Obviously Awesome

Positioning is the act of deliberately defining how you are the best at something that a defined market cares a lot about.

Frequently, the product we end up with is not what we started out to build. Our email system seems more like group chat, our database seems more like an analytics platform and our cake has become muffins. This transformation happens so gradually that we, the product creators, often don’t notice it.

These are the Five (Plus One) Components of Effective Positioning: Competitive alternatives. What customers would do if your solution didn’t exist. Unique attributes. The features and capabilities that you have and the alternatives lack. Value (and proof). The benefit that those features enable for customers. Target market characteristics. The characteristics of a group of buyers that lead them to really care a lot about the value you deliver. Market category. The market you describe yourself as being part of, to help customers understand your value. (Bonus) Relevant trends. Trends that your target customers understand and/or are interested in that can help make your product more relevant right now.

It’s important to really understand what customers compare your solution with, because that’s the yardstick they use to define “better.”

Your opinion of your value does not count as proof; the opinion of customers, reviewers and experts does. Data or third-party opinions are difficult to refute. Your value needs to be provable in an objective and demonstrable way.

Market categories are one way that customers organize products in their minds. Declaring that your product exists in a certain market category will set off a powerful set of assumptions in customers’ minds about who your competitors are, what the functionality of the product should be and what the pricing is like.

Market categories help customers use what they know to figure out what they don’t. A well-chosen market category will help make your unique value more obvious to your target customers.

Market categories help customers understand what your offering is all about and why they should care. Trends help buyers understand why this product is important to them right now. Trends can help business buyers understand how a product aligns with overall company priorities, making it a more strategic and urgent purchase. Trends are important because, as customers, we want to learn about new, interesting and potentially disruptive technologies or approaches. Nobody wants to be left behind when a shift happens, so we’re constantly looking out for new developments that might have an impact on us and our business.

I’ve determined that it’s critical to start with understanding what the customer sees as a competitive alternative, and then working through the rest of the components—attributes, value, characteristics, market category, relevant trends—from there. The flow looks something like this:

Positioning your net broadly as a “fish net” when you have little market experience is the best way to keep your options open until you have enough customer experience to start seeing patterns.

We frequently see our competitors much differently than customers see them.

Keep in mind that most of your target customers have never heard of you or your rival startups—they simply want to know how your product compares to what they use today.

Market confusion starts with our disconnect between understanding the product as product creators, and understanding the product as customers first perceive it.

The positioning team needs to understand the concept of “positioning baggage” before they can attempt to let go of it. You might find that each team member has a different level of positioning baggage—founders and long-time employees might view the product from the full perspective of its history, while newer employees do not.

Although every component of positioning is related to other components, the foundation is the problem your customers are trying to solve, and how they perceive your offering in comparison with other ways of solving the problem.

Understanding the customer’s problem wasn’t enough—to really understand how they perceived our strengths and weaknesses, we needed to understand the alternatives to which they compared us. Customers always group solutions in categories, but talking to them about problems doesn’t necessarily reveal those categories.

The best way to understand competitive alternatives is to answer the question, What would our best customers do if we didn’t exist? The answer could be that they would use another product that looks like a direct competitor with you. But often that’s not the case. For many new products, the answer is “use a pen and paper” or “hire an intern to do it.” Some of the startups I work with have ideas so innovative that customers don’t even understand that they have a problem—if the product didn’t exist, they would simply “do nothing.”

If a competitor has a small number of customers, they are likely to have zero mindshare with prospects and should not be listed as a real competitive alternative. Would a customer really use them if you didn’t exist? Probably not, since few of them are doing so today. What would the majority of your best customers really do? The competitive alternatives often naturally cluster, and if so, it’s helpful to group them. For example, there might be a group called “do it manually”

List all of the capabilities you have that the alternatives do not.

Focus on the characteristics of your product or company that drives a potential benefit—ideally those features are based on objective facts and are provable.

Concentrate on “consideration” rather than “retention” attributes. Consideration attributes are things that customers care about when they are evaluating whether or not to make a purchase. Every product has features that you can connect directly to a goal the customer would like to accomplish right now. Retention attributes are features that aren’t as important when a customer is making an initial purchase decision, but are very important when it comes time to renew. These include how easy it is to do business with a company and the quality of customer support.

For many consumer technical products, features are presented as valuable in their own right—but only because we do the translation to value automatically in our heads.

It’s important to remember that although you have unique attributes that deliver value to customers, not all customers care about that value in exactly the same way.

