Crafting a Customer

Value Proposition and

Positioning
- Dr. Vivek Pani Gumparthi
Introduction
• No company can win if its products and services resemble every other
product and offering.
• As part of the strategic brand management process, each offering
must represent the right kinds of things in the minds of the target
market.
• Creating a compelling, well-differentiated brand position requires a
keen understanding of consumer needs and wants, company
capabilities and competitive actions.
• It also requires disciplined but creative thinking.
Developing a Value Proposition and
Positioning
• A key aspect of marketing strategy is developing a value proposition
and positioning a company’s offering to target customers.
• A company discovers different needs and groups of customers in the
marketplace, targets those it can satisfy in a superior way, and then
develops a value proposition and positions its offerings so the target
customers recognize the distinctive benefits of its offerings.
• By clearly articulating its value proposition and positioning,
compliances can deliver high customer value and satisfaction, which
lead to high customer value and satisfaction, which lead to high
repeat purchases and ultimately to greater company profitability.
Developing a Value Proposition
• How do customers ultimately make choices?
• They tend to be value maximizers, within the bounds of search costs
and limited knowledge, mobility and income.
• Customers choose – for whatever reason – the offer they believe will
deliver the highest value and act on it.
• Whether the offer lives up to expectations affects customer
satisfaction and the probability that the customer will purchase the
product again.
• Depending on the needs of customers, an offering can create value
across three domains: functional, psychological and monetary.
• Functional Value reflects the benefits and costs that are directly
related to an offering’s performance.
• Among the offering attributes that create functional value are
performance, reliability, durability, compatibility, ease of use,
customization, form, style and packaging.
• Functional value is often the primary consideration for offerings that
are regarded as mostly utilitarian, such as, pen, paper, office
equipment etc.
• Psychological Value encompasses the psychological benefits and
costs associated with the offering.
• Psychological value extends beyond the functional benefits to create
emotional benefits for target customers.
• For example, customers might value the emotional benefits they
derive from a car (e.g. the joy of driving a high – performance
automobile and the social status and lifestyle its ownership conveys).
• Psychological value is of primary importance in luxury and fashion
categories, where customers actively seek emotional and self-
expressive benefits.
• Monetary Value includes the financial benefits and costs associated
with the offering.
• Offering attributes that create monetary value include price, fees,
discounts and rebates along with various monetary costs associated
with using and disposing of the offering.
• Although monetary value is typically associated with costs, an offering
can also include such monetary benefits as monetary bonuses, cash-
back offers, cash prizes, financial rewards and low – interest financing.
• Monetary value is often the prevailing choice criterion for
undifferentiated offerings in commoditized categories.
• Across all three dimensions – functional, psychological and monetary
– customer value is the difference between the prospective
customer’s evaluation of all the benefits and costs of an offering and
her or his evaluation of the costs and benefits of the perceived
alternatives.
Marketing Management Process
• Total customer benefit is the perceived value of the bundle of functional,
psychological and monetary benefits customers expect from a given market offering
because of the product, service and image.
• Total customer cost is the perceived bundle of functional, psychological and
monetary cists customers will incur in evaluating, obtaining, using and disposing of
the given market offering.
• The customer value proposition is based on the difference between benefits the
customer gets and the costs he or she assumes for different choices.
• The marketer can increase the value of the offering by raising functional,
psychological and monetary benefits and/or reducing the corresponding costs.
• The value proposition is based on the difference between benefits the customer
gets and the costs he or she assumes for different choices.
• Very often, managers conducts a customer value analysis to reveal
the company’s strengths and weaknesses relative to those of various
competitors.
• The steps in this analysis are as follows:
1 Identify the relevant attributes and benefits that customers value.
2 Assess the relative importance of these attributes and benefits.
3 Assess the company’s and competitor’s performance on the key
attributes/benefits.
4 Monitor customer value over time.
Developing a Positioning Strategy
• Positioning is the act of designing a company’s offering and image to
occupy a distinctive place in the minds of the target market.
• The goal is to locate the brand in the minds of consumers to maximize
the potential benefit to the firm.
• A good brand positioning helps guide marketing strategy by clarifying
the brand’s essence, identifying the goals it helps the consumer
achieve and showing how it does so in a unique way.
• Everyone in the organization should understand the brand positioning
and use it as context for making decisions.
• A well-positioned brand should be distinctive in its meaning and execution.
• A good positioning has one foot in the present and one in the future.
• It needs to be somewhat aspirational, so the brand has room to grow and improve.
• Positioning on the basis of the current state of the market is not forward-looking
enough, but at the same time, the positioning cannot be so removed from reality
that it is essentially unobtainable.
• The real trick is to strike just the right balance between what the brand is and what
it could be.
• One result of positioning is the successful creation of a customer-focused value
proposition, a cogent reason why the target market should buy a product or
service.
 Essentials of Positioning
• Choosing a frame of reference by identifying the target market and relevant
competition
• Identifying the points of parity and points of difference brand associations given that
frame of reference, and
• Creating a brand mantra summarizing the positioning and essence of the brand.
 Success of the Marketing
Management Process
• When consumers’ perception of a product matches a firm’s planned position
for it, the marketing management process proves to be successful.
• The final decision on how to use the four Ps constitutes a firm’s marketing
strategy.
Competitive Frame
of Reference
• Competitive frame of reference
• Defines which other brands a brand competes with and which should thus be
the focus of competitive analysis
• Identifying and analyzing competitors
Does Rolex compete with Titan, Mercedes with Maruti?
 Identifying Competitors
• A good starting point in defining a competitive frame of reference for brand
positioning is category membership – the products or sets of products with which a
brand competes and that function as close substitutes.
• If at all Kinley is trying to identify competitors, it is not just Aquafina or bisleri it is also
Coke, Pepsi, Amul Masti etc.
• The range of a company’s actual and potential competitors, however, cn be much
broader than the obvious.
• To enter new markets, a brand with growth intentions may need a broader or may be
even a more aspirational competitive frame.
• And it may be more likely to be hurt by emerging competitors or new technologies
than by current competitors.
Competitive Frame of Reference
• Firms should broaden their
competitive frame to invoke more
advantageous comparisons. For
example:
The U.S. Armed Forces changed the
focus of its recruitment advertising from
the military as patriotic duty to the
military as a place to learn leadership
skills – a much more rational than
emotional pitch that better competes
with private industry.
Competitive Frame
of Reference
 Competitive Frame of Reference
Once a company has identified its main competitors and their strategies, it must
ask:
1. What is each competitor seeking in the marketplace?
2. What drives each competitor’s behavior?
3. Many factors shape a competitor’s objectives, including size, history, current
management and financial situation.
4. If the competitor is a division of a larger company, its important to know
whether the parent company is running it to diversify it or to run it as a
standalone business.
Points-of-Difference

