This week, we continue our series on marketing and positioning. There can be nothing more important in your business planning that selecting the proper pricing niche, making your story clear using that niche, and the defending your position against the competition. So, here comes the lesson and your challenge…

The five major niches

There are five major classes or niches a company should examine and make its own in calculating positioning in the marketplace. They are:

  • Price
  • Quality
  • Service
  • Innovation
  • Elegance

Your challenge: to find, position, and defend your niche

Think about your positioning. Companies that compete on price rarely compete against others who emphasize service or quality. There are exceptions, based upon cost of sales. For example, Internet resellers have a better chance to combine price and quality than those with much more fixed overhead occupying a bricks-and-mortar physical presence in the community.

Assume that you are not an Internet retailer with many competing products to sell. For you, it is important for the image of the company to be known for one of the above attributes above others.

Here are a few examples to help you

Walmart is known for lowest prices, often for identical merchandise found in other stores for more. But few go to Walmart for quality brands, understanding that they accept Walmart as the low-priced leader. Nordstrom’s competes on service above all, quality second and price a distant third. We enter a Nordstrom’s store expecting superior service and know we will pay a price for this. Apple charges a premium for innovative products, with quality second and service third. Mercedes offers a premium automobile with its customers expecting luxury first, quality second, service third, and price a distant fourth. If Apple released a $229 notebook computer, it would damage the brand and reduce the value of owning an Apple computer in the minds of existing customers.

Your niche selection drives everything else you do

The very image of a company is influenced by your niche decision, as is every decision following it. In many markets, there are poorly defended niches, even markets with dominant players. For example, the tech company, Asus, found this golden opportunity in the notebook market and moved in quickly to overtake all other manufacturers with low prices.

The danger of competing on price

Competing on price alone is the most dangerous strategy of all, since other well-capitalized players can easily join the competition merely by dropping prices upon existing products, of course at the expense of its previous positioning as described above. In our past example above, Asus was able to grab the mantle of price king while maintaining reasonable quality and even provide a bit of innovation worthy of applause by those of us market-watchers looking for examples of good strategic price positioning.

Questions for you and your team

Where do you think you can excel within these five positioning alternatives? What competition would you face? Can you defend your offering against that competition? Can you select and defend several of these at once, such as quality and elegance? Or quality and service? These are worth a team discussion, even for mature companies, with other decisions such as pricing, positioning, advertising and which market segments to concentrate upon—all following that choice.

SOURCEBerkonomics
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Dave Berkus
Dave Berkus is a noted speaker, author and early stage private equity investor. He is acknowledged as one of the most active angel investors in the country, having made and actively participated in over 87 technology investments during the past decade. He currently manages two angel VC funds (Berkus Technology Ventures, LLC and Kodiak Ventures, L.P.) Dave is past Chairman of the Tech Coast Angels, one of the largest angel networks in the United States. Dave is author of “Basic Berkonomics,” “Berkonomics,” “Advanced Berkonomics,” “Extending the Runway,” and the Small Business Success Collection. Find out more at Berkus.com or contact Dave at dberkus@berkus.com

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