In an earlier blog post titled “Positioning statements: how a carrot is more than a carrot” I described how a business identifies itself to its customer vis-à-vis the competition through a positioning statement, and how a well-crafted positioning statement can help an organization grow.
I introduced the framework and provided an example from an indoor hydroponic farm I was developing in business school. (For those of you wondering, we never did start that business. Our technology at that time was cutting edge and expensive so the ROI wasn’t there. Since then the economics have changed and about five similar farms have started up in Chicago. I wish them success!)
Refresher: Positioning statement framework
A positioning statement is structured like this: “For [target customer] who wants/needs [compelling reason to buy], [business/product] is a [frame of reference] that provides [key benefit]. Unlike [main competitor], [business/product] is [key differentiation].”
Wellspring Growers’ positioning statement was: For farm-to-table chefs in the Chicago area who demand the highest-quality fresh produce, Wellspring Growers supplies fresh salad greens and herbs which are harvested within a few hours of delivery for optimal taste and freshness. Unlike local-area farms, Wellspring Growers produce is available all year.
Let’s look at the components one at a time.
The purpose in selecting a target customer, or target market, is to focus your resources, sales and marketing activity on the audience that is most valuable to your business, rather than spreading thin your resources in an attempt to reach all potential customers. Target market selection usually begins with market segmentation – the grouping of potential customers whose problem or use of your solution share several characteristics. You might group customers by how much they buy, the price they can pay, the values they find important, where they are located, etc. There are many excellent segmentation models. One I like is a two-by-two matrix because it makes clear the adjacent markets in which to expand your business. (You can find a worksheet here on our website.)
In selecting a target market keep in mind four things. Choose a market in which:
- You are differentiated – going back to the Wellspring example, we chose chefs at farm-to-table restaurants, because chefs at most chain restaurants would not appreciate how we were different than their current suppliers, nor pay the price premium.
- You can deliver value quickly – while we may have wanted to sell to certain large chains, we would not have had enough volume as a startup to meet a fraction of their needs, and they would have quickly lost interest.
- Customers are accessible – it would have been much more difficult to get a meeting with a large distributor or chain restaurant buyer than to walk into an independent restaurant and ask to speak with the chef.
- There are adjacent markets for growth – as we grew and saturated the farm to table market, we might have developed the volume and credibility to begin reaching restaurant chains, or specialty distributors that serve these outlets.
If you determine that you will focus on more than one target market, develop a positioning statement for each. Some businesses market to both end consumers and intermediaries such as distributors, each with different reasons for buying, frame of reference, etc.
Compelling Reason to Buy
This is the situation that puts your target customer in your market. It is the problem or need that your customers share, and that you can solve. For Wellspring, it was the chef’s need for fresh, beautiful produce that most visibly symbolized their quality standards to their end consumers. We could bring them the freshest produce imaginable – harvested that very morning.
This is your company, service, brand, product or organization. If you offer more than one of these to a given target market, you will need a separate positioning statement for each, unless you intend to market them as a bundle of products or services. For Wellspring, we didn’t focus on individual crops; rather, we marketed them as a bundle of products from which customers would choose what they needed.
Frame of Reference
Frame of reference is the group of alternatives in which your target customer classifies you, and it is always defined from their point of view. While Dove Bar might classify itself as a novelty ice cream product, the consumer probably classifies it as dessert, or an indulgent treat. So now instead of competing for consumer attention in the ice cream aisle, Dove may be competing for attention along with cakes, cookies, or even watermelon. The frame of reference establishes the range of alternatives from which your customer chooses, and thereby informs your comparative communication about how you are different. While you might be tempted to establish the widest possible frame of reference to capture the greatest potential volume (Choose us for dessert!), you might have greater success defining a smaller frame of reference to establish more meaningful differentiation (The most indulgent treat for “me time”!).
There’s a really brilliant framework called the benefit ladder. You’ll find a worksheet with another noted above on our website. I won’t go through it in detail here, but the idea is that benefits can be expressed in functional or emotional terms, and the most established companies and brands focus on emotional benefits because they are the most powerful in driving sales. But for those of us still establishing brand recognition and market share, it is important to be descriptive about the benefits we offer our customers. One way to think about key benefit is how you solve the customer’s problem or address their need. You may be tempted to put key differentiation in this spot, but in fact there may be more than one company within the customer’s frame of reference that can address their need, so keeping this broad rather than singular is absolutely fine.
This is the main rival for your customer’s business. Now I’m guessing a few of you are squirming because it isn’t nice to single out the competition when we’re all doing such noble work. That is true; however, it can be incredibly motivating for teams to imagine what it would take to match or beat so-and-so, even if you don’t wish them ill. You may not want to post this on your website, but setting the bar internally can be instrumental in driving growth.
And if for no other reason, it’s important to single out the competition so you can tell your customers how you are different, whether or not you make specific reference to a competitor. (Speaking negatively about your competition is never a good idea.) In the case of Wellspring, there were other farms that could “harvest within a few hours of delivery for optimal taste and freshness,” but none at that time could do it all year round. We didn’t need to name them specifically to make that point, nor was it in our best interests to remind our customers of their other options in season.