (40.4 percent) of the home-based were "very interested" while 17 (18.5 percent) of the corresponding non home-based businesses were "very interested."
    
Just under 16 percent of all respondents are "very interested" in
receiving training in "Applying Internet Technology To Business Marketing."  The likelihood of finding a very interested respondent will increase to about 40 percent for non-mature, home-based companies with sales under $500,000.  Once a company divides a market into identifiable segments, the next step is deciding which segments to pursue. 
    
The segment must not only have the proper characteristics, but must also be large enough to be pursued profitably. The company must also evaluate its own strengths, weaknesses and strategic objectives to determine the most appropriate segments to pursue. 
    
A nine-step process will isolate these opportunities:

 
1.    Determine how many different clusters are statistically significant.