The Importance of Product Positioning for Startups

Setting yourself apart in the marketplace.

Leveraging behavioral science principles provides startups an edge in crafting product positioning that resonates deeply with customer motivations. By applying these principles, founders can optimize positioning based on insights into human psychology. I find inspiration in events hosted by @Irrationallabs that showcase behavioral science applications and how to integrate them into positioning strategy creatively.

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Introduction

Product positioning is a strategic process critical for startups to get right when bringing innovations to market. How a startup frames its offering can make or break customer adoption and ongoing loyalty. This article will provide founders with an overview of best practices in formulating an effective positioning strategy, from initial customer discovery through aligning with brand identity. Key steps covered include:

• Identifying target customer needs.  

• Analyzing the competitive landscape.

• Testing positioning with early products. 

• Leveraging behavioral science insights.

With a data-driven positioning strategy rooted in customer insights and aligned to brand essence, startups can craft compelling messaging that resonates with their audience and accelerates traction.

Understanding the Role of Positioning in the Marketing Mix

One of the significant decisions startups face is positioning their product offering for market entry. The final decision is challenging even when you conduct extensive customer discovery and competitive analysis and speak with fellow entrepreneurs and industry experts. In this post, I will talk about the pieces of information that you gather throughout the venture realization process and how to integrate this information into effective product positioning.

Before highlighting the steps toward optimal positioning, let's define it. A traditional definition of product positioning is determining a new product's position in consumers' minds. This positioning process includes an in-depth understanding of the marketplace and differentiating how your product differs from existing customer options. This understanding is then applied to communicate your brand's product image to customers. 

As mentioned in an earlier post on marketing mix, your product's position is the foundation for determining your pricing, promotional, and placement strategies. Positioning involves creating a specific image of your brand's product in your target customer's minds. This image must highlight the key benefits of your offering while demonstrating how it differs from competing solutions. The message must be compelling enough to move customers from interest to purchase to advocacy.

For positioning to be effective, founders must consider several critical issues. First, language and context matter. Founders must realize how they frame their product dramatically impacts the customer's mind. The words product innovators use and the context in which they place their products influence the lens customers use to compare and choose among all existing offerings.

Most startups think about their initial product in a restricted fashion, thus limiting their market potential. How you see the customer's problem versus how they see it almost always differs in the early stages. The same condition applies to effective solutions as well. Customers see issues, and associated solutions vary depending on the context in which they are experiencing their situation. You must understand their context and design and market your solution to match the customer's mindset.

Articulating the Target Customer's Needs and Context

The first step in this journey is to define the opportunity you believe exists in the marketplace. As a starting point, founders must ask an essential question: What is the customer trying to accomplish? At the highest level, you want to consider whether the customer is hoping to do one of the following:

• Solve a problem

• Fulfill a need or want

• Accomplish a specific task, job, or goal

You start considering the details once you have framed the opportunity in one of the above categories. First, you are trying to articulate what the customer is trying to do and in what context. For example, where does the effort occur if the customer attempts to accomplish a specific task? At work, home, school, etc., next, you want to identify any obstacles or challenges the customer experiences as they try to accomplish said task. Finally, in startup jargon, what are the customer pain points?

Opportunity Statement Template [In a box]

The opportunity involves helping [Target Customer] when in [Context] to [Solve Problem, Fulfill Need, Do the job, or Achieve goal]. In addition, the customer is looking to [Minimize or Eliminate Pain Points] for [Benefits or Outcomes] measured by these [Metrics].

Researching and Selecting Your Target Customer Segment

Early in the venture realization process, founders consider which customers they should target for early market entry. There are two criteria to ponder at this point. First, customers are actively looking for a solution, and second, those meeting the first criteria are most dissatisfied with current options in the marketplace. Based on these conditions, the founders develop and execute customer discovery and market research strategies.

Customer discovery is a critical part of your positioning journey. In the early stages, you focus on the customer's needs, pain points, and how they currently solve these challenges. During customer discovery, founders must focus on refining their understanding of what the customer truly values in a solution. As you work towards a future solution, you find that various segments view value differently. In other words, your value proposition will most likely vary across customers. As you prepare for customer interviews and surveys, you should focus on the customer's values in solutions they have experienced in the marketplace. Also, do they value something that is currently missing in current options?

To enhance your knowledge about what customers value, founders want to capture behavioral characteristics that align with how you perceive their expected value from an effective product solution. One of the best ways to develop this understanding is to listen to their experience with current products and brands. What they like and don't like in each product. Are there "must have" attributes that other brands possess or lack?

