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On targeting and positioning

Raymond Loohuis: The importance of targeting and positioning as the step that follows from market segmentation.
How to select the best market for exploitation of your business idea, and how to be different from other competitors. Based on a clear overview of possible market segments, now it is time to focus on targeting and positioning, an important step for any startup to become successful in the marketplace. But let me first explain what targeting and positioning is. Targeting refers to the judgement of a startup, which markets to select for further exploitation of a business idea and, also, which ones to be ignored.
Positioning refers to the way a startup distinguishes its value offer from competitors in the eyes of potential customers in a selected target market. This may sound quite abstract, so let me give you an example of two airlines.
Look at these pictures. easyJet targeted a market of business and private customers with a low budget but also with basic service requirements. And therefore, easyJet positioned themselves with other airlines offering more or less the same service levels. In comparison, KLM targeted customers who have a relatively high budget but also higher service requirements. And consequently, KLM positioned themselves next to other airlines offering more or less a similar service level. At the surface, both airlines offer the same service, which is travelling from A to B. But it added extra services linked to customer service requirements that makes them competing in different target markets.
So in contrast to what commonly is assumed, the number of competitors in a target market is relatively small, yet it does not imply that it becomes easier.
Therefore, to truly distinguish yourself as a startup, it is important to understand how you are positioned next to the competitors who compete for the same customer needs in your target market. A thorough understanding of these needs and competing offers is especially important for startups because they oftentimes lack corporate or brand value and so must truly compete on the merit of the promise of their products and services. Consequently, it is of crucial importance that a value proposition should make clear which products or services are offered and how they link to solve specific customer needs in the selected target market.
Before you determine which value proposition for which target market to pursue, there are a few very important criteria that need to be taken into consideration. First, the target market should be distinct enough, meaning that it should clearly differ from other segments. This is, perhaps, more obvious for long-established markets, such as the airline industry, but far more difficult to establish in emerging markets due to the relatively low number of customers as well as need uncertainty. Second, a target market should be accessible, meaning that they can be reached through appealing promotional programmes and channels. Starting an airline, for instance, would imply that one needs to take into consideration the regulations, common business practises, and the route to the market.
Startups must also take into consideration the lock-ins and switching costs that customers endure to change over to your solution, even if your value proposition is more promising than the ones of established players. Third, a target market should be measurable so that market performance, at least when your business excels over time, can be monitored. Finally, a target market must be profitable, meaning that it should become substantial enough to provide a solid revenue stream over time to cover the initial investments and costs.
In sum, the ways startups engage in targeting and positioning is very critical not only to increase the odds of crossing the chasm successfully, but also to become a serious and established player in your target market over time.

In this video we discuss the importance of targeting and positioning as the step that follows after market segmentation.

For an entrepreneur or startup, this is probably the most critical step in developing the venture because now choices must be made about which markets to serve and which ones not.

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