27/09/10

By John Rosling, UK CEO of Shirlaws

“In almost any industry, the big winners are companies that consumers instantly associate with a single highly-focused concept--like Heinz and "ketchup," Volvo and "safety," and Federal Express and "overnight." Ries and Trout.

Positioning makes you money. The stronger your position or brand, the easier it is to attract the best talent to work for you; the more other organisations want to be associated with you and the more you build customer loyalty, which in turn makes any new offerings you introduce attractive and desirable.

There is a market understanding that words like positioning and branding sit in a marketing space. This can certainly be the case in many businesses but, in my view, for most midsized business, the purpose of positioning is to get laser focus on what the business is all about — what it is famous for in the eyes of its clients. In other words it is the strategic conversation that takes place before any operational marketing activities.

Positioning your business is a strategic activity which impacts the whole of your business model. So, the key question behind any Positioning strategy is an understanding of what you stand for - who you are. Being able to answer this succinctly enables you to move into a contextual explanation about your business — fast tracking sales opportunities, distribution channels, and identifying potential acquisitions, mergers and JV opportunities.

Ask yourself what would your business look like if it had a laser like focus on what you were famous for?

As business owners we often start off with a clear focus which is shared by all the founders and first employees. As the business grows, new people join, new ideas are tried, and unexpected customer desires are met (who says no to revenue at this stage!), that focus can begin to fade and eventually blur.

As your business grows, it is therefore vital to review your positioning. This involves you as CEO, with your key team, making a number of contextual choices:

- Should we be a “Distribution” company or a Product company

- What is our primary position and should we position ourselves around Market, Service, Product or Price.

These choices can be visualised below.

The product or distribution choice is a very strategic one. Of course, all companies do both operationally and therefore if you approach this choice from an operational or content view point then it will be hard to draw the distinction and be clear what to really focus on.

Have you ever wondered why many large corporations continually restructure their businesses? One answer is that they will often find it hard to understand the strategic focus of their business.

- A Distribution company has a focus on developing relationships with its market place

- A Product company has a focus on product research and development

This key strategic choice of your primary position informs the whole of your business model.

Once you are clear on your focus you can create a further choice; are you focussed on market, service, product or price?

If you have a Distribution foundation you should focus on Market or Service

A Market focused business (“who you serve”) tends to be strongly identified with a market category, strong at building markets, or a business whose partners would have a strong sense of belonging to “my market”. Saga is a good example of a business that developed a primary Market position. They have a business model based on their knowledge of the needs of a particular market demographic and have chosen to focus on this market and build the asset base of the business by developing multiple products into this market place. Saga started with a single hotel and is now as much a financial services and media business but still within a single market.

A Service focused choice (“how clients experience what you do”) tends to provide a lot of extras to the client base, have an over-riding service (as opposed to a sales) ethic, and focus on the customer feeling well looked after. This is about being famous for how you do something, more than what you do or who you do it to. The choice informs the whole P&L, driving where investments should be made and what priorities should be given. Harrods has a clear primary Service position.

If you have a Product foundation you should focus on Product or Price

In a Product focused business (“what clients get from you”) the product may have potentially higher profile than the company itself. It is often first-to-market, a business investing heavily in product research and development, and attracts “me too” product offerings from other market players. A company such as Coca Cola is an example of a business with a clear Product position. They jealously guard the product recipe and traditionally outsource the distribution and client relationship to joint venture bottling operations.

Finally, in a Price focussed business the focus is upon providing value as well as on developing a strong supply chain and a business model to support economies of scale. Budget is a good example as are EasyJet and Ryanair. At the opposite extreme, Rolex also has a clear Price based strategy.

Cherchez le creneau; what are your competitors up to?

Once these key strategic choices have been made it is important to draw comparisons with other players in the industry to map where your position fits relative to the competition you face in your industry.


