There are myriad books, articles and other valuable sources of advice on how to position a product, service, or company for successful competition within a market. Nearly all of them have a common foundation that may be infinitely adapted to fit a particular circumstance. Whether building a new position or examining an existing one, it is wise to make sure its foundation is sound.

The Fundamental Positioning Equation

The foundation of any market position may be expressed as a simple equation:

Market Positioning = Market Segmentation + Competitive Differentiation

A successfully defined market segment combined with a credible product or service differentiation forms a solid position foundation.

What Is Market Segmentation?

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All companies want to be the best in their business or the “king of the hill”. Simply put, segmentation is deciding of which hill one wishes to be king.

A market segment may be thought of as a group of buyers who share a set of characteristics that make them good sales prospects for a particular product or service. By defining a set of buyer characteristics favorable to one’s product or service, one is effectively drawing a market boundary around a group of buyers. That boundary is helpful in keeping marketing activities effectively focused.

The Biggest Mistakes to Avoid in Segmentation Are:

  1. Drawing boundaries so specific that the result is a market segment too small to bother pursuing.
  2. Drawing boundaries so closely matched to a current product or service that one ignores significant market share that could be easily captured with minor changes to an existing product or service.

What Is Competitive Differentiation?

In a nutshell, competitive differentiation is stating why one’s product or service or company is better than its competitors.

The Biggest Mistakes to Avoid in Differentiation Are:

  1. Making claims that do not appear credible from the start–today’s cynical customers dismiss dubious claims of superiority easily and often.
  2. Making claims that, while credible, are not very important to the potential customer. Customers ignore irrelevant claims with hardly a second thought.

An Example of Great Market Positioning

GreatCall is a different kind of cell phone company. They recognized a cell phone market segment that was large, had unsatisfied demand, and was essentially free of serious competitors. That market segment is comprised of millions of “senior citizens” who want to use a cell phone but find the high-tech, feature-loaded phones widely sold to teenagers to be too complex, if not downright intimidating. Recognizing the opportunity, GreatCall teamed with Samsung to create a cell phone designed specifically to appeal to people over 50. The phone, named the Jitterbug, has oversized, easy-to-read buttons and is very easy to use. The advanced features younger users care about are lacking, but advanced features are not important to customers in this segment. GreatCall has defined a large, profitable market segment and created a product that is successfully differentiated from its potential competitors in satisfying the most important customer requirements.

That is great market positioning and a recipe for marketing success.