Crafting a Customer Value

Proposition and
Ch 7
Positioning
 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.
• Offering can create value across three domains:
1. Functional value (utilitarian)
• Reflects the benefits and costs that are directly related to an offering’s performance.
• Offering attributes that create functional value are: performance, reliability, durability, compatibility,
ease of use, customization, form, style, and packaging.
2. Psychological value
• The psychological benefits and costs associated with the offering.
• Create emotional benefits for target customers.
• Importance in luxury and fashion categories, where customers actively seek emotional and self-
expressive benefits.
3. Monetary value
• The financial benefits and costs associated with the offering.
DEVELOPING A VALUE PROPOSITION
• 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 value proposition is a promise about the experience that customers can
expect from the company’s market offering and their relationship with the
supplier.
• Managers conduct a customer value analysis to reveal the company’s strengths
and weaknesses relative to those of various competitors.
• Customer value analysis process:
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 competitors’ 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.
• Positioning focuses only on benefits and provide consumers with a reason to
choose the company’s offering.
• Positioning should have both rational and emotional components.
• A useful measure of the effectiveness of an organization’s positioning is the brand
substitution test.
• If, in some marketing activity the brand were replaced by a competitive brand, then that
marketing activity should not work as well in the marketplace.
• Positioning requires that marketers define and communicate similarities and
differences between their brand and its competitors. Specifically, deciding on a
positioning involves:
• Choosing a frame of reference by identifying the target market and relevant competition
• Identifying the optimal points of parity and points of difference given that frame of reference
Choosing a Frame of Reference
• Defining the customer market and the nature of the competition,
• An offering can be viewed as attractive in comparison to an inferior
offering, but the same offering can be perceived as unattractive when
compared to a superior offering.
• Category membership: the products or sets of products with which a
brand competes and that function as close substitutes.
IDENTIFYING POINTS OF DIFFERENCE
(POD)
• (PODs) are attributes or benefits that differentiate the company’s offering from
the competition.
• These are attributes or benefits that consumers strongly associate with a brand,
that they positively evaluate, and that they believe could not be found to the same
extent with a competitive brand.
• An increasingly important aspect of differentiation is brand authenticity (‫)ا(صا((لة‬: the
extent to which consumers perceive a brand to be faithful to its essence and its
reason for being. ‫(ا((ال‬
( ‫)زيتب(((يتج‬
• Point of difference criteria:
• Desirable to consumer
• Deliverable by the company.
• Differentiating from competitors
IDENTIFYING POINTS OF PARITY(POp)
• Points of parity (POPs) are attribute or benefit associations that shared with other
brands.
• POPs come in three basic forms:
1. Category points of parity:
• Are attributes or benefits that consumers view as essential to a legitimate and credible offering
within a certain product or service category.
• They represent necessary—but not sufficient—conditions for brand choice.
2. Correlational points of parity:
• Are potentially negative associations that arise from the existence of positive associations for the
brand.
3. Competitive points of parity:
• designed to overcome perceived weaknesses of the brand in light of competitors’ points of
difference.
 ALIGNING THE FRAME OF REFERENCE, Pop,
AND pod
• Straddle positioning:
• The points of difference for one
category become points of
parity for the other, and vice
versa.
• Perceptual maps:
• Are visual representations of
consumer perceptions and
preferences. They provide
quantitative pictures of market
situations and the way
consumers view different
products, services, and brands
along various dimensions.
STRATEGIES FOR CREATING a
SUSTAINABLE COMPETITIVE ADVANTAGE
• Differentiate on an Existing Attribute:
• Difficult to achieve, because offerings in a product category start to become
more similar as their overall performance improves.
• Introduce a New Attribute.
• Build a Strong Brand:
• Differentiation through brand power is of particular value in commoditized
product
Communicating the Offering’s Positioning
• Crafting a positioning statement:
• A positioning statement articulates the target customers and the key benefit
that will provide with a reason to choose the company’s offering.
• E.g. “For safety-conscious upscale families (target customers), Volvo offers the
safest, most durable automobile in which your family can ride (value
proposition)”.
• Many marketers tend to focus on the benefits rather than attributes as the
pillars of the offering’s positioning.
• Attributes provide “reasons to believe” or “proof points” for why a brand can credibly
claim it offers certain benefits.
Communicating the Offering’s Positioning
• Communicating category membership:
• Sometimes consumers may know the category membership but not be
convinced that the brand is a valid member of the category.
• There are three main ways to convey a brand’s category membership:
1. Announcing category benefits.
2. Comparing to exemplars
3. Relying on the product descriptor that follows the brand name