The answer is a thorough and customer-centric frame of reference.
What is a frame of reference? It is that thing that your customer would be using if your product or service didn’t exist. It’s what they would be buying instead of your offering.
Today we’ll look at the role a frame of reference plays in your brand positioning, why most people skim over this part, and real-world examples – including Atari’s brilliant 1975 marketing maneuver that arose out of expanding their frame of reference.
How does a frame of reference fit into my brand positioning?
At its core, brand positioning is a choice and delineation of:
- Your target customer;
- Their frame of reference (also known as your competitive set);
- Your differentiating brand promise;
- Reasons to believe this promise;
- Your customer’s end reward.
When leaders work on their brand positioning, they usually get that they need to identify a target customer and pin down a brand promise, reasons to believe and end reward. Sometimes there is too much emphasis on the reasons to believe – especially in high-tech and with people who are really into their product. Sometimes there is too much emphasis on the end reward – especially when people have watched Simon Sinek’s brilliant-but-incomplete statement that people buy for their why, not their what.
But what is almost always skimmed over is the frame of reference. People get lazy on this point; they list their direct competitors and move on. They think about their frame of reference from the business’s perspective, instead of from the customer’s perspective. This is a huge – and in some cases, business critical – missed opportunity.
What makes a frame of reference thorough and customer-centric?
A lazy frame of reference is easy. We all know our most persistent direct competitors. Frequently there are just a couple elephants in the room.
But while your product or service may be the center of your universe, it is not the center of your target’s universe. She is evaluating your offering in the context of other competitive options – both direct competitors and more elusive “substitutes.” It’s therefore important to consider your brand positioning with respect to all other options your customer might choose, including:
- Direct competitors
- Indirect competitors
- Options completely outside of your space
For instance, if you are trying to sell Coke:
- Direct competitors include Pepsi, Sprite and other soda products.
- Indirect competitors may be Nestea, Gatorade and other cold, refreshing beverages.
- An outside option could be Starbucks coffee for the caffeine, or tap water for the convenience.
Why should my frame of reference be customer-centric?
An important part of brand positioning is differentiation. You need to make sure that you are differentiating from the correct thing in your customer’s head. If you’re selling soda and you believe that you’re competing with other sodas, when actually – in your customer’s head – you are competing with water, you will wind up with a brand promise that is not relevant or meaningful to your customer.
For example, if you’re focusing on how different you are from other sodas, then you might highlight that you use cane sugar instead of high-fructose corn syrup. But if your customer isn’t considering other sodas, and actually is comparing you to water, then using cane sugar is not a relevant or meaningful differentiator. What could be differentiating about your drink versus water is that it's a treat, or that it perks you up.
Atari's Breakthrough (or should I say Breakout?)
In some cases having a customer-centric frame of reference is a make-or-break moment for a company. Let’s look at an example.
In 1975, Atari’s founders Nolan Bushnell and Ted Dabney tried to sell their new home gaming device at a toy industry trade show in New York, at the price point of $79. They sold zero units. It turns out they had their frame of reference wrong. At the time, there were no toys that sold for more than $35, and most were much lower in price than that. Thus $79 was an astronomical price point for the frame of reference of “toys.”
So they looked at other potential frames of reference for a game you played in front of your TV: Radio Shack, TV stores. Then they looked even further, finally landing on indoor home sporting goods: pool tables, ping pong tables, pinball machines. They learned that the sporting goods department of Sears sold a very successful home pinball machine priced at $200. They contacted Sears, which promptly ordered 150,000 units. By the end of the year, Sears had sold 175,000 units. (Hear more of this fascinating story on the How I Built This podcast.)
When Atari started distributing their console as a home sporting good, they were in a useful context for the customer – and they had a compelling price point. In their customers’ minds, home gaming was more like pinball and billiards than like Connect 4 and Etch-A-Sketch.
Not only did this first console launch Atari as a video game pioneer, it launched the entire home gaming category that now includes such illustrious businesses as Xbox, PlayStation and Wii.
How does a customer-centric frame of reference leverage how my customers think?
Positioning is about finding the right balance of similarity and difference in your customer’s mind. You want your offering to be different from other choices in a meaningful and motivating way. But you don’t want it so different that your customer doesn’t understand or remember you. This is basic psychology. Here’s how it works, using the Atari example:
- Similarity = Find a reference point for your customer so she can say, “Ah, Atari is sort of like that ping pong table we talked about getting” – you’ve given her the opportunity to assign you a spot in her head next to ping pong tables.
- Difference = Define your unique qualities so she can say, “Only, Atari is more fun because it’s electronic and brand new” – now you’ve opened up a new file folder in her head just for your brand.
First you establish similarity to a familiar frame of reference, allowing you into your customer’s head. Then you push away from that frame of reference to explain, “We’re like that, only this.” We’re like ping pong tables (similarity) only way more fun and novel (difference).
What happens if my frame of reference isn’t customer-centric?
If you don’t establish a thorough, customer-oriented frame of reference, then either:
- You won’t gain entrance into your customer’s head because you haven’t given her a similarity to associate your new thing with, so she’ll either misunderstand or forget you (likely both).
- OR you’ll pick a frame of reference that is wrong, so she will let you into her head, but you won’t be differentiating against the right thing. In the case of Atari, if she conceives of you as a toy, which typically costs $20-30, and your price is $79, then she’ll quickly dismiss you as too different and not compelling. And she won’t buy.
How do I make sure my frame of reference is customer-centric?
Due diligence with your frame of reference means you ignore your own business for a while and climb inside your customer’s world. They don’t care who your direct competitors are. So instead of just listing those competitors, think more deeply and subtly about what you could be “next to” in their heads. Ask yourself:
- What are the various needs my customer encounters that my offering solves?
- When do those needs come up in her life? What is the context?
- For those needs, what are my customer’s other possible solutions?
- What is she currently doing to solve that specific problem? What are her various workarounds?
Take these questions to heart; pose them to your entire team to get as many angles as you can. (It wasn’t one of the founders of Atari, but their sales lead, who stumbled upon the idea of home sporting goods.) Even better, get out there and speak directly with your customers. Get curious.
Although few do it well, defining a thorough and customer-centric frame of reference may be the most important part of your brand positioning.