The first step for any new business is to ponder how to occupy space inside a target consumer’s mind, which is called ‘Brand Positioning’. It can also be termed as a consumer’s perception of a brand with respect to competing brands.
Why does your brand need to enter his or her mind? If you ask a consumer to name a cola drink, ‘Coke’ name will spurt out. If you ask the consumer to name a toothpaste that comes immediately to the mind, most probably, Colgate name would pop out. If you ask about a photocopying brand, ‘Xerox’ name will spurt out. If you ask them the name of an energy drink, the red bull name will rush out. If you ask an Indian to name a noodles brand, most of the time ‘Maggi’ name would jet out.
Why do these brand names stay at the top of the consumer’s mind so that it can be recalled immediately?
Coke is the first cooldrink to enter the consumer’s mind under Cola category. Seven-up is the first cooldrink under the Un-cola category. Redbull is the first cooldrink under ‘energy drink’ category. Xerox is the first brand under the ‘photocopying’ category.
Being №1 in a consumer’s mind will help a business to grab a major market share and have a sustainable business. The above brands show that the easiest way to get into a person’s mind is to be first.
So, how can a business enter a consumer’s mind by being first? The business has to create a new category that doesn’t exist in a consumer’s mind.
What is the need for categories? Our human brains are wired for categorisation to help us remember things. Without that, we would be quickly overwhelmed by the vast amount of information.
Nicole Branan writes in ‘Scientific American’, “Picture a living thing — say, a dog. Now imagine a hammer. Thinking of a dog activates an area that deals with animate objects, whereas a hammer excites one that processes inanimate things even if you had never seen a dog or a hammer before”.
Whenever we come across new things, subconsciously, we would file them under different known categories in our memories. If a consumer sees your product, he would automatically file the product under a known existing category. The problem with this filing under the existing category is — your product would be filed several layers below the other products and the consumer would fail to recollect your brand name at the top of the mind. Example -Coke is the first product under the cola category. Pepsi is the second brand. Do you remember the third brand? Fourth brand? If you ask people, they may not recollect beyond two names. How many energy drinks can you name other than Redbull?
How To Create A New Category? -The new category should be based on the value offerings a brand can offer to the customer. For that, the company has to observe customers’ needs, desires, pains and choose value propositions that will solve customer’s pains and also match the business’ core strengths and core values. This is also called ‘Brand Differentiation’.
Michael Porter writes, “A company can outperform rivals only if it can establish a difference that it can preserve. It must offer greater value to customers or create comparable value at a lower cost, or do both”
We build a sustainable business by widening this differentiation and evolving the value propositions based on the changing needs and attitudes of customers.
BRAND POSITIONING OF WALMART
For fifteen years(Before Wal-Mart), Sam had been running a chain of independent variety stores in smaller towns. Those stores gave the revenues of $1.4 million by 1960s. Things appeared fine. But Sam felt otherwise. He and his team had been working very hard but the business itself appeared to be of limited growth. He could not push the sales beyond a limit. He felt that he had to find an idea with a better payoff for all their efforts.
“It takes all the running you can do, to keep in the same place.” -Through The Looking-Glass.
Research -Observe, Observe, Empathize — Sam visited nearby towns, did detailed research and found out that the future appeared to be headed towards ‘discounting stores’. He saw that some larger stores were doing revenues of more than $2 million from each store while his fifteen stores together generated only $1.4 million.
Sam, then visited more discounting stores all around the country and studied the concept in-depth. It was clear for him that discounting would go and dominate the market. “Buy it low, stack it high, sell it cheap” was the guiding principle of discounting.
Sam had only two choices — Stay in the variety store business which would be going to be hit hard by the discounting wave of future or open a discount store. He wisely chose the second option.
WALMART’S TARGET CUSTOMERS
Before positioning your business, we need to freeze the target customer segment. Focus on a particular need, work on it, make your product/service distinctive(Positioning) and dominate the market.
Sam thought a lot about the type of customers he had to target, where the competition would be weak and where he would have enough strengths to gain the market share. He had been running ‘Variety stores’ in small towns where the population was around 6000. Sam lived as one among his consumers in that small community. His everyday interaction with the people of the town gave him a sound knowledge of the User behaviour, their needs, desires, and wants. It was his strength. He pondered how he could apply that strength to the most promising opportunity?
Weak Market Forces — Sam observed every competitor in the discounting business. Kmart and other bigger retailers were not going to towns below 50,000 population. Other medium-size brands like Gibson did not go to towns below 12,000 population.
Nobody was ready to provide products at discounted prices to the people living in small towns. But people in smaller towns were well aware of the ‘discounting stores’ as they had friends and relatives in the cities and some of them had even visited those stores. The awareness was there.
Thus, Sam Walton decided to open Walmart stores in small towns having a population of around 5000.
Always Lowest Price — Having lived among people of smaller towns and having run fifteen variety stores for the last fifteen years in those small towns, Sam Walton figured out one major requirement from the customers. They always buy products from a place where it would be priced lower than other places.
At that time, retailers were selling products with higher margin — A retailer would sell a product costing 80 cents for $1.20. Sam, during one of his research work, found out that by pricing the product at $1.00, a retailer could sell 3 times the volume and the profits would be much higher. This tip changed Sam Walton’s idea about retail and his life. His motto became “We Sell For Less — 20% less than the competition”. Discount everything the Wal-Mart carries.
Customer-Centric — Sam learned the importance of ‘Customer Service’ while running the ‘Variety stores’ for 15 years in those small towns. In those years, he and his associates built a strong relationship with customers, who would keep coming back. Loyalty drove the business. The people lived there as a community and most of them knew each other well.
Sam wanted to extend the same concept of ‘Best Customer Service’ to Wal-Mart’s customers too. To provide the best service, he encouraged his employees to think and act like the customers. Even while arranging the merchandise, he would ask his employees to act as a customer and see how it would improve their experience.
Thus, Wal-Mart’s positioning strategy was ‘Low Price’ and ‘Satisfied Customer Service’ which included a Wide assortment of good quality merchandise, friendly service, convenient hours and pleasant shopping experience.
As per Porter’s definition of Strategy, Walmart was offering both value and low price to customers.
The above content is part of the following book.
AVAILABLE ON AMAZON -
References: Positioning: The Battle Of Mind by Al Ries-Jack Trout, Sam Walton’s ‘Made In America’.