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Marketing Research - Perceptual Map

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Lecture slides on perceptual maps.

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Marketing Research - Perceptual Map

  1. 1. MRKT 354 Marketing Management II Session 4 Identifying Competitor Set and Understanding Differences
  2. 2. Marketing Management Today Net Marketing Contribution Diffusion analysis Regression / time series Forecasting = Industry Sales Market Share Demand (customer) Power (competition) Cost (company) Margin Marketing expenses MDS Value: product price Reach: promotion, place Conjoint analysis Response analysis Allocations Course overview
  3. 3. Positioning and Perceptual Mapping • Positioning • Perceptual Maps
  4. 4. Crowded Markets: Product Proliferation Consumers face increasing number of choices • Over 8,200 mutual funds • Over 150 models of cars • Over 30,000 products in a grocery store • Over 100,000 prescription drugs
  5. 5. Positioning: A Critical Ingredient of Marketing Strategy The output is a “positioning statement”, which identifies: • 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
  6. 6. Example positioning statement Target Segment Competitors Positioning 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 Design Features
  7. 7. Comparative positioning • Differentiation-based positioning • Similarity-based 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.
  8. 8. Non-comparative positioning • Need-based positioning • Category-based 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.
  9. 9. Group Exercise #1: Positioning Statement • Q1: Should Samsung use comparative positioning or noncomparative 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
  10. 10. Group Exercise #1- Solution • Q1: Since Samsung is a follower in the smart phone market, comparative positioning may work better compared to noncomparative positioning. • Q2: For upscale Canadian families, Volvo is the family automobile that offers maximum safety.
  11. 11. Positioning and Perceptual Mapping • Positioning • Perceptual Maps
  12. 12. Can You See Patterns in These Customer Data? Ratings of nine brands of notebook computers on several attributes B1 Attractive Light Unreliable Plain Battery life Screen Keyboard Roomy Easy service Expandability Setup Common Value Preference B2 B3 B3 B4 B5 B6 B7 B8 New 5.1 6.0 3.4 1.5 3.3 3.5 2.6 5.5 4.5 5.5 5.6 4.1 3.5 7.4 3.6 3.5 4.1 4.1 4.9 5.3 3.5 4.3 4.9 4.3 3.5 3.5 4.8 3.4 3.5 5.0 4.5 2.9 4.3 3.4 2.5 5.4 3.3 5.4 5.6 3.3 4.4 4.8 5.4 3.9 2.1 2.3 4.1 6.4 3.4 3.1 5.0 3.1 5.4 2.9 3.6 6.6 3.9 3.3 4.5 4.5 3.9 5.4 3.8 3.4 4.4 3.4 2.5 4.0 3.6 4.4 4.8 5.3 2.7 2.7 3.0 5.2 3.3 3.3 4.5 3.3 4.2 4.3 2.7 7.4 5.2 5.0 4.5 3.5 3.5 3.3 2.8 4.7 3.3 4.7 5.2 2.2 3.2 7.1 4.0 2.5 3.7 4.3 6.2 6.0 5.0 3.5 4.7 3.5 3.3 4.2 4.7 3.8 5.2 5.5 2.5 2.2 3.5 3.3 4.3 4.3 3.8 4.3 5.8 3.3 3.5 6.9 4.0 2.5 3.8 5.2 4.0 4.8 4.7 4.2 4.5 4.2 2.5 4.2 4.0 3.3
  13. 13. Conventional Mapping Using Semantic Scales Describes it completely | | 0 1 | 2 | 3 Does not describe it at all | | 4 5 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.
  14. 14. Perceptual Map Need 2 +20 Bu SONO SELF SEMI SUL I SOLD Pr Hi -20 +20 Si SALT SUSI SIBI Ot SAMA -20 SIRO Need 1
  15. 15. 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
  16. 16. 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)
  17. 17. 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.
  18. 18. 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)
  19. 19. ED Market Viagra Viagra Levitra Cialis Levitra Cialis 1 1 1
  20. 20. ED Market Viagra Levitra Viagra Levitra Cialis Cialis 1 2 1 6 5.5 1 The numbers are like distances on a perceptual map
  21. 21. MDS Perceptual Map 5.5 6 2 What more would you like to know?
  22. 22. 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.
  23. 23. Group Exercise #2: Beer Market • Which brands are the closest competitors for Budweiser? • Do you see any clusters of brands considered very similar to each other? • Budweiser Old Milwaukee • Meister Brau • Miller Beck’s • • Heineken • • • Coors Stroh’s • Michelob • • Old Milwaukee Light Miller Lite • Coors Light
  24. 24. 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
  25. 25. Method 2: Attribute Rating Method Example: 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.
  26. 26. Attribute ratings method: Questionnaire • • • 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” . Sporty Youthful ………… Strongly Strongly disagree agree 0 1 2 3 4 5 6 7 8 9 10 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
  27. 27. Perceptual Mapping  Data Matrix = 4 (products) X 6 (attributes) X 300 (respondents). Consumers A1 A2 A3 A4 P1 P2 P3 P4 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 Data Matrix Factor Analysis Perceptual map
  28. 28. 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
  29. 29. Example Plot of Attributes of Laptops on a 2D Perceptual Map Common Easy setup Slow Toshiba 1960CT Performance Light C “Butterfly” Value Elegant Look/Styling 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.
  30. 30. Example Plot of Attributes of Laptops on a 2D Perceptual Map (Plain) Common Easy setup Slow Toshiba 1960CT Performance C “Butterfly” Elegant Looks/Styling Good Value Light
  31. 31. 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?
  32. 32. 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
  33. 33. Group Exercise #3: Beer Market • How would you name vertical and horizontal axes? • Which two attributes are most important to describe the horizontal axis? Full Bodied Heavy Popular with Men Special Occasions Good Value Blue Collar Dining Out Premium Popular with Women Pale Color On a Budget Interesting web site to visit: www.ratebeer.com Light Less Filling
  34. 34. 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
  35. 35. Group Exercise #4: Beer Market • Which beer is most popular with men? • In what ways does Budweiser different from Miller or Coors? Heavy Heavy Full Bodied Old Milwaukee • Budweiser • Meister Brau • Good Value Popular with Men Miller • Beck’s • Stroh’s Budget • Heineken Special Occasions • Coors Blue Collar • Dining Out Premium Premium • Michelob • On a Budget • Pale Color Old Milwaukee Light Light Coors Light Miller Lite • Light Less Filling Popular with Women
  36. 36. 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
  37. 37. 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
  38. 38. Joint Space Map of Beer Market (Perception + Preference) Heavy • Old Milwaukee • Budweiser Beck’s 1 3 Meister Brau • Miller 4 • Heineken • • • Coors Stroh’s Budget Premium • 5 Miller Lite • Old Milwaukee Light Interesting web site to visit: www.ratebeer.com • Light • Michelob 2 • Coors Light
  39. 39. 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? Heavy • Old Milwaukee 3 • Budweiser Beck’s 1 4 Meister Brau • Miller • Heineken • • • Coors Stroh’s Budget Premium • 5 Miller Lite • Old Milwaukee Light • Light • Michelob 2 • Coors Light
  40. 40. 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
  41. 41. 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.
  42. 42. 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)

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