January 12, 2023
Messaging

Product positioning: What is it and how to create a moat

Learn everything you need to know about this essential marketing strategy.

Early in April Dunford’s career, she grew a scrappy startup CRM Janna Systems from $1 million to $70 million+ in under 18 months.

Her marketing team didn’t use misleading sales tactics or corporate growth hacks. Instead, they focused on improving their product positioning. 

Product positioning helps you to focus your marketing efforts on telling stories that resonate with your target audience and speaks to their needs.

In this article, we’ll examine what product positioning is, how to use it to capture the attention of customers, and examples of brands who nail it.

What is product positioning?

Product positioning is how you clearly communicate who your product is for, why they should care, and how you’re different or better to your competitors. It answers the question “how can you help me, the customer, to solve my unique problems and challenges?”

You can have an incredible product, but without strong positioning, nobody will care. If you’re not targeting the right customers and your product doesn’t offer differentiated value, your product won’t sell. 

Product positioning defines:

  • How your product or service differs from the competition
  • Why it solves your target market’s pain points and why they should care

It’s not the same as messaging, it’s not a simple tagline, it’s not a brand’s story or vision or a company’s “why.” 

Product positioning defines how your product solves a problem a specific customer set cares about.

For example, Janna Systems started as an Enterprise CRM solution, competing with Siebel. When the sales team called prospects, potential customers would ask, “how are you better than Siebel?” But they weren’t. They lacked the features, and budget Siebel amassed. 

As April Dunford says, 

They were 8000 employees with 2 billion in revenue. We were a tiny little startup with 30 employees and $2 million in revenue, but we were going to take them on. And so we said, we're an enterprise CRM. So if you're bigger than a certain number of users, you would come and use our CRM. 

After landing a deal with a high-profile investment bank, Janna Systems pivoted. The differentiating feature of their product was that companies could glean insight into interpersonal relationships.

Janna Systems didn’t have features like call scripting or automatic issue escalation, but investment bankers didn’t need them. 

Instead, Janna Systems:

  • Defined how their product differed from the competition: sales teams can use the interpersonal data to start new sales conversations and understand who may influence a deal;
  • Identified why it’s the best option for their target market and why they should care: competitors don’t offer this feature, and it speaks to the relationship-building problem investment bankers have.

Effective product positioning gets to the heart of customer desires and fills a market gap. Ineffective product positioning uses vague language that doesn’t communicate why your audience should care.

Do away with your positioning statement

Brand positioning statements assume a company knows exactly what market category they fill, what they do, and the value they provide in comparison to competitors. 

You can use a framework like this to help you:

Our product is a [market category] that does [unique feature], which enables customer value] for [target customers], unlike [competitors].

Statements assume there’s only one answer to these blanks, but most companies have many target markets with the potential for product positioning to cater to them. 

For example, if your product is a social media management tool (market category) that automates publishing workflows (unique feature), enabling customers to save time posting content manually (unique value) for small businesses (target customers), unlike Later and Hootsuite (list of competitors), you’re assuming your product only solves one problem for one core customer group. 

This statement doesn’t uncover features that resonate with other target customers. For example, you may have a reposting option that enables customers to reuse old content—a feature that your audience of  social media consultants find most useful.

Positioning statements pigeonhole your company as one thing for one group when there’s the potential to be many things for several targeted market segments. 

To find the best positioning for your product, start with April Dunford’s five-component framework: 

The five-component product positioning framework

Five key components comprise product positioning: 

  1. Competitive alternatives: what customers would use if your company didn’t exist;
  2. Unique features: what features your company has that your competitors don’t;
  3. Value: what value do customers get from your product;
  4. Target customers: who cares about your product’s value;
  5. Market category: the market your company intends to win.

The first step isn’t to answer each component and call it a day. It’s to understand that each component is additive..

Positioning Workflow by April Dunford
A breakdown of the product positioning workflow.

1. Competitive alternatives: Understand your product through the lens of customers

Start by uncovering why customers choose you over competitors.. Identify raving fans, lifelong customers, and advocates.. What do they love about your offer? Why do they get value from it? How does it improve their lives, businesses, workflows, etc.?

