Brand positioning tip #2: the competitive frame of reference

In Brand Positioning Tip #1, we covered 2 of the 4 key elements of successful brand positioning done the way Dr. Kevin Keller taught me: points of parity and points of difference. Today, I’d like to highlight the third key element of good brand positioning– understanding your competitive frame of reference.

Competitive frame of reference is a fancy way of saying “the market you compete in.”

This sounds pretty simple, huh? It can be… If you run a furniture store, your competitive frame of reference would probably be the furniture market. If you run a tattoo parlor, your competitive frame of reference would probably be the tattoo market.

Those are pretty cut and dry cases. But have you ever stopped and wondered to yourself, “exactly what market am I competing in?” and realized that you are really competing in a market that is not initially obvious? Or that you are actually competing in multiple markets? If either of these situations are true, you may discover you need to create points of parity and points of difference for each market where you compete.

Here is an common example of a less-than-obvious competitive frame of reference.

What market do you think Starbucks is in? The coffee market? Maybe. In the coffee market, Starbucks competes with grocery stores, fast food restaurants, other coffee shops, and home brewers. Tough market… they aren’t competitive in the coffee market on price, there are probably options that (arguably) taste better, maybe have shorter lines. It’s hard to believe that Starbucks would have grown as big as they are by simply competing in the existing coffee market.

Well, in addition to competing in the coffee market, Howard Schultz has been known to say that Starbucks is competing to be your “third place.” The third place is the other place you want to hang out besides your first place (your home) and your second place (your work). In this competitive frame of reference, Starbucks is competing with all sorts of different places, only some of which are coffee shops. He competes with bookstores, bars, restaurants, parks, libraries… the list of potential third places could go on.

For years, Starbucks has been differentiating itself not just on the quality of its coffee, but also on its experience, which is an attempt to position Starbucks as a place to hang out, relax, or work on par with or better than your favorite restaurant, bar, park, bookstore, etc.

That’s why Starbucks spends so much time with the music, the ambiance, the wacked out drink names that make you feel like you are reciting chants when you order them. It is all part of creating an air of comfort, relaxation, familiarity, exclusivity, and all of the other things that you look for in your preferred hang out spot.

I’m not a Starbucks fan, but it’s in part because I’m not in the market for a third place. I like my first and second places a lot. I’m in the market for a great cup of iced coffee.

But every time I go into a Starbucks, I see tons of people who have their laptops open, or are reading newspapers, or meeting with friends or business associates, so there must be a lot of other people who are in the market for a third place. Small business owners, salespeople who work on the road, people whose home life sucks… clearly the Starbucks positioning in the third place market must be working or there wouldn’t be one everywhere you look.

Just remember your competitive frame of reference might not be what it seems to be at first glance. You may think you are in one business and find a competitive frame of reference that offers you even more opportunity to broaden your customer set to people you may not have considered before.

You may even find that you need to consider brand positioning in multiple competitive frames of reference, each which might give you different points of parity and points of difference.

For example, Red Hat competes in the enterprise software market. But we also compete in the open source software market against a different set of competitors claiming very different points of parity and points of difference.

Carefully consider the points of parity and points of difference for each of your competitive frames of reference, and you’ll be on your way to creating a solid brand position.