1.1.3

• Market positioning is a critically important part of marketing strategy as it determines to a large extent what customers perceive is being offered to them.
• Businesses use marketing to create value for customers by making two key decisions: choosing which customers to serve and how to serve those customers.
• The first decision in marketing strategy involves market segmentation and targeting, which involves analysing the different parts of a market and deciding which segments to enter.
• The second decision in marketing strategy involves product differentiation and market positioning, which involves deciding what makes a product different from the competition and how customers perceive the product.
• After choosing which segments to target, a business needs to decide how to compete in those segments, which is known as the value proposition.
• The market position (or value proposition) is defined by customers, meaning the place a product occupies in customer minds relative to competing products.
• A useful framework for analysing market positioning is a “positioning map”, which illustrates the range of “positions” that a product can take in a market based on two dimensions that are important to customers.
• Advantages of positioning maps include helping to spot gaps in the market, analysing competitors, and encouraging use of market research.
• Disadvantages of positioning maps include not being a guarantee of success and the reliability of the market research.
• Providing a superior value proposition than the competition is a likely source of competitive advantage, but only if it can be sustained.
• There are various possible value differences that have the potential to deliver competitive advantage, such as offering more for less, offering more for more, offering more for the same, or offering less for much less.
• Product differentiation is how customers perceive a distinct and noticeable and desirable difference between the products, goods, and services offered by different businesses.
• Successful product differentiation enables a business to compete effectively and build a brand.
• Differentiated products are often associated with strong brands, which build intangible value over and above the costs of making the product.
• Product differentiation allows a business to add more value in terms of sales compared with the costs of the input through the transaction process.
• A highly differentiated product that delivers what is important to customers can be sold for a higher price than competitors, enabling the business to achieve higher gross profit margins and higher profit margins.
• Product differentiation requires the product to be capable of delivering what is important to customers, and this differentiation can be communicated to customers effectively and protected from being copied.
• Product differentiation only works if the product can be bought by customers if it is affordable for the target customers, and of course, it needs to be profitable for the business.
• Products that are effectively differentiated are often said to have a unique selling proposition (USP), which is something in the eyes of consumers that sets the product apart from the competitors.
• A unique selling proposition needs to be built into the way that the good or service is offered and delivered, and it needs to be positive and focused on what customers value much more than a slogan.
• Adding value - In their different ways, all businesses add value by taking resource inputs and transforming them into goods and services. This is known as the transformation process. The transformation process describes what happens inside the business. This is where value is added to inputs to create outputs.