Use Sean Ellis’ product/market fit survey template to identify your devoted customers. From their responses, pull out reasons why they like your product and find out what they’d do if you didn’t exist. What does your company have that the competition doesn’t? 

Consider review mining to answer these questions. Source this from sites like Capterra, reviews on YouTube, product demos, customer service chats, and more. 

For example, investment bankers used Janna Systems for its relationship-building abilities, so it became a CRM for investment bankers.

The more you understand why customers continue to buy from you and use your product, the more customer-centric your product positioning becomes.

2. Key unique attributes: Define the unique features offer differentiation

With customer insights at hand, you can start identifying unique features and make them the focus of your messaging.

For example, Slack came into the communication tool market with competitors like HipChat already dominating the space. Slack realized it had to set itself apart and did so by positioning itself as a productivity enhancer, integrating with thousands of other applications.

Not only did they leverage the audiences of the brands they integrated with, but built their reputation by simplifying workflows and company communications: 

Screenshot of Communication Tools

For other Slack customers, they switched from their competitors because Slack offered multiple company account logins. Instead of manually logging in and out of various accounts, users could seamlessly toggle between accounts, making Slack the best tool for freelancers and other business professionals requiring multiple accounts. 

If you were Slack in the early days, your features list might look like this:

- Offers thousands of integrations for customers
- Allows multi-account logins
- Asynchronous messages

What features or capabilities do you have that your competitors don’t? The answer to this question guides your feature list. 

Once you write your  unique features list, examine how these features translate into value for your customers. 

3. Value: Let your features guide your uniqueness

The unique capabilities you offer set you apart from the competition and give your customers a reason to choose you.

Whether it's the ease of use, the quality of your products, or the level of customer service you provide, the combination of your features sets you apart. It’s why your customers love you and why they choose to stay with you.

For example, with Slack’s features listed above, this would look like,

- Offers thousands of integrations for customers;
*Value: Instead of using Slack to chat, Dropbox to share files, and Outlook to send emails, integrations centralizes communications and insulates users from distractions.

- Allows multi-account logins;
*Value: Users don’t need to log out of Slack to access accounts from other companies, saving time and frustration.

- Asynchronous messages.
*Value:  Users can log out of the app, but their messages are waiting for them when they log back in, so they never miss an offline message.

Once you answer this question, you must determine:

  1. Who cares about your value?
  2. What are the characteristics of customers who resonate with this value?

4: Customers that care: Segment your customers who care most about your value

When outlining your customer segments, be as specific as possible. ”SaaS companies” isn’t specific enough. For example, company size will often impact how a B2B buyer evaluates tools. Without defining traits like company size, revenue, industry etc., you can’t tailor your messaging to meet the market’s needs. 

For example, Userlist employed April Dunford’s product strategy and came up with two segments that appreciate their individual features. They found two primary audience groups, “small bootstrapped companies” and “marketers at larger companies.”

Then, they linked each feature to the target market. Many small companies would find their offering most valuable. However, marketers at mid-market and enterprise-level organizations may find the lack of analytics offputting. Userlist found they’re the best fit for smaller companies who “just need to get the job done” with basic features.

Instead of job roles, they decided to use characteristics to describe each company:

- They’re small with very few team members to help implement strategy;
- They take a DIY approach; they either don’t have much money or if they do, that money is going elsewhere (e.g. product development, marketing budget, etc);
- They have to pick and choose wisely where to spend their time.
Screenshot of Positioning Spreadsheet
an example breakdown of Userlist.com’s product positioning market research. They linked their target demographic to their features.

Begin by listing your features. Link each to a customer segment that cares most about your product. Define their industry, company size, and/or job title. 

For your example, a unique feature could be “extracting important data from Word, PDF, and image files.. Who cares about data extraction from Microsoft Word or PDF files?

If it’s office administrators or bankers, break it down further, e.g. ”office administrators with immense filing needs at large companies.” Get as specific as possible.. 

5. Market you win: Give your product context by finding its top category

Product context determines the success of your product.

For example, Janna Systems started as a CRM for enterprise clients. Siebel, their competitor, was also a CRM for enterprise clients. This product context (CRM for enterprise clients) deadlocked Janna Systems with Siebel, a competitor 1,000 times the size, with dozens more features. 

