1.1.3 Market positioning

Question 1

What is market positioning?

Answer 1

When a business launches a new product or service, it is the decision of where it is going to be positioned in the market regarding its price, quality, branding and customer perception.

Question 2

What is market mapping?

Answer 2

A tool for identifying the position of a product within a market.

Question 3

What is a market map?

Answer 3

A two-dimensional diagram that shows the attributes or characteristics of a product in comparison to rivals’ products.
Only two criteria can be chosen.

Question 4

What is a saturated market?

Answer 4

This means that there are no opportunities to exploit a market niche in the market.
Competition is likely to be high and profits low.

Question 5

What are the advantages of market mapping?

Answer 5

• Market gaps can be identified which may enable a business to come up with ideas for new products.
• Comparisons can be made between a business’ products and those of its rivals.
• Market maps are simple to construct and offer a visual illustration of the position of a product in the market.

Question 6

What are the disadvantages of market mapping?

Answer 6

• A gap in the market may exist because it is not profitable to fill.
• Mapping a market may require primary research which can be expensive.
• Only two criteria can be chosen which may prove too simplistic.
• Markets are often dynamic and a market map only provides insight at a specific point in time.

Question 7

What is a competitive advantage?

Answer 7

The features of a business and its products that are perceived as superior to its rivals by customers.
It is how a firm’s product is distinctive and defensible.

Question 8

In what ways can a firm gain competitive advantage?

Answer 8

• Innovation, reputation (branding).
• Building strong relationships with stakeholders.
• Adding value.
• Differentiation.
• Market segmentation.
• Price leadership.

Question 9

What are some of the sources of businesses competitive advantages?

Answer 9

• Quality
• Delivery times
• Low price
• Reliability
• Ethical stance
• Design

Question 10

What is product differentiation?

Answer 10

An attempt by a business to distinguish its products from those of competitors.
This involves creating functions or features of the product which help it to stand out from its competitors.
Strong product differentiation helps the firm develop its competitive advantage.

Question 11

How does successful product differentiation help the business?

Answer 11

• It increases demand for its products.
• It increases brand loyalty.
• It allows the business to charge higher prices.

Question 12

What is added value?

Answer 12

It is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service.

Question 13

What are the methods of adding value?

Answer 13

• Marketing and branding
• Functions and features
• Packaging
• Customisation
• Customer service
• Convenience
• Design
• Product differentiation

These methods allow a firm to charge a higher price for its products, thus increasing the added value.