Did you know that there is evidence that positioning your brand as “premium” is significantly associated with improving your startup’s outcome? It turns out that positioning your brand as premium or a value-added proposition for customers is associated improving your outcomes. This is because, in part, early on in a startup a premium positioning allows a substantially increased margin on what would be relatively low sales at the onset. This makes it more important than ever to focus on how your brand adds value to your customers above and beyond what other brands may perform. You need to focus on reasons why your comparatively new product or service is worth the premium price. Our experience resonates with this teaching. Premium positioning works and makes startups, all else constant, more likely to be successful.
Take a moment to think about an important point: it is incredibly challenging to compete on price versus existing players in the market. That is, choosing to compete on price is usually a recipe for disaster for startups owing to the fact that they will lack the volume to obtain substantial profit and they lack the economies of scale of larger competitors. They also lack negotiating power to bring down the costs from suppliers. Thus, competing on cost versus large competitors is a recipe for failure.
Consider how it would it would look versus a company such as Walmart, Target, or similar large distributor based on price alone. They are able to negotiate substantially lower prices from their suppliers owing to their expected volume of sales and positioning. These, and other economies of scale present in larger retailers, make competing with retailers in that vein almost impossible. Thus, we frequently recommend to new startups that they not focus on competing on price and instead compete on value. Again, competing on price decreases the probability that your startup will take off.
We usually support an innovative, sustainable, UNIQUE viewpoint as represented by the business model. If you can’t answer what your unique take on the business is, how this translates to a value-added situation for clients, and therefore why your product is a premium product, well, in our experience you are less likely to achieve the type of break-out success for which teams often look.
This and other interesting facts about startups and positioning will be discussed in future blog entries. I invite you to review Understanding Michael Porter, or a similar text, for thoughts on premium positioning and competition. It can be counter-intuitive for a startup to create, and work to maintain, a premium product. That said, it remains: premium positioning in startups seems to be associated with success.
For a nice example of a premium-positioned startup that has enjoyed considerable success, visit www.emergencysurgicalstaffing.com. This team focused on premium positioning compared to traditional locum tenens staffing models in Surgery. The positioning and value they add has allowed considerable success in their field.
Do you think premium positioning is worthwhile for your startup? Let us know in the comments field beneath. We’re always interested in a lively discussion about positioning in new startups.