What challenges COVID-19 has brought in to the process?
“You can’t be all things to all people. Strategy is about making choices, trade-offs; it's about deliberately choosing to be different.”
As we spoke of S-T-P-P last week and as we should continue to learn a bit more of positioning, I would dedicate this week’s article for those who want to know more about strategy and positioning.
Strategy is a word which has mostly been used for Tactics. Strategy is essentially long-term whereas tactics are the opposite; strategy is about the direction or WHATneeds to be done and tactics are more about theHOW part or the way of making things happen. Taking a look at what was discussed last week, it’s evident that S-T-P-P is strategic as the picture created in the minds of a consumer with respect to a brand has to stand tall among other brands, which means that it should be long-term.
Therefore, it’s of paramount importance to decide the direction a brand can take in the long-run,which will be instrumental in creating a picture of the brand in the minds of the target audience. Addressing the same, Michele Porter back in 1980s mentioned the fact that;
“You can’t be all things to all people. Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.” What Porter was trying to communicate was that; once an image is created in the minds of the consumers about a brand:
a) It shouldn’t be changed in the short-run
b) It has to occupy a permanent place in their minds.
What it also implies is that it should be deliberate and it shouldn’t be incidental or accidental. Strategy is what is thought through before implementation and the second half of strategy is about implementation; in marketing, there are 4 Ps that are used in the process of execution. Prior to the execution, the marketer has to be clear as to what exactly that should be portrayed in the minds of the consumers or the target audience.
Even though Michele Porter has never been a Marketer, the generic strategies presented by him are still to-date is valid as a part of branding strategy which sets the direction brands need to choose. A brand could be positioned either as a niche market or a mass market product. Once the market is chosen to compete in; the next is to choose the basis of competition which as per Porter could be either Differentiation or Cost-Leadership. What it prescribes is that; prior to the execution of positioning, the brand needs to decide which quadrant it needs to occupy among the four options available. Taking an example for Cost-leadership for the mass market; Tata Nano which captured the market with a car of INR 100, 000, where all they wanted to do was to offer a car at INR 100, 000 to the local market. Product development began with a clear guideline from Raton Tata that the price should not exceed INR 100, 000. Starting from Nano, it can go all the way from the left extreme to the right extreme with brands such as Alto, Swift, Toyota, Honda, Mazda, Mitsubishi, and then crossing the border between the quadrants to reach differentiated brands such as Volkswagen, Peugeot, Audi, Mercedes, BMW etc.
Taking the narrow market to consideration; it should be understood that the niche market would only gain profits when the unit price is exorbitant as it only reaches a limited number of users. Aston Martin, Rolls Royce, Ferrari etc would be perfect examples for the ‘Differentiation-Focused’’ quadrant.
If Niche market is about a smaller number of units which go at a higher price, what would be sitting in the Cost- Focus quadrant?
CF is perfectly explained when the B2B market is discussed. B2B as opposed to B2C seeks for the lowest price as B2B is mostly about creating products for the B2C market. In other words what it means is that, even though it’s not a sizable market (CF) the price has to be lower. In line with the vehicle market, the perfect example to cite is buggy carts which are used inside factories, in golf clubs and in hotels, airports and hospitals. The brand of the buggy cart wouldn’t get much of an attention in the purchase decision but the price of it would.
Therefore, it’s evident that understanding the position of the brand is utmost important prior to getting into the task of executing the image through 4Ps. As Michele Porter stated, there is no option for the strategist to be sitting right in the middle of these four quadrants. In Porter’s own words, “you can’t be stuck in the middle”.
Why Sticking in the middle is not recommended?
Sticking in the middle would end up confusing the target audience as it may imply the fact that a quality product is sold at a lower price; in other words, a quality product is made to be a cheaper one to get volumes. This would end up sending confusing signals to the market which will result in confusing the target audience. Hence, in deciding strategy for the last four decades not many wanted to be stuck in the middle. In line with the motor vehicle example discussed above, the example that can be cited as a brand which got stuck in the middle is Lexus. Even though Lexus was better in her performance than other high-end differentiated car brands in the market which are at a higher price-point, Lexus was never perceived as same or on par with any of the brands we mentioned under the quadrant of Differentiation. The reason was that; it was sending confusing signals to the market of its ‘Standing’ in the market. Problem with Lexus is not actually with Lexus. It’s in the mind of the people. In their minds, Lexus is Toyota NOT Mercedes or BMW.
Is sticking in the middle NOT RECOMMENDED anymore?
Answer is NO. You can be stuck in the middle now. As the economic down-turn hit the European and the North American markets back in 2006/7/8, the challenge was to make brands affordable to many as there was no demand for high-end brands. Certain brands brought their positioning down making them appealing to the mass market which was more about making the prestige available for masses hence it was called Masstige (Mass-prestige). Therefore, sticking in the middle was accepted as a strategy after few decades of Porter introducing the original strategy to make sure the brands wouldn’t go out of business.
Ever since then, Best-Cost provider has become a strategic position to take and it has been further reinforced and strengthened with recent changes taking place in the Western Culture including; the Movement of down-shifting (This was explained in a previous article where people reduce consumption and spending voluntarily or involuntarily) , the sharing economy concept (Under which brands such as Airbnb, One-fine-stay have come to the market). This strategy is all about providing the consumers with a quality product at a NOT-SO-HIGH price when it comes to pricing. It may have a few additional frills which are offered by differentiated brands as well.
How to face COVID challenges by brands?
COVID made sure that certain high-end brands went out of business during the first lock-down itself. It keeps alarming on all the other brands too and COVID has knocked on their doors too. What it says in other words is that:
a) People need fresh air to breath than expensive perfumeries to spray
b) People need simple food to eat than luxury meals which costs a fortune
c) Planet earth needs to be taken care of if mankind is to survive in the long run
d) Plant earth doesn’t need us and we need her hence we are her guests not vis-à-vis
In other words, the way brands used to work needs to be changed in a human-friendly way and planet’-friendly way. Prestige will have to be made available for masses at a reduced price. Brands with extra ordinary profits will run out of business if they don’t come down to an equilibrium. One of the main factors about the demand for luxury brands is that they are highly-price sensitive and this very element has sent them out of business. Therefore, the time has come for prestige brands to get to the middle of the strategy quadrant and make it MASS-PRESTIGE (Masstige) for the majority if they need to survive. Failing to comprehend this paradigm shift will have detrimental effects on certain brands.
Therefore, when it comes to positioning of brands in the minds of the consumers, marketers need to be extra-careful as positioning high-end might end up pushing your brands to the center of the quadrant and the effort directed behind brand building will go down the drain.
However, understanding Porter’s Generic Strategies will help brand marketers to decide on the position that the brand needs to occupy in the market which will very much be a point that needs to be taken in to consideration in positioning a brand.
(TBC next week)