MRKT 354

Marketing Management II

Session 4
Identifying Competitor Set and
Understanding Differences
 Marketing Management Today

Net
Marketing
Contribution
=
Diffusion analysis
Regression / time series
Industry
Forecasting Sales MDS
Value:
product Conjoint analysis
price
Market
Share
Reach:
promotion, Response analysis
Demand (customer) place
Power (competition) Margin
Cost (company)

Marketing Allocations
expenses

Course overview
 Positioning and Perceptual Mapping

• Positioning

• Perceptual Maps
 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

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
 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
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.
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.
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 4.0
Light 6.0 3.5 5.0 3.9 3.3 5.3 5.0 2.5 5.5 2.5
Unreliable 3.4 4.1 4.5 2.1 4.5 2.7 4.5 3.7 2.5 3.8
Plain 1.5 4.1 2.9 2.3 4.5 2.7 3.5 4.3 2.2 5.2
Battery life 3.3 4.9 4.3 4.1 3.9 3.0 3.5 6.2 3.5 4.0
Screen 3.5 5.3 3.4 6.4 5.4 5.2 3.3 6.0 3.3 4.8
Keyboard 2.6 3.5 2.5 3.4 3.8 3.3 2.8 5.0 4.3 4.7
Roomy 5.5 4.3 5.4 3.1 3.4 3.3 4.7 3.5 4.3 4.2
Easy service 4.5 4.9 3.3 5.0 4.4 4.5 3.3 4.7 3.8 4.5
Expandability 5.5 4.3 5.4 3.1 3.4 3.3 4.7 3.5 4.3 4.2
Setup 5.6 3.5 5.6 5.4 2.5 4.2 5.2 3.3 5.8 2.5
Common 4.1 3.5 3.3 2.9 4.0 4.3 2.2 4.2 3.3 4.2
Value 3.5 4.8 4.4 3.6 3.6 2.7 3.2 4.7 3.5 4.0
Preference 7.4 3.4 4.8 6.6 4.4 7.4 7.1 3.8 6.9 3.3
 Conventional Mapping Using
Semantic Scales
Does not
Describes it describe
completely it at all
| | | | | |
0 1 2 3 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.
 Perceptual Map
Need 2

SELF
SONO +20
Bu
SEMI

SUL
I
Pr
SOLD Hi
-20 +20
Si Need 1

SALT

SUSI
SIBI Ot
SAMA

SIRO
-20
 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

5.5

2
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
• Which brands are the closest competitors for Budweiser?
• Do you see any clusters of brands considered very similar to each
other?

Old Milwaukee
•
Budweiser
• Beck’s •
Meister Brau • Heineken
• Miller •
•
• Coors
Stroh’s

• Michelob
• Coors
Miller
Lite
• Light
•
Old
Milwaukee Light
 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 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.
 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” .

Strongly Strongly
disagree agree
0 1 2 3 4 5 6 7 8 9 10
Sporty ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
Youthful ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
…………
 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

 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
 Example Plot of Attributes of Laptops on a 2D
Perceptual Map

Common

Toshiba 1960CT
Easy setup
Slow

Performance

Light
Value
C
“Butterfly”

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.
 Example Plot of Attributes of
Laptops on a 2D Perceptual Map
(Plain)

Common

Toshiba 1960CT
Easy setup
Slow

Performance

Light
Good
C Value
“Butterfly”

Elegant

Looks/Styling
 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
 Group Exercise #3: Beer Market
• How would you name vertical and horizontal axes?
• Which two attributes are most important to describe the horizontal axis?
Popular
Full Bodied Heavy with Men

Special
Occasions
Blue Collar Dining Out Premium
Good Value

Popular
Pale Color with
Women
On a
Budget Light Less Filling
Interesting web site to visit: www.ratebeer.com
 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
 Group Exercise #4: Beer Market
• Which beer is most popular with men?
• In what ways does Budweiser different from Miller or Coors?
Heavy Popular
Heavy with Men
Old Milwaukee
Full Bodied
•
Budweiser
• Beck’s •
Meister Brau Special • Heineken
• Miller • Occasions
Good Value
Blue Collar
• Dining Out Premium
• Coors
Budget Stroh’s Premium
• Michelob
• Coors Popular
Pale Color
Miller
Lite
• Light with

On a
• Women
Old
Budget Milwaukee Light Light Less Filling
Light
 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)

Heavy

Old Milwaukee
• Budweiser

• 1
4
Beck’s •
3 Meister Brau
• Heineken
• Miller •
•
• Coors
Budget Stroh’s Premium
2
• Michelob
5
• Coors
Miller
Lite
• Light
•
Old
Milwaukee Light
Light
Interesting web site to visit: www.ratebeer.com
 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
• Budweiser

3
• 1
4
Beck’s •
Meister Brau • Heineken
• Miller •
•
• Coors
Budget Stroh’s Premium
2
• Michelob
5
• Coors
Miller
Lite
• Light
•
Old
Milwaukee Light
Light
 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)