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Lecture slides on perceptual maps.
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MRKT 354Marketing Management II
Session 4
Identifying Competitor Set and Understanding Differences
Marketing Management Today
C o u r s e o v e r v i e w
Value:product
price
Reach:promotion,
place
Conjoint analysis
Response analysis
Diffusion analysisRegression / time series
Forecasting
Demand (customer)Power (competition)
Cost (company)
Industry Sales
Net Marketing
Contribution
Margin
Market Share
=
Marketing expenses
Allocations
MDS
Positioning and Perceptual Mapping
• Positioning
• Perceptual Maps
Crowded Markets: Product Proliferation
• Over 8,200 mutual funds
• Over 150 models of cars
• Over 30,000 products in a grocery store
• Over 100,000 prescription drugs
Consumers face increasing number of choices
• Set of target customers
• The competitor set: the frame of reference
• Core value propositions: primary benefits from buying the offering– Functional benefits– Monetary benefits– Psychological benefits– Holistic combination of the above
Positioning: A Critical Ingredient of Marketing Strategy
The output is a “positioning statement”, which identifies:
Example positioning statement
Cadillac has broken a lot of new ground with its all-new CTS. It drives like a European luxury sports sedan and, like Mercedes-Benz and BMW, this new Cadillac uses rear-wheel drive instead of front-wheel drive. It is designed to appeal to younger buyers who want European performance in an American luxury product. The smallest of Cadillac's sedans, the CTS replaces the European-built Cadillac Catera, two generations of which failed to capture the imagination of the American buying public
Positioning
Competitors
Design Features
Target Segment
Comparative positioning
[Offering] is a better [product / product category] than [competitive offering] for [target customers] because [primary reasons]
• Gatorade is a smart choice for athletes because it rehydrates, replenishes, and refuels in ways water can’t.
• The Palm is an electronic organizer that allows busy professionals to sync data with their PC more easily and reliably than the iPAQ.
• Differentiation-based positioning
• Similarity-based positioning
Non-comparative positioning
[Offering] is a best [product / product category] for [target customers] because [primary reasons]
• Mountain Dew is the soft drink that gives young, active consumers who have little time for sleep the energy they need because it has high level of caffeine.
• For the tradesman who uses power tools to make a living and cannot afford downtime on the job, De Walt offers dependable professional tools that are engineered to the highest standards and are backed by a guarantee for repair or replacement within 48 hours.
• Need-based positioning
• Category-based positioning
Group Exercise #1: Positioning Statement
• Q1: Should Samsung use comparative positioning or non-comparative positioning for its top-of-the-line smart phone: Galaxy III? Please justify your answer.
• Q2: Please come up with a need-based positioning statement for Volvo. Please make use of the following background information.• Target segment: Upscale Canadian families• Benefit to emphasize: safety
Group Exercise #1- Solution
• Q1: Since Samsung is a follower in the smart phone market, comparative positioning may work better compared to non-comparative positioning.
• Q2: For upscale Canadian families, Volvo is the family automobile that offers maximum safety.
Positioning and Perceptual Mapping
• Positioning
• Perceptual Maps
Can You See Patterns in These Customer Data?
Ratings of nine brands of notebook computers on several attributes
B1 B2 B3 B3 B4 B5 B6 B7 B8 New
Attractive 5.1 3.6 3.5 5.4 3.9 4.8 5.2 4.0 5.2 4.0Light 6.0 3.5 5.0 3.9 3.3 5.3 5.0 2.5 5.5 2.5Unreliable 3.4 4.1 4.5 2.1 4.5 2.7 4.5 3.7 2.5 3.8Plain 1.5 4.1 2.9 2.3 4.5 2.7 3.5 4.3 2.2 5.2Battery life 3.3 4.9 4.3 4.1 3.9 3.0 3.5 6.2 3.5 4.0Screen 3.5 5.3 3.4 6.4 5.4 5.2 3.3 6.0 3.3 4.8Keyboard 2.6 3.5 2.5 3.4 3.8 3.3 2.8 5.0 4.3 4.7Roomy 5.5 4.3 5.4 3.1 3.4 3.3 4.7 3.5 4.3 4.2Easy service 4.5 4.9 3.3 5.0 4.4 4.5 3.3 4.7 3.8 4.5Expandability 5.5 4.3 5.4 3.1 3.4 3.3 4.7 3.5 4.3 4.2Setup 5.6 3.5 5.6 5.4 2.5 4.2 5.2 3.3 5.8 2.5Common 4.1 3.5 3.3 2.9 4.0 4.3 2.2 4.2 3.3 4.2Value 3.5 4.8 4.4 3.6 3.6 2.7 3.2 4.7 3.5 4.0Preference 7.4 3.4 4.8 6.6 4.4 7.4 7.1 3.8 6.9 3.3
