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Chapter 4

Chapter 4. Defining Strategy and Positioning. Potential Entrants (Threat of Mobility). Suppliers (Supplier power). Industry Competitors (Segment rivalry). Buyers (Buyer power). Substitutes (Threats of substitutes). Five Forces Determining Segment Structural Attractiveness.

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Chapter 4

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  1. Chapter 4 Defining Strategy and Positioning

  2. Potential Entrants (Threat of Mobility) Suppliers (Supplier power) Industry Competitors (Segment rivalry) Buyers (Buyer power) Substitutes (Threats of substitutes) Five Forces Determining Segment Structural Attractiveness

  3. Exit barriers Low High Low, stable returns Low Entry Barriers High, stable returns High, risky returns High Barriers and Profitability Low, risky returns

  4. 20%- 18%- 16%- 14%- 12%- 10%- 8%- 6%- 4%- 2%- 0 Stars Question marks 4 ? ? 1 3 ? ? 5 2 Market Growth Rate Dogs Cash cow 8 6 7 10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x Relative Market Share The Boston Consulting Group’s Growth-Share Matrix

  5. Desired sales Diversificationgrowth Strategic- planning gap Integrative growth Sales Intensive growth Current portfolio 0 5 10 Time (years) The Strategic-Planning Gap

  6. Existing products New products 1. Market penetration 3. Product development Existing markets 2. Market development New markets Three Intensive Growth Strategies: Ansoff’s Product/Market Expansion Grid 4. Diversification

  7. Opportunity Matrix Success Probability Opportunities 1. Company develops a more powerful lighting system 2. Company develops a device for measuring the energy efficiency of any lighting system 3. Company develops a device for measuring illumination level 4. Company develops a software program to teach lighting fundamentals to TV studio personnel High Low 1 2 High Attractiveness 3 4 Low

  8. Threat Matrix Threats Probability of Occurrence 1. Competitor develops a superior lighting system 2. Major prolonged economic depression 3. Higher costs 4. Legislation to reduce number of TV studio licenses High Low 1 2 High Seriousness 3 4 Low

  9. Make the product Sell the product Design product Advertise/ promote Procure Make Price Sell Distribute Service Choose the Value Provide the Value Communicate the Value Strategic marketing Tactical marketing The Value-Delivery Process (a) Traditional physical process sequence (b) Value creation & delivery sequence

  10. Marketing intermediaries Demographic/ economic environment Technical/ physical environment Marketing planning system Marketing information system Product Place Price Suppliers Publics Marketing organization and implementation Promotion Marketing organization system Political/ legal environment Social/ cultural environment Competitors Factors Influencing Company Marketing Strategy Target customers

  11. Product Positioning Using Perceptual & Preference Maps Differentiation: Creation of tangible or intangible differences on one or two key dimensions between a focal product and its main competitors. Positioning: Strategies to ensure that key differences between the focal product and its competitors occupy a distinct position in the minds of customers. Mapping: Techniques (using customer-data) that enable managers to develop differentiation and positioning strategies by enabling them to visualize the competitive structure of their markets as perceived by their customers.

  12. Generic Positioning Strategies • Our product is unique (eg, Perdue chicken). • Our product is different (eg, Listerine). • Our product is similar (eg, Meisterbrau).

  13. Positioning Statement For [target segment], the [concept]is [most important claim] because[single most important support]. Example: For PC users, the IOMEGA Zip driveis the best portable storage device becauseit is most cost-effective system.

  14. Perceptual Mapping for Developing Positioning Strategies • Develop a visual representation of how target customers view the competing alternatives. • Mapping perceptions: • Attribute-ratings methods (particularly useful for functional products—used in the course MDPREF program). • Overall-similarity methods (particularly useful for image-oriented products). • Mapping preferences: • Modified attribute-rating methods (using MDPREF). • External analysis using PREFMAP-3 program.

  15. Conventional Mapping—Two Products on a Snake Chart Does notDescribes it describecompletely 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.

