Product positioning is the process of identifying the needs of different groups of customers and the extent to which competing products are perceived to meet customers needs. In other words, relating a product to the market is termed as ‘product positioning’.
It also includes activities like determining the market segments towards which major marketing effort will be directed on behalf of a product and suggesting methods to differentiate products from competing ones. Thus, the whole process is meant to bring together the market segments and products. The process can be used to retain existing products and services as well as to introduce new ones.
Thus, product positioning refers to targeting the product at specific class of customers or for specific needs. It determines the image of the product in relation to the rival products. The strategies used for this purpose are product differentiation and segmentation.
These strategies are often employed by the firms who want to engage in non-price competition in markets characterised by imperfect or monopolistic competition. Both the strategies involve financial investment in promotional programmes.
Product differentiation means making the product different in some manner from the competitive products. It is an important product strategy in a competitive market. A marketer cannot control the price of his product which is identical in all respects to the products of competitors.
Product differentiation can offer the following advantages:
(i) It helps in facing competition.
(ii) It facilitates some control over the price of the product.
(iii) It enables the marketer to create brand loyalty.
(iv) Awareness of differences in the product helps to boost the firm’s goodwill.
(v) It provides ideas for advertising.
However, product differentiation tends to increase the problem and costs of advertising and sales promotion. Firms with limited product line find product differentiation particularly useful.