The broader your focus, the more difficult it is to connect with prospects and convince them that your solution is the best one for them above all others.

Target as narrowly as you can to meet your near-term sales objectives. You can broaden the targets later.

We position our offering in a market to trigger a set of assumptions—about competitors, features and pricing—that work to our advantage. By choosing to position within a specific market, you’re giving your prospects clues about what products they should compare you with, your key features, your price and your benefits. Those comparisons help customers quickly figure out what your product is all about and whether or not they should consider purchasing it.

You are looking to deliberately choose a market frame of reference that makes your value obvious to the folks who care about it the most. There are a few ways to go about this:

Use abductive reasoning. The adage “if it looks like a duck, swims like a duck and quacks like a duck, then it probably is a duck” also applies to new products. With abductive reasoning, you choose a market category by isolating your key features and their value, and asking yourself, What types of products typically have those features? What category of products typically deliver that value?

Examine adjacent (growing) markets. Another place to look for options is in the markets adjacent to the one in which you have been positioning yourself. Frequently, there are overlaps or blurry lines between markets. As a product shifts over time, its features and value could look more at home in a neighboring market.

I would caution you to be extremely careful in seeking feedback from customers and prospects about what market they see you in. Prospects may see things differently than those who have already tried to make sense of your product one way and failed. Also, customers will only try to position you in markets that are frequently linked to their industry or job function. Customers aren’t positioning experts, nor are they experts in how a market category works. Frequently they will attempt to position you in the most obvious market possible, and this market is often not the best one for highlighting your strengths.

Head to Head: Positioning to win an existing market You are competing directly against other established players in a well-defined market. For the most part, customers are well educated about what solutions in this market can and cannot do. Prospects also understand the purchase criteria (what is important to consider when making a purchase and what is not).

You aren’t claiming to be better for a certain type of customer; you’re claiming to be better for most, if not all, customers. You’re accepting the current way the market category is defined, as well as the current set of evaluation criteria. You aren’t trying to change the game; you are winning—or attempting to win—at the game the way it is currently played.

If you are already the leader in the market, the status quo suits you. The way prospects define the market has worked well for you (you are the leader here after all!), and you would like them to continue to define it that way.

If you are launching a new product, particularly if you are a small business just starting out, the Head to Head style is rarely a good choice.

The only case where a company might want to position a new product in a known category is when the category itself is defined and understood by buyers, but a strong leader has not yet been established. In technology we see this in new and emerging market categories.

To use this style of positioning, first you have to determine whether or not the category has indeed been created in the minds of customers. You need data that tells you unequivocally that the market already exists in the minds of a critical mass of buyers or is emerging quickly enough for you to meet your business goals.

Be prepared to battle against multiple competitors who will be simultaneously trying to prove they are better than you are at the currently established buying criteria, as well as others who are trying to redefine the purchase criteria to their advantage.

Big Fish, Small Pond: Positioning to win a subsegment of an existing market

Many startups compete in established market categories and do so successfully by first breaking up the market into smaller pieces and focusing on one piece they can win. In marketing, the process of splitting up an existing market is called subsegmenting. A market can be subsegmented by industry (manufacturing vs. retail), by geographic region (North America vs. South America), company size and a myriad of other criteria.

Carve off a piece of the market where the rules are a little bit different—just enough to give your product an edge over the category leader.

You get the advantage of a well-defined category without the stiff competition.

Your focus is showing that there is a subsegment of the overall category with a specific set of needs that the current category leaders are not addressing. Those needs are very important—so important that buyers may want to relax a bit on the overall category criteria to make sure that their subsegment needs are met.

Communities also tend to cluster and share information with each other. As you close more business in a particular subsegment, knowledge of your solution in the community will grow quickly because of the links between people in the segment.

This style requires that the category is well defined and there’s a clear market leader—and you’re not it. People must understand what you mean when you talk about the category.

There needs to be clearly definable groups of customers with unique needs that are not addressed by the market leader.

Convincing them to switch will require showing them that you have deeply understood their specific pain and have fully solved the problem.

This positioning style is often useful for smaller startups that are looking for a way to establish themselves in a market with a strong market leader that they can’t take on directly. The work of this style is first to educate the targeted subsegment about how a general-purpose solution is not meeting their needs. You need proof points that show there is a clear gap in value between the general-purpose solution offered by the market leader and your more-purpose-built solution. You need to help the subsegment understand what’s in it for them if they do have those needs met. There should ideally be a way to quantify the value to them if they choose your solution over the market leader’s more generic solution.

