The first step for any new business is to ponder how to occupy space inside a target consumer’s mind, which is called ‘Brand Positioning’. It can also be termed as a consumer’s perception of a brand with respect to competing brands.
Why does your brand need to enter his or her mind? If you ask a consumer to name a cola drink, ‘Coke’ name will spurt out. If you ask the consumer to name a toothpaste that comes immediately to the mind, most probably, Colgate name would pop out. If you ask about a photocopying brand, ‘Xerox’ name will spurt out. If you ask them the name of an energy drink, the red bull name will rush out. If you ask an Indian to name a noodles brand, most of the time ‘Maggi’ would jet out.
Why do these brand names stay at the top of the consumer’s mind so that it can be recalled immediately?
Coke is the first cooldrink to enter the consumer’s mind under Cola category. Seven-up is the first cooldrink under the Un-cola category. Redbull is the first cooldrink under ‘energy drink’ category. Xerox is the first brand under the ‘photocopying’ category.
Being №1 in a consumer’s mind will help a business to grab a major market share and have a sustainable business. The above brands show that the easiest way to get into a person’s mind is to be first.
So, how can a business enter a consumer’s mind by being first? The business has to create a new category that doesn’t exist in a consumer’s mind.
What is the need for categories? Our human brains are wired for categorisation to help us remember things. Without that, we would be quickly overwhelmed by the vast amount of information.
Nicole Branan writes in ‘Scientific American’, “Picture a living thing — say, a dog. Now imagine a hammer. Thinking of a dog activates an area that deals with animate objects, whereas a hammer excites one that processes inanimate things even if you had never seen a dog or a hammer before”.
Whenever we come across new things, subconsciously, we would file them under different known categories in our memories. If a consumer sees your product, he would automatically file the product under a known existing category. The problem with this filing under the existing category is — your product would be filed several layers below the other products and the consumer would fail to recollect your brand name at the top of the mind. Example -Coke is the first product under the cola category. Pepsi is the second brand. Do you remember the third brand? Fourth brand? If you ask people, they may not recollect beyond two names. How many energy drinks can you name other than Redbull?
How To Create A New Category? -The new category should be based on the value offerings a brand can offer to the customer. For that, the company has to observe customers’ needs, desires, pains and choose value propositions that will solve customer’s pains and also match the business’ core strengths and core values. This is also called ‘Brand Differentiation’.
Michael Porter writes, “A company can outperform rivals only if it can establish a difference that it can preserve. It must offer greater value to customers or create comparable value at a lower cost, or do both”
We build a sustainable business by widening this differentiation and evolving the value propositions based on the changing needs and attitudes of customers.
AMAZON’S POSITIONING STRATEGY
As we saw earlier that to create a category, we need to first freeze the target customer segment and understand their requirements.
Finding a Niche Market. For a startup, the way to succeed is to start focusing on a small niche market. Focus on a particular need, work on it, make your product distinctive and dominate the niche market. Smaller the segment, it is easier for the entire company to focus and meet the customer needs, wants and desires. Once you become a leader in the niche market, you could move to the larger markets. So, the first step is to position your brand for this niche market.
Amazon’s Earlier Niche — In 1994, Jeff Bezos after being jolted by Internet’s 2300 percent annual growth rate, began to think about building a true ‘everything store’ online. But he knew that building such a store is impractical at least in the beginning. So, to position his service in people’s mind, he had to focus on a niche. How to choose a niche? He made a list of twenty possible categories — Computer software, office supplies, apparel, music, etc… One interesting option popped out — The Books.
Why Books? — Bezos chose the ‘Books’ category for the following reasons
- Books was a $10 billion industry in the united states in the year 1994. A considerable percentage of people had already been buying books through mail order or through postal services — A potential customer base with a need for convenience and also familiar with mail order deliveries.
- Generally, most of us would have a “Fear Of Failure” while trying out any new things. Consumers at that time had little exposure to online buying. They had this fear of buying goods of unknown quality. But books were pure commodities. A copy of a book in one store was identical to the same book in any other store. So, the customers had no “Fear of Unknown”. They knew what they would be getting.
- That time, books were primarily supplied by two major distributors and this would help Bezos not to waste time in approaching individual publishers.
- Millions of books were in print worldwide which even a massive retail store cannot stock — too many SKUs — a potential advantage for an online store since it had no such limitations. Though Jeff Bezos could not build ‘Everything store’ in the beginning he could catch the essence of the possibility of ‘unlimited selection’ in the books category.
POSITIONING — THE DIFFERENTIATION
As Amazon began to sell books online, it was beginning to find ways to establish and preserve the difference in a consumer’s mind as it was the next foundational step in building a sustainable competitive advantage.
Amazon’s Difference — According to Bezos, Amazon’s major difference would be providing greater value to customers by a combination of extraordinary convenience, instant access, and comprehensive selection. These differences would have been sufficient to build a competitive advantage but Jeff had one more idea. He decided to add a foremost valuable difference — Low Prices. Amazon would provide both value and low price.
Why Low Prices? He had his own reasons to believe that Amazon would have a natural advantage in selling products with low-profit margin.
Bezos “I didn’t want to repeat the mistake of Steve Jobs — pricing the iPhone in a way that was so fantastically profitable that the smartphone market became a magnet for competition”.
He is of the opinion that high-profit margins justified rivals’ investments in research and development and attracted more competition, while low margins attracted more customers and were more defensible.
So, Amazon’s Positioning Strategy was Low-price, extraordinary convenience, instant access, and comprehensive selection.
As per Porter’s definition of Strategy, Amazon was offering both value and low price to customers.
The above content is part of the following book.
AVAILABLE ON AMAZON -
References: Positioning: The Battle Of Mind by Al Ries-Jack Trout, ‘The Everything Store’ by Brad Stone.