1. Company provides adequate insurance coverage for my car.
2. Company will not cancel policy because of age, accident experience, or health problems.3. Friendly and considerate.
4. Settles claims fairly.
5. Inefficient, hard to deal with.
6. Provides good advice about types and amounts of coverage to buy.
7. Too big to care about individual customers.
8. Explains things clearly.
9. Premium rates are lower than most companies.
10. Has personnel available for questions all over the country.
11. Will raise premiums because of age.
12. Takes a long time to settle a claim.
13. Very professional/modern.
14. Specialists in serving my local area.
15. Quick, reliable service, easily accessible.
16. A “good citizen” in community.
17. Has complete line of insurance products available.
18. Is widely known “name company”.
19. Is very aggressive, rapidly growing company.
20. Provides advice on how to avoid accidents.
Does notDescribes it describecompletely it at all| | | | | |0 1 2 3 4 5
Conventional Mapping UsingSemantic Scales
Need 2
Need 1
+20
+20
-20
-20
SELF
PrHi
Bu
Si
Ot
SEMI
SONO
SOLD
SULI
SAMA
SUSI
SALT
SIBI
SIRO
Perceptual Map
What is a Perceptual Map?
• A perceptual map is a visual representation of how target customers view the competing alternatives in a Euclidean space which represents the market
• The map has the following characteristics:– Pair-wise distances between product alternatives directly indicate
how close or far apart the products are in the minds of customers
– A vector on the map indicates both magnitude and direction in the Euclidean space. Vectors are usually used to geometrically denote attributes of the perceptual maps
– The axes of the map are a special set of vectors suggesting the underlying dimensions that best characterize how customers differentiate between alternatives
Perceptual Mapping Process
• Specify the "Relevant" Objects or Products.
• Relevance means that the set of products chosen must be the set of competitive products that are relevant for managerial decision-making.
• Three possible methodologies to collect information on consumers perception of products: – Method 1: Similarity-based method (Multi-Dimensional
Scaling) – Method 2: Attribute based method (Factor Analysis)– Method 3: Joint space mapping (Perception + Preference)
Method 1: Overall Similarity Method Multidimensional Scaling
• Suppose we are interested in developing a perceptual map of the ED market consisting of Viagra, Levitra and Cialis.
• Suppose we ask a respondent for his perceptions of the similarities among the 3 products by asking for his judgments about all possible pairs (3 possible pairs)
• Ask the respondent to rate on a scale of 1-7 the similarity of two products. Do this for all pairs…n products => n(n-1)/2 pairs.
– 1 is very similar
– 7 is very different
• How different are the products perceived?– What features distinguish different products?
• Commercial software implementation– SPSS and SAS.
Overall similarity method: Questionnaire
• Example) Rate how dissimilar (similar) are the two cars named. Use a scale of 1 to 10, with 1 meaning very similar and 10 meaning very different.
Very Very
similar different
1 2 3 4 5 6 7 8 9 10
Buick & Chevrolet ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
Buick & Lexus ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
…………
• Number of pair-wise questions: (n-1)*n/2 (for n products)
ED Market
Viagra Levitra Cialis
Viagra 1
Levitra 1
Cialis 1
ED Market
Viagra Levitra Cialis
Viagra 1
Levitra 2 1
Cialis 6 5.5 1
The numbers are like distances on a perceptual map
MDS Perceptual Map
2
5.5
6
What more would you like to know?