A simple grid can be used to instinctively map your industry and all the players. This will tell you how you sit in comparison to your competitors and more importantly it will show up any industry gaps that you could choose to fill. There’s an old marketing adage of “cherchez le creneau” (find the niche or gap) — that is often where the easy wins are. In the 1950s VW noticed that all the car manufacturers in the US were in the same market area and moving in the same direction — big and flashy with fins and chrome. The creneau was in a small car and they positioned the Beetle with the phrase “think small” neatly capturing an overlooked market sector and associated the brands with intelligence and discretion.

The power of a clear position understood by customers and lived by staff is vital for profitable growth and equity valuation (see Apple). And although it’s easy to use corporate brands we are also familiar as examples, the lesson is the same for any business.

Years ago I worked in brand development in a large spirits business. We undertook some research asking 50 brand loyalists of our main competitor’s brand to switch for a month to our brand and visa versa. In product and price terms the two brands were essentially indistinguishable. We paid them a modest amount plus their bar bill. After a month every single consumer returned to their preferred brand. But what was really interesting is that we asked the customers not to reveal to anyone the reason for their change in brand. Within hours of the research starting we had participants begging to be released from the trial because they felt so uncomfortable with a different brand and not being able to explain why one man’s wife thought he was having an affair!

All very interesting and you may feel it is far removed from your business, but let me ask you this; if I paid your best customer to switch to a competitor who matched you on product and price, and paid the costs of the service, how likely is it that customer would be begging me, within hours, to return to you despite the cost?

That is the power of positioning.

The key to positioning for mid sized businesses is to understand that it is all about focus. But it is your choice what you focus upon given the capabilities of the organisation, the nature of what you do and, critically, the competitive situation. A client said recently that he was really engaged with innovation but didn’t want to be a Product company — his answer was to develop a focus around innovating the Service he offered his clients — he is loving it.

CASE STUDY: Craster Woodworking

Craster Woodworking (www.craster.com) started out in 1992 as a family joinery business. When Alex Craster took over the business from his father in 2004, following a career in corporate business, all of a sudden he found himself running a small business on his own for the first time and it felt lonely at the top. He had no external assistance at that time and was running around doing everything in the business and uncertain about where he was going with it or how to get there. Alex was introduced to Shirlaws by a contact of his and was immediately attracted to them. “They were different to any other consultant firm I’d experienced before and my coach had great energy that I felt was the right match for me,” he says.

Early on, the coaching focused on what the business was known for in the market place and more importantly what it wanted to be known for. By getting clear on where Alex wanted to take the business the coaching helped him clarify how to get there and got him and his team to focus their time and energy on the activities that built the position he wanted the business to occupy in the market.

The result saw a huge increase in the product range the business offered its clients. It also resulted in an acquisition — the first the business had made in its history which allowed the company to further boost its product range, enter new markets and take on new and prestigious clients.

A key output was the launch of a digital product development platform which provides buyers with a secure login system where they can see what’s being designed for them and keep up to date with the progress of their orders. It’s helped the company build stronger relationships with their clients which supports where the company wanted to be, moving from being a manufacturer to being a partner working with clients to design bespoke hardwood products that define the hotels they serve. This helped Craster build their own unique brand identity — a high value proposition in such a competitive market. It has also seen revenues more than double and margins improve too.

TOP TIPS

- For midsized business positioning is about getting customers and staff focused on what the business is all about — what it is famous for. Being able to answer this succinctly enables you to fast track sales opportunities, distribution channels, potential acquisitions, mergers and JV opportunities.

- Understand your primary position - If you cannot get the distinction between Distribution and Product then get some assistance from outside.

- Know whether you are focused on market, service, product or price. Come up with words that define your market, your service, your product, your price. Get it down to one word per area and then one single word that positions the whole of the business.

- Cherchez le creneau….

Shirlaws is an international business coaching firm that specialises in helping businesses to grow, no matter what stage of development they are at. Founded in Australia in 1999, it has since grown to have bases in Europe, North America, New Zealand and the UAE servicing approximately 600 clients.

We work alongside entrepreneurs and business owners to drive both commercial and cultural change, enabling our clients to experience:

• increased revenues and profits;

• improved business culture and personal lifestyle; and

• a sustainable business that is less reliant on key stakeholders.

www.shirlawsonline.com

shirlawsuk@shirlawscoaching.com

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