If you want to build your business and increase profits, you should understand the concept of positioning. It is one of the most important marketing ideas. A tight positioning can lead to improved marketing efforts, revenue growth and profits.
Harvard Business School professor Michael Porter is a great thinker regarding marketing strategy. At the core of his work is a simple observation: There are only two ways to compete. You can be cheap, or you can be different.
The idea isn't complicated, but it is true and important. It also has significant implications for you in leading your company.
Porter's observation of strategy applies to any market where supply is not constrained. If you are in a market with ample capacity, you have to choose between cost and differentiation. If you aren't unique in some fashion, you have to be less expensive because people will choose based on price.
When supply is constrained, the dynamics are different. In markets with limited capacity, prices tend to be set through the interaction of supply and demand. Products and services with no differentiation can sell for high prices simply because there aren't enough to go around.
In many roofing industry segments, there is ample capacity. Roofing can be an intensely competitive business with many contractors fighting for each job. In such a market, firms have to choose how to compete.
Some companies thrive by competing on price. Walmart, for example, has done well. Ryanair, a low-cost airline, is the largest carrier in Europe. Some roofing companies embrace the same approach.
But competing on price is difficult. When a company focuses on low price, its profit margins are limited. Competition can be intense; all a competitor needs to do to steal market share is offer an even lower price. The company constantly has to look for ways to reduce costs, such as squeezing suppliers to get lower prices.
For most companies, the key to success is differentiation. How will you stand out? Why will someone pay more for your products and services? To succeed, you want to identify what you offer that is unique and important and something you can credibly own versus the competition.
This certainly is a challenge for roofing contractors. In a market with many competitors offering similar products and services, what makes you different?
There are many ways to differentiate. You can identify a unique attribute, such as a particular guarantee or service. Even better, you can offer a unique benefit, such as lower maintenance costs, lower energy bills, and/or confidence the project will go well and the roof system will last. Some companies differentiate based on image alone.
The difficulty with differentiation is there are many things you can highlight. You can claim superior reliability, environmental footprint, customer service or maintenance. You can discuss a unique installation process or your highly skilled crews. You can offer 24-hour customer service. You can tell potential customers you have been in business for more than a century or you are family-owned and operated. The problem is you can't focus on it all.
Perhaps the most important marketing lesson is this: You can't make everyone happy. You can't be all things to all people. If you try to delight everyone, you likely will end up making everyone somewhat happy but no one thrilled. This works well in a market with no competition, but in a market with many competing firms, your competitors may focus on particular segments, leaving you stuck in the middle.
In the roofing industry, it would be difficult to be the most efficient contractor for commercial builders as well as the top-quality contractor for high-end residential work. The processes and project execution are different. One way to see the problem is to think about your company's website. A commercial roofing contractor's website will feature pictures of commercial properties and speak to commercial builders and property managers. A residential roofing contractor's website, on the other hand, should highlight unique residential capabilities. Someone looking for a commercial roofing contractor doesn't want to see pictures of residential properties, and someone looking for a residential roof system doesn't want to see commercial properties. It is difficult to demonstrate excellence in both unless you develop a brand portfolio, which will be discussed later.
This is why positioning is so important. You have to stand for something. Positioning is a technique to define your place in the market.
There are four parts to positioning: target, frame of reference, benefit and attributes. Each part is important.
The target defines your perfect customer. It can't be everyone. A target such as "people who need new roofs" adds little value. You must narrow it down. What type of customer is it? Who is willing to pay more for what you offer?
It is important to remember your target doesn't have to include all your customers. The target simply identifies the ideal customer.
The frame of reference defines your competitive set and answers the questions: What are you? Are you a commercial roofing contractor, a "green" roofing contractor or a solar roofing contractor?
The best way to define your frame of reference is to think of your competition. When people consider your firm, what other types of companies are in the mix?
Although it is easy to skip this part, you should spend time to get it right. The frame of reference sets up much of your positioning. Are you a commercial roofing contractor who is the most environmentally friendly? Or are you a green roofing contractor who provides high reliability? The distinction matters.