From a positioning perspective, you want to understand how your customers compare existing solutions. Why did they choose specific competing products? How do they describe the value in terms of benefits and product attributes? What market category do they perceive the competitors to be operating in? The same or different? The responses to these questions will help you decide later what market category you should see yourself in and who your real direct and indirect competitors will be upon market entry.

Once you start early product testing, you can continue to refine your customer segment. It is essential to keep your customer base narrow initially, targeting those that best represent those who truly value the benefits and features of your product offering. At this juncture, you want to stay as narrow as possible but broad enough to meet early revenue goals. It is a challenging balance, but it is crucial to get it right.

Conducting In-Depth Competitor Research

While founders conduct early customer discovery, they can also dive deeply into the competitive landscape. In the early stages, before you have settled on a solution for design and testing, you can take what you are hearing from your customer and then conduct a deep dive into the competitive landscape. The information from early customer engagement guides your thinking about how customers see competition. Again, this may differ significantly from your initial thoughts on the competition. However, don't give up on your initial assumptions about the competitive landscape. Research competitors from both perspectives. Customer input is precious, but you must become the domain expert on your competition.

You base your eventual decisions about positioning on what you consider your key differentiators. What does your product do best? Your competitive analysis aims to identify what aspects of your offer are different and better than existing marketplace options. As a starting point, founders should conduct deep research on the competing products in the market. Make sure to include both established and emerging opportunities. Next, list all the product attributes and features of these competitors. Next, compare the feature list to what your customers have identified as essential or missing. This comparison allows you to isolate the critical attributes that already exist and those that are missing. This analysis provides a clear picture of where you can be unique and better than existing options.

Later in your product design and testing stage, you can isolate these differentiating features and build them into your product. As you show your early product iterations to customers, you will solicit feedback on how they see your offer versus competing products to see the unique features shine through the noise. Listen carefully to how customers describe your product's characteristics and how specific features enable the desired benefit. At this stage, you may be considering many potential product features. At this point, this makes sense. You will begin to prioritize critical features during the MVP phase.

While early research provides initial insights into competitors, founders should take a more structured approach as they conduct an in-depth competitive analysis. This structured approach involves:

• Creating a database of direct competitors with similar offerings and indirect ones providing alternative solutions. Include critical details on product features, pricing, segments, marketing, etc.

• Analyzing competitors' business models across elements like value proposition, customer relationships, activities, resources, partnerships, costs, and revenue streams. This analysis reveals their strengths, weaknesses, opportunities, and threats.

• Identifying differentiation opportunities based on underserved needs, inferior features, lack of customization, etc., that competitors exhibit.

• Continuous monitoring of competitor product developments, marketing initiatives, and partnerships post-launch. This intelligence activity enables rapid response to competitive threats.

While founders conduct early customer discovery, they can also dive deeply into the competitive landscape. In the early stages, before you have settled on a solution for design and testing, you can take what you are hearing from your customer and then conduct a deep dive into the competitive landscape. The information from early customer engagement guides your thinking about how customers see competition. Again, this may differ significantly from your initial thoughts on the competition. However, don't give up on your initial assumptions about the competitive landscape. Research competitors from both perspectives. Customer input is precious, but you must become the domain expert on your competition.

One final consideration at this stage is to decide what industry and market will best communicate your value to the customer. This decision has become more challenging in today's marketplace as industry verticals blend into new emerging spaces. I have lost count of the number of founders who started their idea as being in one market area only to decide on a different one later. These standard pivots are because your product and the markets evolve. When you are ready to enter the market, your earlier thoughts on the positioning may no longer be relevant. Framing your offering in the right market is vital to your positioning effort. When you establish your business in a particular market, you alert the customer on how they should think about your product with other options. You tell your customers which products to compare you with, your key benefits, features, and pricing. These comparisons help tell your customers what you are all about and why they should consider your offer over others.

As you establish your marketing strategies, you will want to decide how to frame your business in the best market. The choice may be straightforward. Your product aligns with most of your competitors within the same market. However, you might consider identifying with an adjacent market. While the boundaries between markets can blur, you may want to place your business in a growing adjacent market. For example, you develop a new note-taking app. You can position it against other note-taking apps (a competitive space). Or you could frame your product as part of the knowledge management system market. Your customers now view your product differently, which may broaden your opportunities, making it more appealing to specific business customers.

