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As a startup founder, there are tons of decisions you’ll make about your marketing strategy. This post is about one of those decisions that you’re likely to overlook. It’s a decision that isn’t talked about all that much, especially with technology startups. But it’s also a decision that, if you get wrong, will be a major drag on growth.
What am I talking about? Your company’s positioning strategy.
What is a positioning strategy?
Before we talk about positioning strategy, you have to understand how people make buying decisions. There’s a simple rule that I have found applies to nearly every purchase: When people buy things, they think in terms of “category” first. Once they’ve made a mental fix on what “category” they’re buying in, they look for the best choice within that category.
This applies to both consumer products and business products. Here are a few examples:
• Looking for a smartphone: purchase an iPhone
• Looking for an SUV: purchase a Toyota Highlander
• Looking for a CRM: purchase Salesforce
• Looking for video communications tool: purchase Zoom
Sometimes we think of categories explicitly; other times we just understand them subconsciously without really knowing it. But if you think about the last ten things you’ve purchased, I’m willing to bet that nine of them involved a category-first decision process.
Every company has two positioning options.
Given that people make buying decisions with a “category-first” mindset, every company has two choices: They can position themselves in an existing category, or they can design a new category where they can position themselves as the owner. (I didn’t come up with this idea; I credit a post I read by Mike Volpe, former CMO of HubSpot). Both approaches are valid.
Companies such as Nextiva, Groove and Mailchimp have all built solid businesses by competing in existing categories (unified communication, help desk and email marketing, respectively). Others, such as Salesforce, HubSpot and BombBomb, have designed new categories in the market (cloud-based software, inbound marketing and video-based communication).
Making your positioning choice early is crucial.
Your positioning strategy will have major ramifications for your marketing and branding efforts over the next three to five years, if not more. That’s because the process for competing in an existing category is fundamentally different from the process of designing an entirely new category.
To show you what I mean, here’s how a high-level marketing strategy compares between the two approaches:
When competing in an existing category:
• Your message focuses on the product.
• You work to convince people you are better than the other options in the category.
• You take share from an existing market.
• Pricing is based on the market leader.
• Buyers are already looking for a solution.
When designing a new category:
• Your message focuses on problem.
• You try to convince people that a solution to that problem exists.
• You build a new market.
• Pricing based on value added.
• Buyers are not aware of a preexisting solution.
There are advantages and challenges associated with each. But even more importantly, it’s hard to imagine a marketing strategy that would be effective at both. In fact, attempting to do so would only work against you by creating confusion in the market.
At my company, where I also serve as VP marketing, we’re building a new category called “omnidata intelligence” because we’re helping businesses get value from their data with an entirely different approach. There isn’t an existing category that covers the problem we solve, so trying to position ourselves that way would only make it difficult for us to get the right message across.
Position yourself or be positioned.
If you don’t tell the market how you’re positioned, someone else will end up doing it for you. This “someone else” could be potential customers, analysts, bloggers or the press. Since people make buying decisions in a “category-first” mindset, they will naturally try to peg you in a category if you don’t to that for them.
Unfortunately, if your messaging and positioning aren’t clear, then these groups are likely to put you in the wrong category. The result isn’t pretty, as they’ll probably draw incorrect comparisons and wrong conclusions about what you have to offer.
Here’s what we’ve covered so far:
• Buyers make decisions with a “category-first” mindset.
• You can compete in an existing category or design a new category.
• The choice has major ramifications for your marketing strategy.
• If you fail to clarify your positioning, you’ll confuse potential buyers.
The process of choosing a positioning strategy is a topic of another post, but here’s a rule of thumb: If you’re solving problems that haven’t been solved before, there’s a good chance you’re building a new category. Now, the rest is up to you. How are you going to position your company?
June 11, 2019 at 08:37AM
Forbes – Entrepreneurs