The benefit part of positioning answers the following questions: What do you offer your customers? What is the benefit of working with you? Are you the most reliable, the easiest to work with or the quickest?
The key thing to remember in positioning is you only get to have one benefit. You have to choose. If you have multiple benefits, your positioning quickly will lose focus.
Attributes are the specific things you offer. They are the reasons why someone should believe you can deliver the benefit.
The benefit and attributes need to connect. If your benefit is about peace of mind, your attribute needs to support this. Perhaps you have a long history, provide a 20-year warranty or have crews available 24 hours a day; these all support the benefit of peace of mind. It is fine to have two or even three attributes as long as the attributes all support the benefit.
Once you determine your positioning, it is easy to develop the total business proposition. The "four P's" of marketing (product, price, place and promotion) fall logically from tight positioning.
If you position your company as environmentally friendly, the four P's are clear. From a product perspective, you will offer a green product. You will work with certain suppliers and complete projects in a low environmental-impact fashion. Your prices will be high, but people generally understand a favorable environmental profile brings with it a higher price. You will talk about the environment in your promotional materials, and your office will reflect your environmental focus, such as having solar panels on your roof.
You can combine the four elements into a positioning statement. This is a short sentence that states how you compete. It looks like this: To (target), my company is the brand of (frame of reference) that (primary benefit) because (key attributes).
If I were writing one for Nike, the positioning statement might read something like this: To serious athletes, Nike is the brand of athletic equipment and apparel that helps them perform their best because Nike products are built with the latest technology and input from the world's greatest athletes.
Positioning statements tend to feel a little awkward and clunky, which is fine because a positioning statement is an internal document. You don't put it on your website, and you don't print it on your business card.
Developing your positioning sometimes can lead you to interesting questions. What if you have two types of customers who want different things? You might have a residential roof system repair business and an industrial new construction business. How do you write one positioning statement that includes both groups? What if you want to enter the residential solar market when your existing business primarily is commercial roofing? How do you create a focused value proposition that spans both markets?
In many cases, the answer is simple: You don't. There are times when you will need more than one brand, and you will need to create a brand portfolio. One brand might be residential repair and the other industrial new construction.
This is a common strategy. Indeed, most companies have more than one brand. Some consumer companies have hundreds of different brands. Procter & Gamble, for example, sells Pampers® diapers, Crest® toothpaste, Tide® laundry detergent and many other brands.
Business-to-business companies also leverage brand portfolios. United Technologies Corp., for example, sells elevators under the Otis brand, helicopters under the Sikorsky brand, and heating and cooling systems under the Carrier brand.
Brand portfolios can drive growth. With multiple brands, you can compete in distinct market segments. But be careful when creating a portfolio because it can be difficult to manage. Each brand needs a distinct website, customer service structure and management. This can be costly and complicated.
You only should create a new brand if the opportunity is compelling, the proposition is distinct from your existing brand and you have the resources to manage multiple brands.
Developing a positioning and brand are good ways to start looking at your customers. Who are your best clients? What do they have in common? What types of projects do you tend to win?
It also is useful to think about reverse questions. Who is not a great customer? Who do you turn away? Answering these questions can lead you to an understanding of your particular strengths.
You need to look beyond the surface to uncover deeper motivations. What are your customers worried about? What is important to them? It is then essential to look at your competitors. Who else is in the market? What are they offering? Where can you be different or superior?
From this analysis, you then can explore how you are going to market to determine whether it matches the positioning. Is your pricing strategy consistent? Do your proposals communicate your positioning?
Ultimately, the exercise should result in you improving your marketing, attracting the right kind of customers and making them happier. This, in turn, should lead to better financial results.
For many companies, the best approach is to work with an external firm to help develop a positioning and brand character and then review implications for your business. These projects can require an investment, particularly if you need customer research. Unusually complex projects can be costly, but your money can be well-spent. Identifying a strong positioning is the foundation of building a great business. Without one, you may well struggle. Knowing who you are and how you will compete is the key to your company's long-term success.
Tim Calkins is clinical professor of marketing at Northwestern University's Kellogg School of Management, Evanston, Ill.