Multidimensional Scaling
• With 3 products, I can perfectly represent the information in two dimensions
• With more products to be represented in two dimensions– information loss
• Multidimensional scaling (MDS) is a mathematical technique that helps implement this analysis of similarity perceptions with minimum information loss.
• What are advantages/disadvantages of MDS– Allows you to map products without specifying the list of attributes.– Better for softer attributes which we do not verbalize very well (feel, aesthetics) – Impractical when the number of products are large.– Interpretation of axes are more difficult
• Commercial software implementation– SPSS, SAS modules.
Group Exercise #2: Beer Market
•
Meister Brau
Stroh’s
•
•
•
Beck’s
• Heineken
Old Milwaukee•
Miller •
Coors•
Michelob•
Miller Lite
• Coors Light•
OldMilwaukee Light
•
Budweiser
• Which brands are the closest competitors for Budweiser?
• Do you see any clusters of brands considered very similar to each other?
Group Exercise #2- Solution
• Which brands are the closest competitors for Budweiser?
Miller
• Do you see any clusters of brands considered very similar to each other?
- Beck’s/Heineken
- Old Milwaukee/Meister Brau
- Michelob/Coors Light
- Budweiser/Miller/Coors
Method 2: Attribute Rating MethodExample: Evaluation of a New Laptop concept.
• Select a set of laptop computers of interest to be the target group including the new concept…(say 4 products)
• Decide on the set of relevant attributes on which to capture consumer perceptions (6 attributes)– Prior quantitative or qualitative research that elicits
important attributes for the target consumers.
• Ensure that consumers are familiar with the laptops that are to be evaluated (e.g., through video presentation, or actual prototypes)
• Respondents (target customers) evaluate / rank or rate products.
• Ask consumers to rate 10 cars on the following 10 attributes.• For each car, ask consumers to rate what extent each adjective describes
the brand.• Example) Use a scale of 0 to 10, with 0 meaning “strongly disagree” and 10
meaning “strongly agree” .
Strongly Strongly
disagree agree
0 1 2 3 4 5 6 7 8 9 10
Sporty ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
Youthful ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ …………
Attribute ratings method: Questionnaire
Data Matrix Factor Analysis Perceptual map
Perceptual Mapping
A1 A2 A3 A4
P1
P2
P3
P4
Data Matrix = 4 (products) X 6 (attributes) X 300 (respondents).
Consumers
Submit data to factor analysis
Interpret the underlying key dimensions (factors) using the directions of the individual attributes
Explore the implications of how consumers’ view the competing products
Factor Analysis: Key Concepts
• It is difficult to get a clear picture of the market when dealing with so many attributes and products.
• All the data/dimensions might not be necessary to capture consumer perceptions. Why?
• Highly correlated attributes– Create linear combination of the measures to get a single new dimension of
the original attributes.
• Take out attributes on which all computers are rated about the same.
• Factor analysis output: – Say 70% of the information contained in the original attributes can be
represented by creating just 2 new dimensions. These dimensions are called factors.
– Analysis done using commercial software SPSS or SAS
Light
Example Plot of Attributes of Laptops on a 2D Perceptual Map
C“Butterfly”
Slow
Look/Styling
Performance
Easy setup
Value
Common
Elegant
The six attributes were measured on semantic differential scales: 1) Slow–Fast operation, 2) Plain–Elegant, 3) Easy–Difficult setup, 4) Poor–Excellent value, 5) Light–Heavy, and 6) Common–Distinctive.
Toshiba 1960CT
C“Butterfly”
Slow Easy setup
Light
Common
Elegant
Example Plot of Attributes of Laptops on a 2D Perceptual Map
Looks/Styling
Performance
GoodValue
Toshiba 1960CT
(Plain)
Guidelines for Interpreting Perceptual Maps (Laptop)
• The arrow indicates the direction in which that attribute is increasing.
• Length of the line from the origin to the arrow is an indicator of the variance of that attribute explained by the 2D map. The longer this line, the greater is the importance of that attribute in explaining variance.
• Attribute that are both relatively important (i.e., long vector) and close to the horizontal (vertical) axis help interpret the meaning of axis.
