Product positioning: Key tips and common mistakes

In March 2021, B2B tech consultant April Dunford spoke with MaRS about product positioning. This article results from that conversation and is the first of a two-part series.

MaRS: What comes first — product or positioning? Can these grow side by side, or does one need to be developed before the other?

April Dunford: Here’s the way I like to think about it. When we are in the concept or development phase of a product, what we have is essentially a positioning thesis: We’ve done our homework, we’ve interviewed potential prospects and we have a set of assumptions. We say, “I assume these are my competitive alternatives, I assume my differentiators are that, the value is this, these are the people that are going to love my product, and this is the market I’m going to win.” But these are just assumptions at this point — they haven’t been validated.

We build the product with these positioning assumptions baked in, and then we release it to the world and see what happens. At this point we are trying to validate our assumptions, and in my experience, our assumptions are generally at least partially wrong. What we have to do then is adjust the positioning. After we have worked with an initial set of customers, and once we start seeing some patterns in who loves our stuff and why, then we can really focus on tightening up the positioning.

To answer your question, I think it’s okay, in the early stages of a product coming into market, for your positioning to be a little loose. Once you start seeing patterns and once you’re past the first wave of customer adoption, then you need to be ready to really tighten it up, so you can target the kinds of customers who you know are a really good fit for your product.

MaRS: What do you see as the biggest mistakes companies make when developing their product positioning?

April Dunford: There are two common mistakes I see.

The first mistake companies make is that they don’t think about their positioning at all. Many folks fall into kind of a default positioning. It often goes like this: The founder wakes up one morning and says, “You know what sucks? Email sucks. I’m going to make better email.” And they do that. They get it in the market, and customers either love it or don’t love it, and the company makes a few changes based on that feedback.

Fast-forward a few years, and this email product, well, maybe it looks more like chat or maybe it looks more like team collaboration. But the founder doesn’t see it that way, because what they set out to build was better email. They never really considered that there might be a different way to position the product.

So mistake number one is falling into this trap of default positioning and not really constructing it deliberately.

The second mistake I often see is not considering the full set of competitive alternatives to your solution from a customer’s point of view.

In my methodology, one of the first steps in this process is to look at the competitive alternatives and figure out how to make sure customers understand that you’re different and better.

The mistake folks make when they’re looking at competitive alternatives is that they often only consider direct competitors — meaning other software solutions that look just like them or the other technology that looks just like theirs. But from a customer perspective, there are often alternative ways of solving the problem that look nothing like your solution.

In B2B software, for example, we’re often competing with things like spreadsheets or interns or pen and paper and manual processes. The research shows that, on average, we lose 40 percent of deals to “status quo.” So our positioning has to not only position us against software that competes directly against us, but help customers understand why they should choose our software over a spreadsheet or an intern or manual processes.

MaRS: When should a company re-evaluate or shift its product positioning? What are the downstream signs that there may be a need to reposition?

April Dunford: It’s a really good thing to understand that positioning is not a set-it-and-forget-it exercise. Positioning generally shifts over time.

It shifts because you will add new features into your product. It shifts because the competitive landscape changes as new players enter the market or as mergers and acquisitions take place. Sometimes it shifts because customer attitudes evolve and what was valuable to them last year is not valuable to them this year. And sometimes you have outside forces you couldn’t predict, like a change in government legislation or COVID-19, that change how customers run their businesses, and this impacts your positioning. Positioning is a living, breathing thing that often needs to be adjusted over time.

When I was a vice-president of marketing, we would review the positioning on a regular cadence every six months. We’d sit down together as a team and see if anything had changed since the last time we looked at our positioning. Specifically, we’d look at whether the competitive alternatives had changed — were there different competitors in the market than six months ago, or was anything else different? And then we would look at our own differentiated capabilities and question whether they were the same as six months ago. Had we added new things, or had our competitors caught up to us? In some cases, a differentiating factor six months ago might no longer be a differentiator because your competitors have matched you.

This regular check-in allowed us to assess whether our value proposition was the same as six months earlier and whether we were still a good fit for the same customers. We scanned for early warning signs rather than waiting for a more serious situation to develop.

If you do this process and find something in the mix has changed, then it’s likely you’ll want to go back and adjust your positioning given the new set of inputs.

MaRS: What sales data and metrics are useful to help develop product positioning?

April Dunford: I wish I had a better answer for this one. Weak positioning impacts your entire marketing funnel. In the early stages, you will find you are attracting prospects that are not your best fit. Once prospects are in the funnel, weak positioning will often result in customers scratching their heads, trying to figure out what you really are. This means your deals close slowly. Later you will see customers asking for discounts because they don’t really appreciate the value you can deliver. And lastly, you will often see high churn as customers discover your product wasn’t really what they wanted and they find something else that’s a better fit.

If you have a sales team, the most common symptom of weak positioning can be heard on a first sales call with a customer. You will see customers asking questions as they try to figure out how to categorize what you do. You will hear them attempting to compare you to businesses you don’t compete with. Often you will hear them asking questions like, “So what are you again?” or “I get this, but I’m not really sure how it’s different from what I’m doing right now.”

If you have existing very happy customers and yet still have very confused customers in the early stages of a sales process, that could be a sign you have a gap between the reality of why customers love you and the way you are representing your product to new prospects.

Product positioning: Further resources

• Product positioning: Stress your unique value (part 2 with April Dunford)
• Positioning: What it is and why it matters
• Product positioning and positioning your startup: Customer creation stage
• Product positioning and positioning your startup: Customer validation stage
• Positioning: Creating an image of your product in your target customer’s mind