The Opportunity Cost of Poor Positioning Strategy

I read a post recently that made me think about ‘opportunity cost’ in a different way. The gist of the post was that while we tend to consider opportunity cost in the business environment, everything has an opportunity cost. It makes sense of course, I just never really stopped to think about it that way; watching a show on Netflix has an opportunity cost of the time you could have read a book, taken a hike, or played with your kids. Choosing the waffles at an all you can eat brunch buffet has an opportunity cost of not being able to eat the omelet or smoked salmon. You get the point; everything has an opportunity cost.

Since positioning strategy is our ‘thing’, I started thinking about it in terms of opportunity cost. What does it cost a brand to make one choice about positioning strategy versus another? There are clearly a lot of choices that go into developing and settling on a positioning strategy and choosing your target customer is one with a potentially huge opportunity cost. Considerations like, How large is the group? What’s their likelihood to purchase your brand? How loyal will they be? How do they view competitive brands? etc. all come into play.

Every brand manager runs through some sort of physical or mental checklist in an attempt to define the value of their choices. From what we see, the opportunity cost assessment tends to fall one way; larger target customer groups being assigned more value than smaller customer groups. In my opinion this happens as a result of a heavy focus on the sales goal and how to achieve it as quickly as possible. These goals are your reality but defining your target customer group based on them frequently leads to poorly defined target customers and an overly generalized positioning strategy. The opportunity cost of an ill-defined target customer leading to a somewhat generic positioning strategy is the difference between success and failure.

Dennis CrowleyComment