CHAPTER 7:

STRATEGIC POSITIONING

The relationship between competitive positioning and market segmentation:

Marketing offerings:The product/service/ brand Market segmentation: Indicates how the

that is being offered to the customer. For example, business must distinguish between the different
car brands (Toyota, Volkswagen, Ford) and their customers in terms of their needs, behaviour and
offerings such as price, safety and quality. demographics.

Customer needs

Competitive positioning Market

Market offerings Market segmentation

Relationship between competitive positioning and market segmentation

Competitive positioning: The value offered by the organisation’s product, service or brand so that they are
seen as different from other competitors’ products.

Competitive positioning map: a visual illustration of the competitive position of the business, its brands,
specific products and services. (it is usually depicted in a two-dimensional graph)

Example of a basic two-dimensional competitive positioning map for cars

Product A Product C
(high price and high quality, e.g. Porsche Taycan) (high price and low quality, e.g. some French
imports)

Product B Product D
(low price and high quality, e.g. Haval) (low price and low quality, e.g. most entry-level
cars)

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 Statistical tools that assist in
positioning products and services

CLUSTER ANALYSIS
Used to band together data obtained from demographic or psychographic variables of
consumers. For example retirees and employed people living in a certain town can be identified

CONJOINT ANALYSIS
A Research technique that delves deeper to determine how consumer makes decisions
regarding products or services. For example, the reasons for buying milk and deciding which
type of milk (full cream, 2% fat and skimmed milk) can be ascertained.

DISCRIMINANT ANALYSIS
Assist in identifying usage behaviour based on demographics such as age, income, social status.
Discriminant analysis is therefore used to assign objects to one group among a number of
groups and it is used to assess the sufficiency of the used classification system.

Segmenting consumer markets

Geographic criteria Demographic criteria

Place of residence, province or country Age, income, occupation and education

Psychographic criteria Behavioural criteria

Factors like lifestyles, personalities and values. Form the product and usage rate

The impact of generational cohorts in society

A cohort: Group of people of a certain age that share similar experiences over time and have similar characteristics.

Baby Boomers Generation X Millennials Generation Z

(1946-1964) (1965-1980) (1980 -2000) (born after 2000)

In South Africa, the Millennial cohort has a further sub-division, called Afrilennials
They have to care for their parents, as well as their extended family, while also being expected to provide
for their own offspring. The increased demands on their disposable income is called the ‘Black tax’ in that
the money they earn must pay to support their extended families while still providing for their own
families

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 Targeting strategies

S Symmetric competition

Occurs when businesses have the same resources and capabilities (for instance, same target
market and same competitive positioning posture) and use the same market strategies.

A Asymmetric competition

Occurs when competitors have different set of resources, knowledge and background and react
quite differently to the same developments or changes in the marketplace.

Criteria that helps assist the business in deciding what targeting approach to follow:

03 Viability
01 Distinctive

Is the segment different enough from Is the target market viable in size? Is there
other segments in the marketplace so sufficient financial advantages in including a
that a separate marketing strategy will segment as part of your target market?
gain traction in this market?

02 Defendable 04 Accessibility

Will the inclusion of the segment be

Are the segments accessible to our business?
defendable when competitors try to
Look at geographic location, supply chain
enter the market? A organisations'
problems or distribution channels.
sustainable advantage that acts as a
barrier to entry.

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Targeting strategy funnel

Shotgun strategy
All the segments in the market are identified as part of the
Undifferentiated strategy target market. (Every person in the country, province or city
is seen as a member of the target market).
For example; a manufacturer only produces black cars.

Multi-segment targeting approach

Acknowledges that there are multiple segments in the market,
Differentiated strategy of which a number could be viable. An individual marketing
strategy is developed for each of these segments.

Niche strategy
Aimed at one specific market segment or target market. The
organisation gains a competitive advantage by focusing all
Concentrated strategy efforts on servicing this segment.
For example the manufacturer of Rolex watches chooses to
concentrate on only the luxury segment of the watch market.

