Placement

1. Where Is It?

About a year ago, I visited a mall with two stores selling fancy soaps and other women’s products for the bathroom. One shop, a Crabtree and Evelyn, was on the first floor, two stores away from the mall’s main entrance. The other store was on the third floor. Since both stores depended on people walking past, the store with the most passersby was more defensible. If you look at gas station in your area, you’ll find the same situation: the more traffic that passes a gas station, the more likely it is to survive.

A young pedodontist (a dentist for young children) set up his office next to the area’s largest pediatrician. This strategy put the pedodontist where he would be easily noticed by a large number of patients.

Another such strategy comes from a life insurance company that has its annuities sold by Merrill Lynch brokerage houses. Again, the place the product is sold exposes it to a large number of potential customers.

2. What Type Is It?

A manufacturer of metallurgical equipment has over a 50 percent market share; a competitor with a similar product has a 15 percent share. The first company sells through its own highly specialized salesforce. The second company sells through manufacturer’s agents. The first company’s position is more defensible because it has the right type of salesforce for its technical product.

Each of two malls near my home has a fancy gift store. One store appears to be doing well, while the other seems to be struggling. The difference is that the successful store is in an upscale mall where all the stores sell expensive merchandise. The other store is in a mall where stores sell moderately priced merchandise. The type of location gives the first store a defensible strategy.

3. How Many are There?

My kids often ask to go to McDonald’s, but never to Wendy’s Part, if not all, of the reason for this is that McDonald’s has more restaurants that Wendy’s. Every time we go by a McDonald’s, the kids want to stop. We rarely go by a Wendy’s.

GM’s sales are three to four times as large as Chrysler’s. Does this mean that GM’s customers are more loyal than Chrysler’s? Or that GM’s cars are much better than Chrysler’s? No, GM’s sales are higher because GM has a bigger dealer network: the large network contributes to a defensible position.