Large category leaders will often acquire small companies to block a fast-growing competitor from gaining on them in a particular subsegment. Ideally your competitive advantage is something that is difficult for the market leader to copy, either because you own the intellectual property, or (more commonly) because trying to match your functionality might cause them damage in the broader market where they are winning.

Create a New Game: Positioning to win a market you create

You aren’t simply capturing demand that already exists; you have to spark some demand first. This style is usually only possible when there has been a massive change with a big potential impact on what is possible or what is important in a market. These changes can include new technologies, economic changes, political forces or a combination of these.

Creating a new category is the most difficult style of positioning, even when the pre-existing conditions are aligned to support it, mainly because it involves the greatest amount of “teaching” the customer. In the other positioning styles, you’re leveraging what folks already know about a category and building on that to create a position in the mind of customers. In this style, you are starting with a blank canvas.

To credibly create a new category, you need a product that is demonstrably, inarguably new and different from what exists in other market categories. Wishful thinking won’t convince prospects that you don’t belong in any other existing category—this needs to be obviously true in the minds of customers. Also, be aware that the leaders of existing categories may claim that your new product is merely a feature or subset of their existing solutions. To successfully create a new category, you need to have strong arguments against any competitor that tries to convince customers that what you are selling is “merely a feature” instead of a product in its own right. Timing is also important in creating a new category. To help customers make sense of why this category hasn’t emerged sooner, there should be a very strong answer to the questions, Why now?

Category creation is about selling the market on the problem first, rather than on your solution. If the category doesn’t already exist, it means customers aren’t currently aware that they have a problem. They don’t understand the cost of not solving that problem, nor do they understand the potential value they can unlock by solving that problem. Customers need to be aware of those things before you can successfully convince them to purchase any solution (including yours).

Anyone who successfully defines a market can become its leader because the market was specifically designed that way. Once the market is created, it takes serious work to change it in the minds of customers. Companies that successfully create a category in the customers’ minds are well set up to lead it, not only in the short term but also in the future.

You need a certain amount of money and time to convince the market to make this shift. Because of the investment and time required, this style is generally best used by more established companies with massive resources to put toward educating the market and establishing a leadership position. For smaller companies, this style generally requires the participation of deep-pocketed, patient investors.

The most common way startups fail at this style is by working to build the market and then losing out on establishing themselves as its leader. At the exact moment when prospects start to show signs of understanding the category, a larger competitor or a well-funded fast follower swoops in to take advantage of their category-creation work and steal leadership from them.

“The most successful efforts in category creation do not result from company executives creating an acronym at an offsite. Rather they are discovered from deeply understanding a narrow set of customers. These customers are often ‘freaks,’ extreme in their attitudes and behavior, forged by tectonic technological and societal shifts. The category then emerges when and if the freakish attitudes and behavior become mainstream.

Think of your product’s strengths, your market context and a trend that is relevant to your customer base as three overlapping circles. You are aiming for the center, where all three intersect.

If a current trend helps reinforce your positioning and the value that your offerings deliver, you can use it to your advantage. Aligning with a trend can help make your offering look current and relevant, particularly for customers interested in that trend.

“If you change the way you look at things, the things you look at change.” WAYNE DYER

Describing a trend without declaring a market can make your product cool but baffling. There are lots of ways that throwing trends into the mix can be potentially harmful. Companies can get too focused on the trend to the exclusion of the market, which ultimately leads to confused customers.

Another way that using trends can get you in trouble is if you focus on the trends and the market, but don’t show the link to your actual solution.

The definition of the problem helps to put a boundary around the discussion and frame it in a way that makes what you are talking about obvious to customers as well.

The story then moves to describing how customers are attempting to solve the problem today and where the current solutions fall short.

The next stage of the story is what I call “the perfect world.” It’s where you describe what the features of a perfect solution would be, knowing what you know about the problem and the limitations of current solutions.

The sales story goes on to introduce the product or company and position it in the relevant market category.

Next, the story naturally flows into talking about each of the value themes with a bit more detail into how the solution enables that value. A completed sales deck also adds some information, such as handling common objections, a case study or list of current customers. The story wraps up with a discussion of whatever you would like the prospect to do next.

While most people think of positioning as a marketing concept, a shift in positioning feels more like a shift in business strategy.

New technology can suddenly change what is possible in a market. Once customers understand it, purchase criteria can shift very quickly.