• To represent a laptop on each attribute, draw an imaginary perpendicular line from the location of the laptop onto that attribute. (These are shown by dashed lines on the map).
• What practical uses can you now put this map to at this stage?
Advantages and Disadvantages
Advantages• Works well for hard or functional attributes (price, product
features).• Asks fewer questions than MDS, especially when the
number of considered products are large
Disadvantages• Researcher should be able to clearly conceptualize the
attributes• Misleading if chosen attributes are not one most important
to consumers• Implicit equal weighting of attributes in survey
Popular with MenHeavy
Special Occasions
Dining Out Premium
Popular with Women
Light
Pale Color
On a Budget
Good ValueBlue Collar
Full Bodied
Less Filling
Interesting web site to visit: www.ratebeer.com
Group Exercise #3: Beer Market• How would you name vertical and horizontal axes?
• Which two attributes are most important to describe the horizontal axis?
Group Exercise #3- Solution• How would you name vertical and horizontal axes?
- Vertical: Heavy/Light
- Horizontal: Premium/Budget
• Which two attributes are most important to describe the horizontal axis?
- Premium
- Good value
Popular with MenHeavy
Special Occasions
Dining Out Premium
Popular with Women
Light
Pale Color
On a Budget
Good ValueBlue Collar
Full Bodied
PremiumBudget
Light
Heavy
•
Meister Brau
Stroh’s
•
•
•
Beck’s
• Heineken
Old Milwaukee•
Miller •
Coors•
Michelob•
Miller Lite
• Coors Light•
OldMilwaukee Light
•
Budweiser
Less Filling
Group Exercise #4: Beer Market• Which beer is most popular with men?
• In what ways does Budweiser different from Miller or Coors?
Group Exercise #4- Solution
• Which beer is most popular with men?
- Beck’s
• In what ways does Budweiser different from Miller or Coors?
- More popular with men
- Heavier
- Less preferred for special occasion
Improving Perception Only Maps
• Limitations of Perception Only Maps– Silent on preference (e.g. consumer ideal point)– Silent on the size of segment
• Solutions: Introduce customer preferences into perceptual maps (Joint space maps: Perception + Preference)– A simple ideal point method: Introduce an “ideal” brand for
each segment as an additional stimulus evaluated by customers
– Plot the location of the “average” ideal brand for each segment
– Use the size of circle to show the size of segment
Joint Space Map of Beer Market (Perception + Preference)
PremiumBudget
Light
Heavy
•
Meister Brau
Stroh’s
•
•
•
Beck’s
• Heineken
Old Milwaukee•
Miller •
Coors•
Michelob•
Miller Lite
• Coors Light•
OldMilwaukee Light
•
Budweiser
Interesting web site to visit: www.ratebeer.com
4
25
31
PremiumBudget
Light
Heavy
•
Meister Brau
Stroh’s
•
•
•
Beck’s
• Heineken
Old Milwaukee•
Miller •
Coors•
Michelob•
Miller Lite
• Coors Light•
OldMilwaukee Light
•
Budweiser
14
25
3
Group Exercise #5: Beer Market• Which beers are most likely to be purchased by consumer in segment #3?
• If you reposition Stroh’s, where would you move this product?
Group Exercise #5- Solution
• Which beers are most likely to be purchased by consumer in segment #3?
- Old Milwaukee
• If you reposition Stroh’s, where would you move this product?
- Toward segment #5
Uses of Perceptual Maps
• Customer Analysis and Competitive Analysis– Understand the competitive market structure as perceived by
customers.
• Position relative to competition
• Select the set of competitors to compete against
– Represent customers’ perceptions in a manner that aids communication and discussion within the organization
• Product– Perceptions of a new product concept in the context of existing
brands in the market
– Finding the “gap” in the market to position the product.
Learning
• Perceptual maps are about “How our product is perceived by consumers relative to competition?”– Link Segmentation and Positioning
• Segmentation, Positioning and Perceptual mapping involve careful and sophisticated quantitative analysis and not vague managerial intuition.
• Three important methods to develop perceptual maps– Overall similarity– Attribute rating– Joint space mapping (perception + preference)
