But these approaches to product positioning have serious flaws. Companies are much better off if they establish positions based on what we call “intangible” factors, qualities such as reliability and service. Unlike price and technical specs, intangible don`t fit neatly onto a product-comparison chart. They can`t be adequately measured or described by numbers. But intangibles are much more powerful as positioning levers.

Why are intangibles so powerful? First, let`s take a look at why price and specsmanship are so ineffective as positioning factors. Competing on price has all sorts of problems. Low-price products are often perceived as low-value products, particularly in consumer markets. Consumers assume cheap in price means cheap in quality. What`s more, low-price companies always face the thread that someone else will offer a lower price and steal their position.

The idea of the “learning curve,” or “experience curve,” encounters this this type of behavior. A learning-curve strategy involves a two-step logic. First, a company lowers its prices to increase its volume and gain market share. Next, the company takes advantage of economics of scale and mass-production experience to cut its manufacturing costs. Prices are lower, but so are costs.

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