One: The idea of "positioning" (as written about by Jack Trout, Al Ries, et al.) strikes me as corresponding roughly to what Seth Godin calls a "lie" in All Marketers Are Liars. So "what's your position" is, IMO, roughly equivalent to Godin asking "What's the lie you need your customers to believe?" And one of the points that Godin makes is (paraphrased) "You can't beat your competitor by shouting their lie louder than them".
The idea is, if there's a competitor in space X, who "owns" the (position|lie) "we are the cheapest source of X" then you can't really just start screaming "No, we're cheaper than $COMPETITOR". Now you need to pick a different lie. It might be completely different "We have the most advanced and functional X" or it might be related to, but a spinoff from another lie, eg "We're just as cheap as $COMPETITOR, but our X lasts OVER FOUR TIMES AS LONG" or whatever.
This all seems to also tie into the stuff Steve Blank talks about when he discusses market segmentation. Are you going for the "low cost" segment, or the "best product" segment, or the "best overall value" segment, etc.
Of course, if you don't have competitors, your positioning is more about competing with the status quo. Now you need your customer to believe the "lie" of "I really need X because my kids will do much better in school if I buy it" or "This website will help me meet attractive members of the opposite sex" or whatever. In any case, there has to be something the customer believes about the world, that makes them (want|need) your product or service.
Again, I'm far from an expert on all this, but I recommend reading Positioning: The Battle for Your Mind by Al Ries, Jack Trout and Philip Kotler, Differentiate or Die: Survival in Our Era of Killer Competition by Jack Trout and Steve Rivkin, All Marketers Are Liars by Seth Godin and The Four Steps To The Epiphany by Steve Blank, if you haven't already. It's a lot to digest, and it'll probably take some trial and error and iterating, but it's not hard to get the basic principles down.
FWIW, since our products are all Open Source, I'm leaning towards starting out with more of a "lowest price" messsage, since my perception is that people expect Open Source products to be less expensive. But I think if we succeed, we can raise prices once we have more credibility in the market. For example, IIRC, Red Hat Linux was originally much cheaper than the alternatives, but - as I understand it - modern day RHEL actually isn't particularly cheap.
We'll see though. Part of it depends on if we can actually define a sufficiently unique market niche to be in a "resegmented" market. Our products touch on a lot of different areas, so we either have a zillion competitors, or none, depending on how you define things. This is why we're still struggling with this.
I think the million dollar question is how do you determine if a lie or a position will stick in the prospective customers minds? Regardless of what position you choose, you will be assessed against an incumbent. If your are going for Blue Ocean Strategy, even then you will be compared to alternatives and substitutes.
When you are on the whiteboard deciding which way to go, I am assuming you will be having set of positioning options; how do you pick the best one ? How do you make it more compelling or sticky.
You're right, that is the "million dollar question"! I wish I had an easy answer. All I can come up with so far is to go with your best judgment and iterate, iterate, iterate.
I mean, I could imagine doing some A/B testing and micro-benchmarking on a small scale, to get an idea of which message resonates best. But what I'm not convinced of, is whether or not the position that tests well on a micro level, will still hold up on a broader level.
Another note on the topic of "stickiness"... I've had several people suggest to reading Made To Stick which deals with that very issue. I haven't gotten around to that one yet though. Someday soon... :-)
Lets go back to where you said people expect open source to be low priced . I am assuming you want to "ride that position" but the questions that arise are (a)is that position exclusive to your company or is someone else also riding that low cost bandwagon (b) is that will that position translate to sales. I work as a consultant in the banking industry ; all managers I have worked with are wary of opensource thanks to a lot of misleading propaganda. So your position of low-cost wont work in this segment of the market; this segment of market wanst SLAs and support and extensive hand holding. Have you done surveys or had customer interviews to validate your position in your target market before deciding your position.
I came across this hurdle and tried using some surveys based on Amazon Turk but I ended up asking questions that were either leading or poorly phrased and got responses that did not clarify my dilemma.
I don't know that anyone in this space has really seized onto that particular position and really "owns" it in the market-at-large. And, to be honest, in a lot of ways, out biggest competition right now is "the status quo", not competing products. Given that our goal is to convert current non-users of this type of technology, not to steal market-share from $COMPETITOR, we may not wind up focusing on the cost aspect at all. Well, other than offering some "earlyvangelist" customers deep discounts just to get in the door and gain some early traction.
So your position of low-cost wont work in this segment of the market; this segment of market wanst SLAs and support and extensive hand holding. Have you done surveys or had customer interviews to validate your position in your target market before deciding your position.
That's an ongoing process for us. We've done a ton of customer interviews and we're always trying to do more. Note that we aren't yet committed to a "lowest price" message and strategy, but I'm tentatively leaning that way. And you make a good point about how, in some segments, that's a non-starter for other reasons.
The fact that this stuff isn't easy is why I think you're right in calling it "the million dollar question". :-) Assuming you have a reasonably decent product/service, it seems that positioning / marketing strategy are pretty crucial to determining if you become a million (or billion) dollar firm or just an also-ran.
We're working in the enterprise software, B2B space, where sales are high-touch anyway, so it's hard to say whether or not we can do any low-cost experiments or micro-benchmarks that will actually tell us anything useful. But that's something I've been chewing on for a few days now; trying to figure out a way to do that.
I bring up this anecdotal evidence as you mentioned "status-quo" as your competition. We had better results when we leveraged status quo as our "ally and partner" and used it to succeed. In this case status quo was a sister product.
In your case, status quo implies that people are doing something already which could be done better/faster/cheaper with your product. Find out what they are doing now, which product they use now and try and build a partnership with that product. Nothing flatters a product manager more that having Business Development guy from a new company calling up and seeking ways to partner.
If your product can be integrated with sa Microsoft Sharepoint or Biztalk -- get a developer license and build an integration widget with those. Can it be integrated with IBM or Salesforce or whatever bigger company -- find the best fit for your case, build a solution that profitable to both and increases the mind-share for the big dog and have them take you with them to the prospective CIO office.
Just my $0.02. I also am struggling with positioning for my product which is a B2C and goes up against Youtube. I would love to hear your thoughts on that.