This context also meant that prospects continued to compare them to their outsized competitor. Leads would ask, “well, what makes you different?” 

When they discovered their product resonates best with investment bankers, they changed the context to a “CRM for investment bankers.” Within the CRM for bankers niche, they weren’t trying to beat Siebel at their game. They reinvented the context by stepping into a different arena. 

Adjusting their context grew revenue from $2M to $65M in under 2 years. 

Once you understand who values your product, you can use this to craft the context around your messaging. 

Your product is only as successful as the context surrounding it and your flexibility to pivot when faced with challenges to your initial context. 

6. Message testing: Understand how well your product positioning resonates

Once you identify all five components of your product messaging framework, test how your messages land on your target audience so you can uncover any areas to pivot, further informing the success of your product positioning strategy. 

Tools like Wynter put your B2B marketing messages in front of your ICP. This helps clarify your product positioning by providing insights on:

  • What your target customers need and how they think;
  • How your marketing and product messaging lands on them.

Marketers traditionally track KPIs like conversion rates, click-through rates, and CPA (cost per acquisition) but the only way to know if your messaging works is to test it. 

For example, Wynter tested Loom’s messaging against a targeted panel of product directors. Although Loom has more than 1.1 million users, its target customers failed to grasp its unique features and value through its website’s product messages. 

Phrases like “record quick videos of your screen and cam” confused some product directors, making them wonder if they could only record a portion of their screen or the entire desktop. Others were confused about the pricing model–is it a monthly subscription? Free? 

Wynter reduces friction in the buyer journey and offers pointed solutions for companies to fix any messaging problems. 

Product positioning is key, but this can only be established by understanding how your message resonates with your customers.

Successful product positioning in the B2B space

Let’s break down examples of how two B2B companies successfully position their products. 

1. Docparser: Customer insights

Screenshot of Docparser Homepage

Moritz Dausinger founded Docparser long after its sister company, Mailparser. Launched in 2014, Mailparser extracts data leads, ecommerce orders, and reports contained inside emails and sends them to other applications. When growing Mailparser, he saw a demand for companies wanting to extract data from PDFs.

Although both products are similar, Mailparser didn’t offer this capability, and Dausinger’s team couldn’t rebrand it as Docparser requires different tech and has distinct use cases. So, he developed a separate product dedicated to PDFs.

Dausinger used Docparser’s initial launch to gain feedback on the product’s usability, applying that knowledge to continually improve the product. 

A year after launch, Docparser signed hundreds of businesses to its service and is now more successful than its sister product. 

Listening to your customers' needs allows you to create products that meet their needs and expectations. It reveals  what your customers want, which can help you correctly position your product to attract new customers and grow. 

2. Lattice: Competitive pivoting

Screenshot of Lattice Homepage‍

In five years, HR platform Lattice grew to a company of 240 people with $21 million in ARR, nearly doubling YOY. 

Lattice started as a goal-tracking company with OKR-based features. When Alex Kracov, the Founder of Lattice, wanted to sell the product, his team kept hearing about an upcoming trend in an adjacent space around continuous performance management. 

At the same time, HR shifted from traditional annual performance reviews to a continuous feedback model. 

So, Kracov pivoted the product from OKRs to developing a system that enabled managers to give tailored feedback to employees. 

Their competitor at the time, Reflektive, offered continuous performance management, so Lattice modeled their product after theirs with a focus on better design and user experiences.

In Kracov’s words,

We really believe that you need to build something that employees and managers love to use, not just build for the HR persona. So that's the early story of how we built the product and tried to differentiate it.

Their competitors failed to invest in the design interface, so Lattice stole their customers. 

Lattice started as one thing (OKR tracking) and quickly pivoted once its target market expressed a need for a different product type.

Your product starts with positioning 

Product positioning focuses your efforts on your target audience’s values and needs. To position your product correctly, start by outlining the features (or combination of features) that differentiate you from your competitors. Map these features to the value of your product and determine who cares about it.

Once you identify your target audience, decide on the best context to position your product in relation to the market category. As each aspect of this framework builds off of one another, you must complete these steps in this order.

By focusing on your target audience’s values and needs, you can create product positioning that is both appealing and differentiated from the alternatives.

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