Decision 4 Positioning and differentiation strategy including the marketing mix

Positioning

Customers' perception of the product offer relative to those of competitors.

Stage 3 in Figure 4.12 is positioning. Deise et al. (2000) suggest that in an online context, companies can position their products relative to competitor offerings according to four main variables: product quality, service quality, price and fulfilment time. They suggest it is useful to review these through an equation of how they combine to influence customer perceptions of value or brand:

Customer value (brand perception) ■■

Product quality x Service quality Price x Fulfilment time

Strategies should review the extent to which increases in product and service quality can be balanced against variations in price and fulfilment time. Chaston (2000) argues that there are four options for strategic focus to position a company in the online marketplace.

It is evident that these are related to the different elements of Deise et al. (2000). He says that online these should build on existing strengths, and can use the online facilities to enhance the positioning as follows:

• Product performance excellence. Enhance by providing online product customisation.

• Price performance excellence. Use the facilities of the Internet to offer favourable pricing to loyal customers or to reduce prices where demand is low (for example, British Midland Airlines uses auctions to sell underused capacity on flights).

• Transactional excellence. A site such as that of software and hardware e-tailer dabs.com offers transactional excellence through combining pricing information with dynamic availability information on products, listing number in stock, number on order and when they are expected.

• Relationship excellence - personalisation features to enable customers to review sales order history and place repeat orders. An example is RS Components (www.rswww.com).

These positioning options have much in common with Porter's generic competitive strategies of cost leadership or differentiation in a broad market and a market segmentation approach focusing on a more limited target market (Porter, 1980). Porter has been criticised since many commentators believe that to remain competitive it is necessary to combine excellence in all of these areas. It can be suggested that the same is true for sell-side e-commerce. These are not mutually exclusive strategic options, rather they are prerequisites for success. Customers will be unlikely to judge on a single criterion, but on the balance of multiple criteria. This is the view of Kim et al. (2004) who concluded that for online businesses, 'integrated strategies that combine elements of cost leadership and differentiation will outperform cost leadership or differentiation strategies'. It can be seen that Porter's original criteria are similar to the strategic positioning options of Chaston (2000) and Deise et al. (2000). Figure 4.16 summarises the positioning options described in this section, showing the emphasis on the three main variables for online differentiation -price, product and relationship-building services. The diagram can be used to show the mix of the three elements of positionings. EasyJet has an emphasis on price performance, but with a component of product innovation. Amazon is not positioned on price performance, but rather on relationship building and product innovation. We will see in Chapter 5, in the section on price, that although it would be expected that pricing is a key aspect determining online retail sales, there are other factors about a retail brand such as familiarity, trust and service which are also important.

Relationship building or service quality innovation 100%

100%

Relationship building or service quality innovation 100%

Figure 4.16 Alternative positionings for online services

100%

Pricing innovation

Product innovation

Figure 4.16 Alternative positionings for online services

An alternative perspective on positioning strategies has been suggested by Picardi

(2000). The three main approaches suggested are generic:

1 Attack e-tailing. As suggested by the name, this is an aggressive competitive approach that involves frequent comparison with competitors' prices and then matching or bettering them. This approach is important on the Internet because of the transparency of pricing and availability of information made possible through shopping comparison sites such as PriceRunner (www.pricerunner.com) and Kelkoo (www.kelkoo.com).

2 Defend e-tailing. This is a strategic approach that traditional companies can use in response to 'attack e-tailing'. It involves differentiation based on other aspects of brand beyond price. It will often be used by multi-channel e-retailers such as Debenhams (www.debenhams.com) and John Lewis (www.johnlewis.com). Such retailers may not want to eat into sales from their high-street stores, or may believe that the strength of their brands is such that they do not need to offer differential online prices. They may use a mixed approach with some 'attack e-tailing' approaches such as competitive pricing on the most popular items or special promotions.

3 E2E (end-to-end) integration. This is an efficiency strategy that uses the Internet to decrease costs and increase product quality and shorten delivery times. This strategy is achieved by moving towards an automated supply chain and internal value chain. This approach is used by e-retailiers such as dabs.com (www.dabs.com) and E-buyer (www.ebuyer.com).

Differential advantage

A desirable attribute of a product offering that is not currently matched by competitor offerings.

Advertising With Circulars

Advertising With Circulars

Co-op Mailing means that two or more businesses share in the cost and distribution of a direct mail campaign. It's kind of like having you and another non-competing business split the cost of printing, assembling and mailing an advertising flyer to a shared same market base.

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Responses

  • april
    How differentiation and positioning influence marketing mix decisions?
    8 years ago
  • ranugad
    How differentiation and positioning influence decisions related to marketing mix?
    8 years ago
  • jessamine
    What is position strategy decision?
    8 years ago
  • subhan
    What is positioning for excellence?
    1 year ago

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