Where does your business fit in the overall scheme of your marketplace? Are you the market leader? Are you the low cost leader? Do you have the most premium offering? These are just a few of the ways you can describe your market positioning. Good market positioning insures that you are differentiated sufficiently within your market and therefore have a strong platform from which to attract customers.
Understanding your competition is key to good market positioning. Make a list of your key competitors and look at how they describe their product or service. What subset of the overall market are they really going after? Sometimes businesses are not well differentiated by their offering but are geographically separated. For example, Starbucks and Coffee Bean & Tea Leaf offer pretty much the same products and even the environment they sell them in looks very similar. However, they are usually far enough apart that there is sufficient business for both to survive in a given city (sometimes the distance required is only a block or two). In other cases, two businesses cover the same general geographic area but go after a different type of customer. For example, Nordstroms and Ross are both clothing stores that carry a wide variety of clothing plus shoes and accessories. They may even overlap in the brands of clothing they carry however they target very different segments of the market. Nordstroms goes after a customer with more disposable income who is willing to pay more to shop in a nice environment and to get premium service. Ross goes after a customer who is more price conscious but still hopes to find hip clothing in current styles. How are you positioned with respect to your competition?
Your market positioning will often drive your pricing strategy. Perhaps you are the newest entrant to the market so you want to try to grab market share by pricing yourself slightly below the competition. Or maybe you have been around the longest in the market and you want to price your product or service above the competition and sell it as a premium offering in the marketplace – the most expensive but also the best. There are many approaches to pricing your product or service but it should be well thought out. Simply pricing yourself the same as the competition and not differentiating yourself in any other way will make it difficult for you to attract and retain loyal customers.
How you position yourself within your market with respect to your competitors and your pricing determines the types of customers you will attract and greatly impacts the overall success of your endeavor.