One-on-one targeting
A narrower focus on a target market. The focus here is to target
Customised strategy
the specific needs of individuals or a very small number of
customers. With this approach, companies offer consumers a
product created to their individual specifications.

Undifferentiated Differentiated Concentrated Customised targeting

targeting strategy targeting strategy targeting strategy strategy

Large group of Allows Maximises per-unit One-on-one market

ADVANTAGES

customers diversification profits due to Increased customer

Maximises sales Minimises risks concentrated satisfaction
effort Creates client efforts. Increase in market
Differentiated loyalty share
DISADVANTAGES

Can lead to Expensive Increased

Can't please exclusion of some Higher cost material and
every customer customers Risk of manufacturing
cannibalisation costs.

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 The use of the product life cycle
as a positioning tool

This figure can be found on page 180

Commanding position: There is a monopoly or quasi-monopolistic situation where the one

business has a major share of the market.

Conducive position: This implies that there is enough leeway for the business to make strategic
decisions, such as growing the market with a good protective moat (the business is strong enough
to protect its products from competitors for a long time).

Defensible position: This implies that there is a lot of competition with other businesses that are
also trying to grow their market share.

Fragile position: The business is in uncertain territory and can easily be attacked and might lose
its reason for existence abruptly.

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 Innovative product developments can be grouped into the following categories:

This implies adding new products to existing product lines.

New product lines

Additions to existing An example of this is the introduction of ready-to-eat Jungle breakfast cereal in
product lines different flavours, added to the regular product line.

This is usually done when the packaging of the product is changed, such as
Improvements smaller packaging due to changing customer requirements or reducing the
calorie content of an existing product.

A significant change is made to some vital component of the product, be it the

Repositioning
price that is increased or lowered or an advertising message that is changed.

A classic example of an innovation that disrupted the existing market is in the

airline business. Low-cost airlines such as Kulula.com, Safair and Mango are
Cost reductions
well-known South African examples of airlines that are competing on lower
fares and reduced services against the full-service airlines such as SAA and BA

THE PRODUCT LIFE CYCLE

This figure can be found on page 182

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 Product portfolio performance
assessment

Even during the PLC stages, product portfolio assessment must be done and measurement is based on the market
growth rate and the market share relative to that of the competitors.

Two basic portfolio models

BCG Matrix
DPM (Directional policy matrix)
(Boston Consulting Group’s)

BCG Matrix
Evaluates the business’s existing portfolio and then uses this as a point of departure to further grow the
portfolio through optimal investment decisions.

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DPM (Directional policy matrix)

A two-dimensional matrix that looks at the position of the products in the market.
-Also called the market attractiveness-business position model.
-Used by management in its resource allocation decision-making.
-Based on the attractiveness of the market, which is dependent on: the size of the segment, the growth
rate of the segment, profit margins and sustainability of the market.

Market analysis and opportunity

assessment

Having gathered the relevant information, management can make decisions regarding which segment to
target.

4 Basic alternatives for the individual products in the product range between which management must
decide.

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 The strategic decisions are centred around the following broad issues:

• New products: The issue of invention versus innovation/ resources that should be invested/ it is time-
consuming/ small businesses usually do not have the resources to pursue this venture.

• Supporting existing products: The range of products in the product portfolio must be analysed and
decisions need to be taken on how the scarce resources of the business will be invested.(Need to look at
how much profit it makes us).

• Delete existing products: There are three ways that this can be done.
-1st: The product could be phased out over time. The time period could be linked to a financial year, the
amount of raw material available or the stock that is currently in the supply chain.
-2nd: The product could be phased out with the end of the production run.
-3rd: Close down the product immediately. This means that the product’s unprofitable life comes to an
abrupt end, which could still save the business some money as this type of product is a usually a complete
drain on the resources of the business.

Managing the optimum portfolio

The audit consists of five stages:

1. The audit of the environment in which the business operates.

2. Marketing strategy audit of the mission, vision and the objectives and strategies being followed by the business.
3. Then the organisational structure and human resources of the organisation are audited
4. Followed by a systems audit of the functioning of the business
5. Finally, the audit will look at the product portfolio and the rest of the marketing mix decisions that were taken.