What are the various kinds of markets in which you can sell your product? How do you determine which market is the right one for your product?
Positioning means establishing the context for the use of your product, and selling your product in the right market helps provide that context. For instance, if you sell a new snack in the “chip” market, customers immediately know approximately what your product will look and taste like.
Keep reading to learn how to target the right market and dominate it.
Targeting the Right Market
Positioning consultant April Dunford recommends that, once you understand your competition, your superior features, and which customer segments to target, you should target the right market. The right market is the one that provides context on how to use your product and that gives you the opportunity to dominate that market.
(Shortform note: Dunford doesn’t provide specific advice on how to select the market for your product that provides the right context on how to use it. In Crossing the Chasm, Geoffrey Moore advises that you won’t initially have enough data to know which market—or what he refers to as a niche—to position your product in. You must therefore first position your product as well as possible through a thought exercise: Think of your target customer (who you identified in the previous step) and consider in what scenarios they’d buy your product. This is, in essence, the niche you should enter (for instance, “high-end convenience store snacks”).)
You can try to dominate three types of markets, claims Dunford:
1. An existing market: Customers already know this market well and understand what defines a good product within it. For instance, in the chip market, consumers know a chip should be salty and crunchy and expect this from all chips. Small businesses shouldn’t try to win over an entire existing market—to create a chip more popular than Pringles, for instance. However, a large company could try to win over an existing market if the market is changing in a way that favors its product (say if the chip market is becoming increasingly health-conscious, and your company sells a veggie chip), or if there’s no existing market leader.
(Shortform note: If you were to succeed in dominating an existing market in the way Dunford recommends, you might even go so far as to establish a monopoly in the market. Dunford doesn’t discuss this specific possibility, but in Zero to One, Peter Thiel argues that creating a monopoly would advance the greater good. This is because monopolies, facing no stiff competition that requires them to minimize expenses and maximize profit, can dedicate resources toward improving the lives of employees and society as a whole. If you aim to dominate an existing market, it might be worth asking yourself if you’d feel compelled to give back to society if you achieve your goal and perhaps changing your aim if the answer is no.)
2. A subsegment of an existing market: Alternatively, if you’re a smaller company, pick a subsegment—an industry, region, customer group, or another factor—of an existing market you can dominate. Winning over a subsegment is easier than winning an entire existing market, and you’ll likely grow more quickly within that subsegment because happy customers will spread the word about your business within their small subsegment community.
(Shortform note: You might appeal to a subsegment of an existing market by differentiating your product. According to Alan Lafley and Roger Martin, differentiating means producing a product that’s special in the eyes of the customer—has a higher quality or more exciting branding, for instance. Brands can charge more for differentiated products because customers value them more highly than competitor products. You might therefore target the “gourmet” subsegment of the existing chips market by positioning your product as being for epicures.)
To win over a subsegment of a market, you must identify a customer group within the broader market that has an unmet need—for instance, people with a potato allergy who still want to eat chips. You must then prove that your product is better for your market subsegment than the leading product on the market within that subsegment. In our example, you must prove that your veggie chip is better than the existing potato-substitute chip that dominates the market.
(Shortform note: In The 22 Immutable Laws of Marketing, Al Ries and Jack Trout contend that you must not only prove that you’re a better product than the market leader, but you must also communicate to customers that you understand you’re not the leading product on the market. They advise this specifically to businesses that aren’t at the top of their chosen markets (because customers only buy from you when your messaging aligns with what they understand about your brand), but their advice also applies to companies in a subsegment of a market. You might acknowledge your subsegment position to customers by saying something to the effect of: “We know we’re no Pringles, but we offer something healthier than Pringles…”)
3. A new market: Creating your own market is extremely difficult but also has the greatest potential for you to dominate, claims Dunford. This style is hard to pursue because you can’t use existing market references to help customers understand what your product is: You need to educate them from the ground up about your product.
Here’s an illustration of this: If you position your veggie chip in the “chips” market, consumers will instantly understand what you’re selling (a salty, fried vegetable snack) because they understand what a chip is. However, if you position your veggie chip in a new “alternative dehydrated superfood” market, customers won’t understand your product because they don’t grasp and will need to be taught what an “alternative dehydrated superfood” is.
However, while creating a new market is difficult, if you succeed, you’ll be the dominating company in a market that’s set up to support your unique strengths.
(Shortform note: Al Ries and Jack Trout agree with Dunford that being first in a market means potentially big success. They elaborate that if you’re first in a market, customers will remember and reach for your brand more than newcomer brands and will continue to choose you even if newcomers offer better products. Trout and Ries would likely further argue that if you’re going to create a new market, you should start educating your customers about it immediately and not waste time trying to perfect your product before setting up the market. They feel that being first in a market offers you so many advantages that the quality of your product is secondary in importance. This approach might make creating a new market easier than Dunford thinks.)
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Here's what you'll find in our full Obviously Awesome summary:
- What "positioning" is and why it's so important for marketing
- Three common (and avoidable) mistakes marketers make
- A 12-step process that lets you position any product well