Leveraging Early Testing to Refine Positioning

A chicken and egg scenario. What comes first, product or positioning? They influence each other. Your understanding of your customer's perceptions of competition, along with your research, shows where there are gaps in the market, benefits, and features missing or failing in some manner. This information drives your design focus. On the other side, once you have designed early versions of your product, you can solicit direct feedback from customers about how they perceive your value and how they compare it with the competition (and who they compare it with is critical).

As you plan to design and test an early product version, this is the perfect opportunity to learn how your customers see your offering. Founders should always plan how to engage the customer during product testing. In many cases, I suggest that before testing, you create questions that you want to ask during the testing period. To understand how customers perceive your product, you want to know what products they compare your offering. What alternative products do they have in mind? How do they see the differences? Responses to these questions help you to define what different and better means from your customer's point of view.

Once several customers have had a chance to experience your product, you can determine the best way to position your offer's unique attributes - features, and capabilities. With the information derived from your market research and direct customer experience with the product, you now know what product features and benefits to highlight.

Crafting a Positioning Statement to Guide Marketing

An important outcome of your MVP process is to work with your customers to develop proof that your product features drive the desired benefits in the customers' eyes. How customers validate the feature and benefit relationship allows you to articulate your position for marketing and branding purposes.

Many founders confuse the difference between features, benefits, and value. You must clearly define each and map how specific features enable benefits that lead to the value your target customer desires. At this point, I have founders create a table that maps out the relationships between specific features and the benefits enabled by said attribute. Additionally, you should consider how this feature-benefit relationship maps to the initial customer opportunity you selected early in the process. For example, does this product feature help the customer solve the problem or achieve the goal?

Once you have a clear picture of these relationships, you can consider how to communicate your position to your customers and the market at large. As founders consider their customer acquisition strategy, I suggest using a marketing mix framework, such as the Four Ps - Product - Price - Promotion - Placement. As discussed earlier, each of the four "Ps" is important and must work together. However, the first P, your product, is the foundational element. Formulating the product's position in the market drives your decisions across all marketing mix elements. For example, your product positioning determines how your initial target customer views your offer regarding product attributes, benefits, and value. Additionally, you want to demonstrate how your product meets these needs better than current market solutions.

At this point of the process, I think it helps to draft a positioning statement to help communicate to all stakeholders how your offer fits into the market. While there are potentially many applications of such a statement, I see it more as an internal document to support marketing and branding decisions. In addition, these statements ensure you are communicating your offer to the market effectively.

A positioning statement clarifies to everyone who is the target customer and why they care. The information must identify the market and product category that will be the primary competitive landscape during early product deployment. As part of this statement, you clarify how your product's unique features enable benefits vital to your target customer. Finally, you must describe how your product differs from current market options. Sometimes, founders integrate a specific core competency that supports the differentiating elements of the offer, thus telling the customer that this is the right enterprise to solve their problem.

Many positioning templates on the Internet help a founder get started. Below, you will find one I use in my classes.

Sample Template

For (target customer) Who (statement of need or opportunity), (Product name) is a (product category) That (statement of key benefit). Unlike (competing alternative) (Product name)(statement of primary differentiation).

A positioning statement looks like this:

• For (target customer or market)…

• Who (have a compelling reason to buy)….

• Our product is a (product's placement within a new or existing category)….

• That provides (a critical benefit that directly addresses the compelling reason to buy)

• Unlike (primary alternative source [that is, competitor] of the same benefit)

• Our product (key difference or point of differentiation to the specific target customer)

Aligning Positioning with Brand Identity

A startup's product positioning strategy should tightly align with its core brand identity. Rooting your positioning in your authentic brand essence allows you to spark deeper connections with target customers.

Ensure your brand pillars, personality traits, and origin story inform how you frame your value proposition and differentiation points. Reflect your brand's tone of voice, mission, and essence in your positioning language and messaging. For example, an eco-friendly brand should incorporate sustainability themes and social impact focus into its statements. Choose words and phrases that tap into the emotions your brand aims to evoke based on its personality.

Strategically apply visual components of your brand identity, such as logo, color palette, typography, and other graphic assets to reinforce your desired positioning. Incorporate these visual identity elements prominently into campaigns and materials to cue critical aspects of how you wish to be perceived. For instance, a startup aiming to be seen as bold and innovative could strengthen this perception by using visuals in their aesthetics that convey modernity and forward-thinking design.