  16. Uses of Mapping Techniques • Understand the market structure of product categories as perceived by customers. • Select the set of competitors to compete against. • Image studies to help position the organization. • Represent customers’ perceptions and preferences in a manner that aids communication and discussion within the organization. • Evaluate a new product concept in the context of existing brands in the market. • Developing a name for a new product.

  17. Mapping Methods in Marketing Perceptual Maps Joint Space Maps(includes both perception & preference) Preference Maps Similarity-based methods Attribute-based methods Ideal-point model(unfolding model) Vector model External analysisusing PREFMAP-3 Simple “joint space maps” using modified perceptual mapping methods Positioning–8

  18. Perceptual MapsUsing Attribute Ratings Example: Evaluation of New Laptop Concept with Longer Battery Life • Select a set of laptop computers of interest to the target group (including the new concept). • Identify key attributes (eg,through focus groups). • Ensure that consumers are familiar with the laptops (eg, through video presentation). • Have consumers evaluate the laptops. Reliable .............................. Unreliable (A1) Common .............................. Distinctive (A2) Light .............................. Heavy (A3) Short battery life .............................. Long battery life (A4) • • • Poor value .............................. Good value (A15)

  19. Perceptual MapsUsing Attribute Ratings cont’d • Generate a matrix of inputs consisting of each consumer’s (C1, C2,...) Ratings of each brand on each of the attributes (A1, A2, A3,....) A1 A2 A3 A4 ............... A15 Dell 320N 6 3 7 2 2 C1 TI Travelmate 4 3 4 1 5 Toshiba concept 3 6 2 7 7 • • • Dell 320N C2 TI Travelmate Toshiba concept • Compute average ratings of each brand on each attribute. Submit data to a suitable perceptual mapping technique (eg, MDPREF or Factor Analysis). • Interpret the underlying key dimensions of the map using the directions of the individual attributes. • Explore the implications of how consumers’ view the competing products.

  20. Example Plot of Attributes of Laptops on a 2D Perceptual Map Common Toshiba 1960CT Easy setup Slow Performance Light Value  C“Butterfly” Elegant Looks 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.

  21. Example Plot of Attributes of Laptops on a 2D Perceptual Map (Plain) Common Toshiba 1960CT Easy setup Slow Performance Light GoodValue  C“Butterfly” Elegant Looks

  22. Guidelines for Interpreting Perceptual Maps (Laptop) • The arrow indicates the direction in which that attribute is increasing (The attribute is decreasing in the direction opposite to the arrow). • The 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.

  23. Guidelines for Interpreting Perceptual Maps (Laptop) cont’d • Attributes that are both relatively important and close to the horizontal (vertical) axis help interpret the meaning of the axis. • To position 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).

  24. Perceptual Map of Beer Market (This slide shows only the products) Old Milwaukee Budweiser Beck’s Meister Brau Heineken Miller Coors Stroh’s Michelob Coors Light Miller Lite OldMilwaukee Light

  25. Perceptual Map of Beer Market cont’d (This slide shows only the attributes) Heavy Popular with Men Heavy Full Bodied Special Occasions Blue Collar Dining Out Premium Good Value Budget Premium Popular with Women Pale Color On a Budget Light Less Filling Light

  26. Perceptual Map of Beer Market cont’d (This slide shows both products & attributes) Heavy Popular with Men Heavy Full Bodied Old Milwaukee Budweiser Beck’s Meister Brau Heineken Special Occasions Miller Blue Collar Dining Out Premium Good Value Coors Stroh’s Budget Premium Michelob Popular with Women Coors Light Miller Lite Pale Color On a Budget OldMilwaukee Light Light Less Filling Light

  27. Interpreting Perceptual and Preference Maps • Technical adequacy • What percentage of variance in the raw data is captured in the map? • What percentage of the variance of each attribute is captured in the map? • Managerial interpretation • What underlying dimensions characterize how consumers view the products? • What is the competitive set associated with the new concept? • How well is the new concept positioned with respect to the existing brands? • Which attributes are related to each other? • Which attributes influence customer preferences positively? Negatively? • What improvements will enhance the value of the new concept? • Which customer segments have positive perceptions and high preference for the new concept?

