Many think, erroneously, that strategy means having a vision, mission and values or strategic statements. And, although strategy can, and should, include statements that clarify the north and purpose of an organization, I very frequently see “strategies” based on nice sounding phrases that clarify very little and tend to sound like what other companies publish as their strategy.
The key to having a good strategy lays in positioning. And positioning may be hard to understand. Positioning is the offering of specific products and services for a clearly defined set of clients. Positioning us usually thought of in terms of pricing, whether its premium or low prices. Brands such as Fendi, Louis Vuitton and Cartier charge higher prices because they are considered premium or luxury items, while companies like El Machetazo, Walmart and El Costo are recognized for their consistently low prices. But positioning goes beyond this, considering clients and the value given to them.
To choose a good positioning, we must define two things:
- Who will we serve and what are their needs
- What products and services will we provide (and what won’t we)
If the answer to these questions produces a unique value proposition that is significantly different from that of our competitors, then we will have a good strategic position.
- Clients and needs. Knowing who you will serve is key. Defining your customer can be done in many ways. You can define clients based on demographics (age, gender, income), geography, tastes, and preferences, among other things. Identifying who we serve allows us to understand the needs of our clients in depth, and, consequently, serve them better. When there is no clarity as to who our client is, we end up with a group of overserved clients, who receive more than they need and therefore pay more than they wish, and a group of underserved clients who would be willing to pay more for additional products and services, and as a result, the company leaves money on the table. Let’s look at MINISO for example. MINISOs target market is young people, between 18 and 28 years old, that need practical, Japanese style home products. Of course, this does not mean that clients out of that age range don’t shot at MINISO, but this focus allows the company on the specific needs of the target group, helping them customize their offer and their activities to serve them better. Another example is Running Balboa, focused on the needs of runners. When we compare them to Sportline, which is likely to carry shoes for any number of sports, it can be complicated for a client to find the right shoe at Sportline because of the variety of styles and prices.
- Products and services. Choosing what products and services we’ll offer is important because, unless you are Amazon or Alibaba, you cannot offer everything. Having a limited offer provides focus and direction, increases product and service reliability, helps in quality control and aids in decision making. On the contrary, an ambiguous offer generates confusion inside the company, disorients and misaligns teams, hampers performance and deteriorates returns and results. Two examples. A well-focused Panamanian company is Orgánica. Orgánica offers organic consumer food products, and this provides clarity to the Orgánica teams about what products they should have in stock and gives customers a sense of what they can expect. On the other hand, we have a company like Gran Morrison, which offers non-perishable consumer products, but customers are not always clear about what they can find there. Defining a set of products and services my be a complex task. ¿What can we offer that is better, or cheaper or differentiated? ¿How do we limit our offer from the universe of products and services in our industry? We must establish clear limits that define what not to offer.
Given a group of products and services, and a target market, we need to question whether what we derive from it constitutes a unique value proposition. ¿How does it compare to what direct and indirect competitors offer? ¿Is this sustainable in the middle term? ¿Can we really say we are offering something others are not? If not, we need to be more incisive and get back to the drawing board.
Once we have a strategic position that generates distinctive value for our clients, it is key to review the value chain and map critical activities to understand and strengthen the areas that generate more value. It is important because your success will make competitors copy you but copying your value chain is harder. It seems Riba Smith has done just that. We could say Riba Smith focuses on families that need convenient, high-quality products. And to serve them better than others, not only do they bring unique products and provide delivery, but they have also developed a range of products of their own, doing backward integration to a point that is difficult for competitors to copy. They can try, but I suspect Riba Smith manages its value chain and core activities better than anyone in the market, and that thanks to that, they are more profitable than other grocery stores in the country.
Designing a clear strategic positioning is not as easy as doing a strategy workshop in one day and magically getting it. Many things must first be analyzed, including financial statements, competitors, clients, the industry, benchmarks, etc. After defining a clear target market and offering, comes an implementation process that takes time and resources. However, those who take the time to define and implement their strategic positioning are the ones that, consistently, make more than the rest.