Strategic positioning: what value will you deliver?

Strategic positioning is the result of strategy work. It answers four questions. In which markets does the company want to operate? Which target customer segments does it concentrate on? What benefit, i.e. what unique value promise, does it offer these customers? And how does this distinguish it from the competition? This includes the key quantitative goals to be achieved with the positioning.

The well-known models take different approaches. Michael Porter looks at the competitor and distinguishes two basic types of advantage, cost leadership and differentiation, each in the overall market or in a niche. Michael Treacy and Fred Wiersema start from customer benefit and bundle customer expectations into three groups: best product, best total cost, best total solution. Arnoldo Hax puts customer bonding at the centre and asks how a company binds customers through an individual service package.

These works give rise to five basic strategies for customer segments: cost leadership, product leadership, price-value strategy, customer intimacy and system lock-in. Cost leadership offers the least potential for customer loyalty because price alone is the differentiator. Customer intimacy and system lock-in offer the highest. System lock-in can only be achieved under special conditions.

A positioning geared to low costs places different demands from a value proposition based on the total cost of use. In a price-value strategy, for example, purchase, operation, maintenance, waiting time and disposal may all be relevant together. The lowest purchase price and the lowest total cost are therefore different statements that must be examined from the customer's perspective.

In a product-related positioning, special performance features and their further development are in the foreground. A positioning geared to individual customer solutions requires a deep understanding of the customer's tasks and the ability to combine services accordingly. Both may require innovation, but they direct attention to different processes and competences.

Standardised service delivery, fast product development and individual solution work create different requirements. The analysis therefore also looks at where knowledge comes together, who is allowed to make decisions and how sales, development and service delivery cooperate. A value proposition only becomes viable when these prerequisites are actually worked on.

Cost leadership and price-value strategy put production and logistics at the centre. They need standards, centralised functions, clearly structured responsibilities and a culture that rewards efficiency. Product leadership makes innovation and marketing the core process. It requires creative employees, little bureaucracy and a management that makes decisions under high risk. Mistakes made while experimenting are not punished there.

Customer intimacy relies on customer management. Decision-making authority moves to employees in direct contact with customers, and entrepreneurially minded customer teams combine internal knowledge with customer knowledge. If the strategy is not clear at this point, considerable friction losses arise in the organisation because contradictions constantly have to be dealt with.

Improving processes can strengthen a company's performance. It does not yet answer the question of which customers should be served with which benefit. Strategic positioning and operational effectiveness must therefore be distinguished. Both have to fit together: a cost reduction can contribute to the chosen offering or weaken a capability it requires.

The generic strategies are frameworks for thinking. They do not replace an examination of customer expectations, competition and your own capabilities. The strategy process clarifies which options appear viable for which segments and which tensions the organisation has to manage. The decision is then translated into service offerings, processes and the use of resources.

Every position has its own danger. Only one company in an industry can be the cost leader, and the risk of constant price wars is high. A differentiated product is imitated as soon as it is on the market, so the product leader's lead does not last.

In the price-value strategy, variety raises total costs, and overemphasising individual features undermines the standardisation of processes. The customer intimate finds that the customer absorbs its knowledge. It must therefore keep finding new, untapped potential with the customer and often needs staying power at the start of a relationship.

Evaluating market segments and analysing customer expectations are two different steps. An attractive industry is not yet a suitable target group for your own company. First, market opportunities and competitive conditions are examined using comparable criteria. Then the customer perspective clarifies which minimum requirements and specific benefit criteria count for target segments. Leadership connects these results with core competencies and decides where the company wants to grow.

A value proposition translates the choice into a recognisable promise. A strategy map can derive objectives for processes, learning and economic impact from it. Positioning is thus a sequence of decisions that must be noticeable in sales and in service delivery. External copy alone does not prove a distinctive market position.