• Points-of-difference (PODs)
• Attributes/benefits that
consumers strongly
associate with a brand,
positively evaluate, and
believe they could not find
to the same extent with a
competitive brand
 Points of Difference
• Associations that make up points of difference can be based on virtually any type of
attribute or benefit.
• Louis Vuitton may seek a point-of-difference as having the most stylish handbags,
Energizer as having the longest-lasting battery and Fidelity Investments as offering the
best financial advice and planning.
• Strong brands often have multiple points-of-difference. Apple (design, ease of use and
software), Nike (performance, innovative technology and winning) and Southwest
Airlines (value, reliability and fun personality).
• Creating strong, favorable and unique associations is a real challenge, but an essential
one for competitive brand positioning.
• Successfully positioning a new product in a well-established market is very
challenging when compared to a new burgeoning market.
Criteria to Determine Whether a Brand
Association Can Function as a PoD
• Desirability (Desirable to Consumer - Personally relevant to them)
• Deliverability (Firm must have capabilities to feasibly create and maintain the brand
association in the minds of consumers) and
• Differentiability (Customer must see the brand association as distinctive and superior
to relevant competitors)
Points-of-Difference
and Points-of-Parity
• POD criteria

Desirable

Deliverable

Differentiating
Points-of-Parity

• Points-of-parity (POPs)
• Attribute/benefit associations that are not necessarily unique to the brand but
may in fact be shared with other brands.

• Did Tata Nano have point of parity with “cars”?

Points-of-Difference
and Points-of-Parity
• POP forms
Category
The items which the customer considers essential for the
category. Building, teachers. Sports ground etc. for a
school.

Correlational
These are the associations that follow as a consequence
of establishing a point of parity. Cheap products often
are considered to be bad quality.

Competitive
Measures taken to overcome possible weaknesses vis-à-
vis competition. 10 years warranty.
 Straddle Positioning
• Occasionally, a company will be able to straddle two frames of reference with one set
of points-of-difference and points-of-parity.
• In these cases, the points-of-difference for one category become points-of-parity for
the other and vice versa.
• Subway restaurants are positioned as offering healthy, good-tasting sandwiches.
• This positioning allows the brand to create a PoP on taste and a PoD on health with
respect to quick-serve restaurants such as McDonald’s and Burger King and at the same
time, a PoP on health and a PoD on taste with respect to health food restaurants and
Cafes.
 Straddle Positioning
• Although a straddle positioning is often attractive as a means of reconciling potentially
conflicting consumer goals and creating a ‘best of both worlds’ solution, it also carries
an extra burden.
• If PoP and PoD are not credible, the brand may not be viewed as a legitimate player in
either category.
Points-of-Difference
and Points-of-Parity
• Choosing specific POPs and PODs
• Compétitive advantage
• Means of differentiation
• Perceptual map
• Emotional branding
 Competitive Advantage
• To build a strong brand and to avoid getting commoditized, marketers are encouraged
to build a sustainable competitive advantage.
• Sustainable competitive advantage is a company’s ability to perform in one or more
ways that competitors cannot or will not match.
• Pharmaceutical companies are developing biologics, medicines produce using the
body’s own cells rather than through chemical reactions in a lab, because they are
difficult to copy.
• Interestingly few competitive advantages are inherently sustainable. At best, they may
be leverageable.
• A leverageable advantage is one that a company can use as a springboard to new
advantages, much as Microsoft has leveraged its operating system to Microsoft Office
and then to networking applications.
• Broadly, a company that hopes to stay for a long haul has to be in the business of
continuously inventing new advantages that can serve as the basis of points-of-
 Means of Differentiation
• Any product or service benefit that is sufficiently desirable, deliverable and
differentiating can serve as a point-of-difference for a brand.
• The obvious and often the most compelling, means of differentiation for consumers
are benefits related to performance.
• Swatch offers colorful, fashionable watches;
 Emotional Branding
• Many marketing experts believe a brand positioning should have both rational and
emotional components.
• In other words, it should contain points-of-difference and points-of-parity that appeal
to both the head and the heart.
• Mederma (Scar Treatment Product) – Women did not just buy for physical treatment
but also to increase their self-esteem.
 Establishing a Brand Positioning
• Communicating category membership

