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The Competitive Frame of Reference

Where does your brand compete?

This can seem like a very simple question with equally simple answers, and it can be.

If you run a furniture store, you probably compete with other furniture stores. If you run a tattoo parlor, you are up against other tattoo parlors vying to attract the same customers as you.

Great brands can't be positioned in a vacuum; they must be positioned in context. The competitive frame of reference provides the context for positioning, and it is a fancy way of describing the market or context in which you choose to position your brand.

The furniture store and tattoo parlor are pretty cut-and-dried cases. But have you ever stopped and wondered to yourself, "exactly which market am I in?" and realized that you are really competing in a market or context that is not initially obvious?

Let's look at one example of a less-than-obvious competitive frame of reference.

What Market Do You Think Starbucks Is In?

Most people would say Starbucks is in the coffee market because the primary product Starbucks sells is coffee. In the coffee market, Starbucks competes with grocery stores, convenience stores, fast food restaurants, and other coffee shops. The coffee market is tough, and in many of those places the profit margins are pretty slim.

In the coffee market, Starbucks isn't usually competitive on price. In fact, the company managed to convince the world that coffee that used to cost 50 cents a cup was actually worth $2 or more. Starbucks may no longer be the most expensive coffee in the world, but there are definitely plenty of places you can find coffee cheaper.

When it comes to taste, I'm not sure Starbucks has a huge advantage either, despite what their marketing folks might tell you. Only hardcore Starbucks addicts would tell you it is the best coffee out there. Everyone's tastes are different, but if you are like me, you probably wouldn't have too much trouble finding a cup that tastes better.

Convenience is pretty important in the coffee market simply because many people are in a rush to grab a quick cup on the way to work. And Starbucks stores are nothing if not ubiquitous. But in my experience, the only thing as ubiquitous as Starbucks is a line at Starbucks. So, even though you can find Starbucks stores everywhere, after standing in line, it'll still probably take you 10 minutes or more before you have your coffee in hand.

Thus, in a market where price, taste, and convenience are all very important, Starbucks doesn't look like a strong competitor. Yet Starbucks has more than 16,000 stores in 50+ countries around the world and does over $10 billion per year in revenues.1 Almost makes it hard to believe that Starbucks could have grown this big by simply competing in the coffee market.

Well, in addition to competing in the coffee market, Chairman and CEO Howard Schultz has been known to say that Starbucks is competing to be your "third place." According to him, 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 the competitive frame of reference of third places, Starbucks has a whole different set of competitors, only some of which are coffee shops. Starbucks competes with bookstores, bars, restaurants, parks, libraries—all the places you might want to hang out and spend your time away from home and work.

For years, Starbucks has been differentiating itself not just on its coffee, but also on the experience and environment it creates. That's why Starbucks focuses so much time with the music, ambiance, and complex 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.

Now, I personally have some pretty awesome first and second places to hang out in. I love my house and I love my office. When you add to this the fact that I am a bit of an introvert who values privacy and quiet time, I'm not really in the market for a third place. So Starbucks' differentiation as a third place probably matters less to me than a nice, tasty 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. That and $10 billion in revenues per year tells me 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 who need to get out of the house—clearly the Starbucks positioning in the third place frame of reference must be working or there wouldn't be a Starbucks on every corner.

In fact, as I write this, Starbucks has just announced a new logo and brand identity that actually removes the word "coffee" from the logo completely. I wonder whether this is actually a sign. Perhaps their effort to position themselves in the "third place" competitive frame of reference has been so successful that they're considering moving into even more markets that utilize their third place brand position, but aren't directly related to coffee at all?

Multiple Competitive Frames of Reference

In all likelihood, you'll decide that you have one primary competitive frame of reference where your organization will spend the majority of its positioning energy.

But hopefully the Starbucks example opens your eyes to the possibility that you may want to position your brand in more than one frame of reference. By looking beyond the obvious competitive markets, you might even uncover new business opportunities or ways to broaden your horizons to include people who may never have considered your brand before.

Be open to the idea that you might want to develop different positioning for each frame of reference, or that you might choose to highlight different elements of the brand as you present yourself in different frames of reference.

If this seems complex, don't worry. In Chapter 4, I take you through a simple exercise that will help you determine the optimal competitive frame of reference (or references) for your brand.

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