As you expand your target customer base over time, evolve the positioning accordingly while maintaining alignment with your core brand identity. Consistent expression of your origins and heritage strengthens messaging and avoids fragmentation even amidst growth into new segments. Periodically re-validate that your essence permeates all efforts to optimize the enduring resonance.

Tracking Market Response to Optimize Positioning

Effective product positioning requires ongoing refinement and optimization based on market response data. Rather than finalizing their positioning just once during initial development, startups should continually track performance metrics and test variations to keep messaging resonant as market dynamics shift.

During MVP creation and initial sales outreach, systematically test alternative positioning statements and value proposition framing with target customers. Surveys, interviews, and focus groups conducted throughout development provide quantitative and qualitative data to identify which messaging strongly resonates with each customer segment.

Once launched in the market, closely analyze key performance indicators tied to your positioning. Monitor conversion rates, sales cycle length, churn, and other metrics. If results are unsatisfactory, revisit your messaging and value communication. Use techniques like A/B testing to iterate positioning based on real-world response rapidly.

Regularly monitor competitors' messaging updates, promotional strategies, and partnerships. Additionally, watch for significant shifts in broader customer needs, industry forces, or market expectations. If substantial changes occur, rapidly adapt and re-align your positioning to stay connected and resonant with your audience.

Continuously refine marketing assets, including website content, ad creative, email campaigns, and more, to better highlight your differentiated value using market response insights. Your messaging should evolve as you optimize it across channels.

Positioning Through a Behavioral Science Lens

Leveraging behavioral science principles gives startups an edge in crafting product positioning that profoundly resonates with customer motivations. Techniques based on psychology and behavioral economics allow founders to create messaging tailored to emotional triggers and cognitive biases.

Customers feel drawn towards products that tap into fond memories or associations from their past. Positioning a new offering as recapturing positive nostalgic experiences can help drive adoption. For example, an app that digitizes family photos could position itself as enabling customers to reconnect with cherished childhood moments.

How a product is positioned using positive or negative framing influences customer perception. A travel app may be framed as enabling seamless booking experiences versus reducing booking headaches. Testing both variants during customer research provides data on which style of framing resonates strongly.

Positioning a product as scarce, exclusive, or limited-time incentivizes urgent customer action. Playing upon scarcity triggers fear of missing out, which can boost early conversions. A launch promotion offering 50% off to the first 100 customers creates excitement to capitalize on the value.

Monitoring customer sentiment and emotional associations evoked by different positioning languages provides insightful data. AI tools can analyze responses to identify subtle differences in emotional resonance across phrasing variations. Startups can iterate messaging to optimize for desired reactions.

Incorporating behavioral techniques allows startups to develop emotionally informed, psychology-driven product positioning. Frameworks based on robust behavioral research can be continually tested and refined to resonate strongly with the motivations of target customers.

Why Product Positioning Matters for Startups

Keeping positioning in mind throughout the new venture realization process has many benefits. As a starting point, it forces the team to stay focused on customers' needs from the perspective of the customers themselves. Their needs, behaviors, and desired value should drive product design and deployment. Internally, a strong positioning statement provides a solid foundation for your marketing mix and branding strategies. It guides your promotional and brand messages throughout the sales process and should help shorten the time from initial awareness to purchase.

A strong positioning message makes it easier to explain your value to all stakeholders, starting with your customers. As you build a strong understanding of your product's position in the customer's mind, you will be able to attract the right customer to gain early traction in the market. Additionally, providing clear expectations of what value your customer will get should reduce churn and increase advocacy.

Finally, investors are interested in how you position yourself in the market. Knowing where your product fits in the marketplace helps founders stay ahead of trends and respond to market changes intelligently.

Conclusion

An effective product positioning strategy is vital for startup success, yet it remains an inexact science. This article aims to provide founders with a comprehensive overview of recommended positioning approaches and best practices. By deeply understanding your target customer needs through discovery, research, and early testing, you can identify precise points of differentiation and value. Analyzing competitors and the market landscape equips you to position yourself uniquely. Tight integration with your brand identity and essence helps craft authentic messaging that emotionally engages. Testing positioning variants informed by behavioral science principles allows data-driven refinement based on customer psychology. While positioning will continue to evolve, maintaining alignment with your brand purpose and customer problems will enable startups to develop product stories and framing that connect with audiences and drive adoption. With a dedication to continual positioning optimization, founders can propel growth.