  28. Mapping Preferences Objective—Introduce customer preferences into perceptual maps: • A simple ideal point method (MDPREF): Introduce an “ideal” brand as an additional stimulus evaluated by customers. 1. Combine attribute ratings of ideal brand with the other brands. 2. Compare how similar the ideal brand is to the other brands included in the study. • A simple vector method (MDPREF): Introduce “preferences” as an additional variable in the ratings data 1. Analyze the preference variable simultaneously with evaluations of the cars on each attribute. • Identify which attributes influence consumer preferences the most • Identify which brands are most preferred in the aggregate. 2. Analyze preferences separately for each customer. • Identify target segments that prefer the brand of interest the most

  29. Mapping Preferences cont’d • PREFMAP-3 external unfolding • Develop a perceptual map of competing alternatives by other methods. • Given the fixed positions of the alternatives, map the preferences of customers on the same map (this approach is called external unfolding).

  30. Two Preference Models Ideal-Point Preference Model Vector Preference Model IncreasingPreference Preference Preference DecreasingPreference Ideal Point Attribute Attribute (eg, sweetness) (eg, service speed)

  31. Ideal-Point Map Ideal Point (I) dIA dIB A B (a)A is preferred twice as much as B.(dIB = 2dIA) Interpreting Preference Models Vector Map Preference Vector A dAC dAB C B (b)A is preferred to B and B is preferred to C.With reference to A, C is preferred half as much as B.(dAC = 2dAB)

  32. MDPREF Vector Method for Representing Aggregate Preferences • Matrix of inputs: • A1 A2 A3 A4 ............... A15, PREF • Dell 320N 4 3 4 1 2 2 • C1 TI Travelmate 6 3 7 2 8 8 • Toshiba concept 3 6 2 7 6 6 • • • • • Dell 320N • C2 TI Travelmate • Toshiba concept • Note: A higher number on PREF indicates higher preference for that brand. • Compute average ratings of each brand on each attribute and the average preferences for each brand. • Submit data to MDPREF to obtain a “joint space” map showing relationships between brands and their evaluations on each attribute. • Interpret the map. The relative locations of the brands are directly provided by the map. The orientation of the attributes (including preference) are determined by drawing vectors from the origin to each attribute. The positionf a brand on an attribute is determined by drawing a perpendiclar line from the brand location to the attribute orientation.

  33. Example Input Data for MDPREF Vector Model Input matrix has attributes on rows and objects on columns 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

  34. Preference Map Using MDPREF Vector Model Low battery life Keyboard Expandability • Toshiba Elegant Distinct • New Concept Unsuccessful Avant-Garde Heavy Fast operation • IBM • Compaq Reliable • Sanyo • Good design • TI • AST Exec Difficult to use • Dell • NEC Value Graphics Poor setup • Samsung Screen quality • Preference

  35. Data for PREFMAP-3 for Representing Individual Preferences • Matrix of inputs: • C1 C2 C3 C4 ............... • Dell 320N 2 3 9 3 • TI Travelmate 7 7 2 5 • Toshiba Concept 3 8 3 5 • • • • • An element of this matrix is the stated preference of each consumer (C1, C2, . . .) for each brand. A higher number indicates higher preference for that brand. • Submit data to PREFMAP-3 (in addition to perception data) to obtain a “joint space” map showing relationships between brands and preferences between brands for each consumer. • Interpret the map. The relative locations of the brands are directly provided by the map. The direction in which an individual consumer’s preferences are increasing is determined by drawing a vector from the origin to each consumer’s ID displayed on the map. The relative preference for a brand for an individual consumer is determined by drawing a perpendicular from the brand location to the preference orientation. Identify target segments by examining consumer groupings on the map.

  36. Limitations of Preference Mapping • Provides a static model—ignores dynamics of customer perceptions. • Interpretation is sometimes difficult. • Does not incorporate cost or likelihood of being able to achieve a desired positioning. • Does not incorporate a “probability model” to indicate goodness of a map. • Generally, need about 6 to 8 products to make the technique useful.

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