Market position is important because it’s the perception that you want the buying community to have about your company. In this industry you absolutely have to choose, because the focus is so important. There are only three choices when choosing market position: low cost provider, customer intimate, or product innovation. Let me say a little bit about each of those.
The low cost provider is a very enviable position and not something to be thought less of. Wal-Mart is a good example for the low cost provider.
Customer intimate means that a customer sees something unique in you that they are willing to pay extra for and that’s the critical point. Don’t mix up customer intimate with customer service, because everybody has to have good customer service. To be customer intimate you are providing something unique that that customer is willing to pay for. Again, good example is Nordstrom’s as customer intimate. You will pay a little more for that blouse because what they are going to allow you to do is return it with no questions asked.
Product innovation means that you are relentless about constantly changing product and a good example of that one is Apple. People want to be part of that innovative product community, but they are not the low cost provider and they are not customer intimate because they don’t provide something unique to each customer, and they are certainly not the low cost provider.
There are conditions that favor each one of those. Being the low cost provider means that you are that because customers all look pretty much alike, they use the products the same way and there is intense price competition against those like services. If those are the conditions that you are playing in, then you would strive to be a low cost provider.
In customer intimacy, clients don’t use the product the same way. That can be nuanced. It doesn’t have to be huge differences, but they use it differently. Because they use it differently, you have to know the client a little better and because the client knows they are different they are willing to pay for it. Those are the conditions that if they came up that you would say, my product position is customer intimacy.
Product innovation comes up where there is a group of customers who are willing to be early adapters, who view themselves as a like group – whether it be tech geeks or whether it be fast car drivers or whether it be rich people – who view themselves as a cohesive group that likes this product. It is not mass market.
Those are the conditions that favor the three market positions and it’s critical that you know which one you are, because you have to drive all your activities towards being the best at the one you picked and being good enough at the other two.