Announcing category benefits A premium hotel can mention its luxurious rooms, restaurant
Bar, swimming pool. Spa etc.

A comparison with other premium hotels in the city.

Comparing to exemplars

Airbnb
Relying on product descriptor Online platform for rental accommodations
 Positioning Example: TATA NANO
• Was planned to be positioned as an aspirational product for people wanting to
upgrade from a two-wheeler to a car.
• However, TATA group and media positioned NANO as a cheap (instead of ‘affordable’)
car in the minds of consumers even before the launch.
• Wrong positioning was a major reason why the car did not sell.
• Although the company tried to reposition the car later, it did not succeed.
• A well-entrenched position is difficult to change.
• Therefore, companies must be careful in positioning.
 Key Takeaways
• Digital technologies have caused a significant power shift in the world of marketing.
• Earlier, companies held all the cards. They controlled the information shared with
consumers and managed positioning easily.
• Now consumers have the largest voice.
• If you don’t brand yourself, others will.
 Monitoring Competition
• Variables in assessing potential
competitors
• Share of market
• Share of mind
• Brand Recall
• Share of heart
• Brand Preference
Market Share = Sale / Market Size
Quantity (units) or Value (Amount Rs or U$)

LG CTVs = 10000 TVs in a month, the television market size is 50,000 TVs
Market Share = 10000/50000 = 30%
Av price of an LG TV is Rs. 20000. overall average price is 22000.
Sale of LG in Rs terms = 20000X10000 = 20,0000000 (Rs 20 crore)
Market Size in terms of Rs. = 50000X22000 = 110,00000 (110 crore)
LG Market Share in terms of amount = 20 crore / 110 crore = 18%
 Alternative Approaches
to Positioning

1. The story
2. The customer’s engagement with the brand
3. The visual language or expression of the brand
4. The manner in which the brand engages the senses.
5. The role the brand plays in the lives of the people.

• Brand narratives and storytelling Cultural branding

• Setting • Fair and lovely (Glow and Lovely) taps
• Cast into the cultural notion of beauty.
• Narrative arc • Bullet feeds notions of machismo.
• Language • Hero Honda is about thrift.
Positioning/Branding
for A Small Business
• Find compelling product • Create buzz and a loyal
performance advantage brand community
• Focus on building one or • Employ a well-
two strong brands based on integrated set of brand
one or two key associations elements
• Leverage as many
• Encourage product trial in
any way possible secondary associations
as possible
• Develop cohesive digital • Creatively conduct low-
strategy to make the brand
cost marketing research
“bigger and better”
Stray Thoughts on Positioning
• Positioning starts with a product.
• A piece of merchandise, a service, a company, an institution, or even a
person.
• Perhaps yourself.
• But positioning is not what you do to a product.
• Positioning is what you do to the mind of the prospect.
• That is, you position the product in the mind of the prospect.
• So its incorrect to call the concept ‘product positioning’. As if you
were doing something to the product itself.
• Not that positioning doesn’t involve change. It does.
• But changes made in the name, the price, and the package are really
not changes in the product at all.
• They are basically cosmetic changes done for the purpose of securing
a worthwhile position in the prospect’s mind.
• Positioning is also the first body of thought that comes to grips with
the problems of getting heard in our overcommunicated society.
• Positioning, as a concept, has really changed advertising.
• “We’re the third largest-selling coffee in America,” said the Sanka
Radio commercials.
• The third largest? Whatever happened to those good old advertising
words like ‘first’ and ‘best’ and ‘finest’?
• Well, the good old advertising days are gone forever and so are the
words.
• Today you find comparatives, not superlatives.
• “Avis is only No.2 in rent-a-cars, so why go with us? We try harder.”
• “Honeywell, the other computer company”
The End!