Aug 232011
 
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Positioning – It’s Easier To Reach Down Than Up

When you are positioning your company and its products and services in the market, remember that it is “easier to reach down than to reach up”.  Here we’re talking about your business, but for anyone who has ever painted a wall or ridden on a subway, the “reaching up” metaphor will work well.  Trying to keep your arms above your head for any extended period of time is a lot harder than reaching straight out or downward.

So what does this mean in the context of your business and how you try to position yourself in the marketplace?  Let’s take a simple example.  Let’s say that you are starting or running a business where you help companies manage their social media marketing and communication efforts.  Do you position yourself as a Facebook expert?  As a Twitter and Facebook expert?  As a Social Media Manager?  Or as a Social Media Strategy expert who also has a team that can provide day-to-day social media management services on various platforms?  This list of service description options could go on and on, of course, but the point I want to get across here is that in most cases it would be better to position yourself at the high end “strategy” level, then be able to “reach down” into all the other “mundane” activities.  If instead you simply position yourself simply as an expert in Twitter, for example, it will be much harder to then try to make the argument to prospective clients that you were a “social media strategist” capable of advising on the big picture (in other words, “it’s harder to reach up”).

Let’s look another example of how positioning yourself at the higher end of the marketplace can also have desirable collateral benefits.  Let consider the example of the “strategy consulting” business.  The three major players in this business for years have been McKinsey & Co., Boston Consulting Group, and Bain Consulting.  These companies position themselves as having the best and the brightest talent on their consulting staff and they leverage that position in the marketplace to charge clients multiple million dollars minimum, per engagement.   Strategy consulting is considered by many to be at the pinnacle of business consulting, as it deals with the highest level questions of where best to lead the company for optimal growth and profitability in the future.  It deals with high-level business strategy questions that really relate more to leadership than to management.  These strategy consulting firms work with the senior leadership of the company to come up with strategic options, but just about all of the execution risk is on the management team of the client company.  Because they’ve positioned themselves at the high end of the market, they are able to charge much higher fees than the “lower level,” more execution oriented management consulting firms, and for this reason, they consistently rank among the most profitable advisory firms in the world.  In this case, instead of saying “it’s easier to reach down,” you could say “why reach down, when you’re already up”.

The main point here is that how you position yourself in the marketplace, or in other words, the image you create for yourself, can have significant implications not just in terms of how profitable your company is, but also in terms of your flexibility if at some point you’d like to extend the products or services you offer.

Automobile companies can serve as an excellent example of positioning and how it’s often easier to reach down than to reach up.  They can also serve as a good study into how sometimes it’s better not to try to reach either down or up, but rather stay within yourself and the brand you’ve created.  Let’s take Toyota for example.  Back in the 1970’s oil crisis, they entered the U.S. market in a big way with small, fuel-efficient cars that were perfect for the economic environment at that time.  Their cars did not, however, have a good reputation for quality during their initial foray into the market.  They had a reputation for “rusting out,” which led to an overall poor perception of their quality.  This is something they were able to change over time and ultimately, they created one of the most successful car models of all time:  the Camry.  Using this as a foundation, they were able, over considerable time, to beat the odds and “reach up” into producing higher-end cars with more of a perception of quality.  When they decided to produce true high-end luxury cars though, rather than trying to “reach up” even further, they launched a new brand called Lexus, which they’ve been able to build into one of the preeminent luxury auto brands.  Within the Lexus brand, there are now several car models, but all of them are of the luxury variety.  In other words, given the position they’ve achieved in the market with this brand, they’re now not trying to reach either up or down, except within very tight limits.

Most small businesses don’t have the luxury of thirty or forty years to launch various brands and models of their offerings.  Usually, given limited resources as a small business owner, you need to target a particular position in the market and stick with that position.  If you are in such a situation, my advice in most circumstances is that you should try to position your company and your offerings at, or at least toward, the high end of your particular market.  By doing so, you typically will still allow yourself the flexibility to “reach down,” if and when you may want to in the future, and in the meantime, you should enjoy better profit margins playing at the higher end of the market.  If you start by positioning yourself at the low end of the market, however, it will be a lot harder to make the climb to the high end.  Every situation is unique, of course, and sometimes there’s a great argument for targeting a particular niche at the low end of the market and positioning yourself as the preeminent provider in that space.  In my experience though, that’s not typically where you want to start.

How have you positioned yourself and your company’s offerings?  Have you limited your upside unnecessarily?  Take an honest look at what you’re doing and consider whether you may be able to position yourself at the higher end of the market where, unless you’re doing very large sales volume, the bigger profits are usually made.

I look forward to your thoughts and comments.  Leave a comment below or in the top right corner of this post.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com.

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  • Paul Mudd

    A very though provoking and helpful article. Thank you.

  • This is an excellent article. These are issues I have been struggling with. Thank you for the wisdom and clarification! Well done, Paul!

  • Thanks for your comment, Paul. I’m happy you found the article helpful and thought-provoking. Paul

  • Hi, Vena. I’m happy you found the article helpful! Don’t feel alone, as positioning is an issue that almost all entrepreneurs struggle with at various stages of their venture’s growth. Paul

  • Zbig Skiba

    It’s also important not to reach too far up too quickly. If your firm’s expertise and experience is purely technical, then it is unlikely that you’ll be successful in reaching for strategy right off the bat. You can always reach another level higher. Toyota did not start in the U.S. marketplace with a luxury car where they had not experience, but with a gas efficient car that met the existing needs of the marketplace. They then reached up higher and higher over time — the reliable Camry, a entry level luxury Lexus, and finally into the high end luxury car market.

  • Agreed. Your point is well taken. It can also be dangerous to reach up too far, too quickly. It depends greatly on the particular business you are pursuing, what you’re bringing to the table, and the maturity of the industry and competitors. Thanks for your comment. I think it’s an excellent positioning caveat.