After segmentation and market targeting the next important step in developing an effective marketing strategy is product positioning Product positioning refers to the Way in which an organisation sets itself apart in the market and how its products and services are perceived by the target market as a whole; this incorporates the concept of all stakeholders of the company.
To compete successfully in a target market, an organisation must have a form of differential advantage. Taking Porters work we know that this has to take one of three formats - cost leadership, differentiation or focus. Positioning is about the communication of the overall value proposition such that it creates and maintains this clearly to customers, thus creating a distinctive and ideally unique, place in the market for the organisation.
To be effective, the basic value proposition offered by an organisation must be something that is relevant to the target market, it must be differentiated from the competition and it must be sustainable and communicated clearly to that market. This aspect fits more closely with differentiation as a generic strategic option and this in part helps to explain the proliferation of brands, products and services.
Indeed differentiation at product, brandor corporatelevel, is now regarded as a key element of establishing asustainable market position. The differentiating variable may be actual-based on the physical attributes and features of the product, or perceived - based on the image of the product or the supplier; as is the case with many services. Differentiation may occur with different elements of the marketing mix; it may involve attributes which give customers more benefits than the competition; it may, for example, stem
from a unique brand image or superior service.