Positioning B2B Firms

Abstract: Though the concept has been around for over four decades, many companies do not understand positioning well or use it effectively. This is especially true of companies operating in business markets. Positioning is the customers’ perception about what a firm does, what it doesn’t and how it delivers products and services. It is their impression of what the company stands for.

Advertising is an appropriate method for consumer products. In B2B space positioning is created largely by the firm’s actions. A clear and specific impression creates customer preference. Effective positioning can help improve price realisation and profits.

First published in Business Gyan, India

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Srinivasan, Vice President of a large division of one of India’s biggest IT companies, lamented that his account managers didn’t convey to customers “what we bring to the table”. “They are unable to communicate a unified, single story about what we offer without narrating many examples.” This is an all too common affliction. When customers don’t know what to expect from a seller, when they can’t visualise what the supplier stands for, they treat offerings like commodities and drive a hard bargain. Is it any wonder business managers complain how difficult it is to make money in today’s fiercely competitive markets?

To clearly express what you bring to the table, you have to make tough choices about what your company stands for, what it does and what it does not. It may be more comfortable to leave things vague, but it doesn’t help a firm tell customers how they stand apart. Positioning is not about advertising. It is about what a firm does and what it doesn’t, how it does and what customers perceive it to be. Positioning is conveyed largely by the firm’s actions, especially in business markets.

In the 1960s Al Ries and Jack Trout wrote about positioning for the first time. They said a firm must create a specific impression in the minds of their customers. A well-defined image of the firm, or brand, ensures it rises above the clutter of communications in the market place. A clear association of the product and its benefits help customers make better choices. The resulting customer preference helps the firm extract better value and improve its financial performance. Simple?

Not so simple. Because creating a sharply defined positioning means you have to choose. If you choose one path, you can’t follow another. If your customers wonder whether your shampoo is positioned as anti-dandruff or for silky hair, they are likely to hesitate buying it.

Often, pursuing one positioning enables a company to develop a unique set of capabilities that is less effective for other positions. A marathon runner develops stamina from the highly efficient system by which her body transfuses oxygen from blood to muscles. A sprinter relies on explosive burst of speed from strong muscle groups in legs and shoulders. These distinct capabilities make a sprinter a poor marathoner and vice versa. The successful athlete makes a choice between sprint and long-distance running. Yet, both are great athletes and both sports have their fans.

In his 1996 HBR article titled ‘What is Strategy?’ Michael Porter urged companies to recognise that they need to make choices that are often mutually exclusive. He argued that distinctive positioning that creates competitive advantage is the result of trade-offs. Marketers who wish they could create an all-embracing position should heed Porter’s advice: “Strategy renders choices about what not to do as important as choices about what to do.” The strength to make such choices rises from a clear understanding of what the firm seeks and conviction in the effectiveness of the means to achieve goals. It springs from deeply held beliefs and values and an astute understanding of what customers cherish.

Sumaya HMX came to a difficult crossroad a few years ago. A small Bangalore firm, it engineers and installs customised ‘air-conditioning’ equipment for offices and factories. Unlike conventional air-conditioning, it uses water – no CFC – in a two-stage evaporative cooling process to reduce the temperature of ambient air. The cooler air is hundred percent fresh unlike air-conditioning. Their equipment consume a lot less power than air-conditioning. Use of water as the medium of heat exchange cools the air to a comfortable temperature and keeps it from getting bone dry. Vaidyanathan, the founder and Managing Director of the company, firmly believes a section of customers appreciate the quality of air his company’s environment friendly Ambiators produce.

In January 2003, Sumaya HMX was pitted against three of the largest Indian air-conditioning companies in the race to win an order from a large and reputed Bangalore company. The machine would cool the new cafetaria block that will stand adjacent to an office block. The customer’s engineering consultant had specified Sumaya HMX’s Ambiator. But one of the bidders who had air-conditioned the office block a couple of years ago offered a cheaper solution. They suggested that during mealtimes part of the airflow could be diverted from the office to the dining hall. Doing away with the need to install a full system enabled them to offer a lower quote.

The customer, who had earlier bought several smaller units from Sumaya HMX, promised Vaidyanathan the order if he would match the lower, barely viable, price. Vaidy recognised the customer’s name would be a prized testimonial. The bigger temptation was the large value of the order. It was roughly equal to the company’s previous year’s turnover. It was a difficult choice. In the end, he declined.

He wrote to the customer explaining how his products promoted responsible action towards the environment. Its hundred per cent fresh air output was healthy, unlike air-conditioning. He pointed out that the customer believed in the same values. Indeed, they enjoyed an excellent reputation as a responsible and caring employer. He asked if a few lakh rupees were not but a small price to pay for the issues they cared about deeply. The letter must have touched a chord. The customer bought.

Sumaya HMX’s Ambiator was positioned as an environment friendly, healthy – 100% fresh air alternative to conventional air-conditioning. That was the very reason its product was specified in the first place. To cut corners and reduce price would have diluted the position Vaidyanathan was assiduously building. To accept the lower price the customer offered would have been negation of the value they were creating. It was better to point that out before walking away.

Could it have turned out any other way? Of course! There was no guarantee the customer would not have plumped for the lower offer. Vaidyanathan felt it was better to decline than dilute his position by engineering a cheaper solution or, accept only a small share of the value that he was creating. Clearly, to this customer, Ambiator did represent value commensurate with the higher price.

Positioning is not merely about what you say in the media, or how you say it. It is as much about what you do. It is true that not everyone may be interested, but then it is not a good idea trying to be something to everyone. Bill Cosby, the comedian and an astute strategist summed it up pithily, “I don’t know the key to success, but the key to failure is to try to please everyone.”

Knowing yourself, what you stand for and who values you is the essence of positioning. It is easy to see why sound marketing strategy stems from wisdom