Market Positioning (Edexcel A Level Business)

• Market positioning refers to the process a business goes through when launching a new product or service
  • The business decides where they want to position the product in the market with regard to price, quality, branding, and customer perception
     
• Market mapping is a tool for identifying the position of a product within a market
  • A market map refers to a two-dimensional diagram that shows the attributes or characteristics of a product in comparison to rivals’ products
  • Only two criteria can be chosen e.g. price and quality, age and income, etc.

M&M has positioned itself as low price and low quality in this example of a market map
 

Market Map Analysis

• If there were no spaces left on the market map, it indicates that the market is saturated
  • This means that there are no opportunities to exploit a market niche in the market
  • Competition is likely to be high and profits low
     
• However, the existence of a space on the market map may indicate the existence of a market niche
  • This needs to be researched carefully before the business commits e.g. it looks like there is a gap in the market in high price / low quality area in the map above
  • This gap does not represent a worthwhile market as the business would find it impossible to build and maintain a loyal customer base

The  Usefulness & Limitations of Market Mapping

• Competitive advantage refers to the features of a business and its products that are perceived as superior to its rivals by customers
  
  
• It is how a firm’s product is made both distinctive and defensible
  • Distinctive means that it is different from the competitors
  • Defensible means that the business can prevent competitors from copying it
    

Some of the main sources of Competitive Advantage
 

• There are many ways a firm can gain competitive advantage including innovation, reputation (branding), and building strong relationships with stakeholders, adding value, differentiation, market segmentation and price leadership
  
  
• Examples of the source of businesses competitive advantage include:
  • Quality e.g. Audi is well known for the exceptional quality of the finishing inside their cars
  • Delivery times e.g. Amazon Prime delivers products within 24 hours of ordering
  • Low Price e.g. Primark is considered to provide the best value/low price combination
  • Reliability e.g. Apple Macs have an excellent reputation for long life and reliability
  • Ethical stance e.g. Tony's Chocolonely only uses cocoa in their chocolate which is 100% free of slave/child production
  • Design e.g. Dyson vacuum cleaners stand out from the crowd with their original design

• Product differentiation is an attempt by a business to distinguish its products from those of competitors
  • This involves creating functions or features of the product (or firm) which help it to stand out from its competitors
    
  • Strong product differentiation helps the firm to develop its competitive advantage
  • The development of product differentiation often helps a firm to create a unique selling point for its product which can be used in marketing
  • Product differentiation may be tangible (clearly visible) or it may be a perception that is created about the product in the consumer's mind
    
    
• Successful product differentiation helps the business to increase demand for its products, increase brand loyalty, and allow the business to charge higher prices

• Examples of successful product differentiation include:
  •  In 2014 Hyundai Cars in Singapore introduced a three year warranty on all new cars when the industry standard was one year
  • Green & Black use Fairtrade cocoa AND sugar in the production of their chocolate

• Adding value is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service
  • E.g. customers are prepared to pay more for potatoes when they are packaged as oven chips than they would be willing to pay for a bag of potatoes
       

Some of the methods of Adding Value
 

• The methods of adding value overlap with some of the features of product differentiation
  • Marketing and branding
    Building brand identification and customer loyalty to the brand allows the firm to charge a higher price for its products thus increasing the added value e.g Yeezy 350 V2 sneakers sell for $250 a pair
     
  • Functions and features
    Adding unique features allows the firm to charge a higher price for its products thus increasing the added value e.g. Samsung Galaxy Watch 5 has robust health tracking tools built into it, along with an amazing screen
      
  • Customer service
    Businesses that ensure they have a good reputation for customer service can charge a higher price for their products thus increasing the added value e.g. John Lewis is considered to provide the best customer service amongst department stores in the UK
     
  • Customisation
    Allowing customers to design or create their products allows the firm to charge a higher price thus increasing the added value e.g. MoonPig birthday cards can be completely customised
    
    
  • Packaging
    Apple products are well known for their superior packaging which creates an exciting opening experience for the customer. This allows the firm to charge a higher price for its products thus increasing the added value