Perceptual Mapping EWMBA 206'1

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Perceptual MappingEWMBA 206.1

• Session 3
• Fall 2009

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Perceptual Maps

• To gain competitive advantage, a firm must
  correctly position itself, its products, or
  services against competitive offerings.
• Need to develop a Mental Map of how our product
  is perceived by consumers relative to the
  different competing products in the marketplace.
  
• Linking Segmentation and Positioning.
• Techniques that help us to construct such mental
  or Perceptual Maps are called Multidimensional
  Scaling and Factor Analysis.

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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

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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.
• Two possible methodologies to collect information
  on consumers perception of products
• Method 1 Attribute based method (Factor
  Analysis).
• Method 2 Similarity-Based method
  (Multi-Dimensional Scaling)

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Method 1 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.

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Perceptual Mapping

• 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
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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

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Example Plot of Attributes of Laptops on a 2D
Perceptual Map
Light
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Example Plot of Attributes of Laptops on a 2D
Perceptual Map
(Plain)
Common
????Toshiba 1960CT
Easy setup
Slow
Performance
Light
GoodValue
? ????????CButterfly
Elegant
Looks/Styling
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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?

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Limitations

• Researcher should be able to clearly
  conceptualize the attributes
• No perception gap between intended and actual
  perception of the attributes.
• Works well for hard or functional attributes,
  (price, product features).

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Method 2 Overall Similarity RatingsMultidimensio
nal 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 rank on a scale of 1-7 the
  similarity of two products. Do this for all
  pairsn products gt n(n-1)/2 pairs.
• 1 is very similar
• 7 is very different
• How different are the products perceived?
• What are features distinguish different products
• Commercial software implementation
• SPSS and SAS.

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ED Market
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ED Market
The numbers are like distances on a perceptual
map
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MDS Perceptual Map
5.5
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2
What more would you like to know?
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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 and simultaneously
  infer attributes.
• Better for softer attributes which we do not
  verbalize very well (feel, aesthetics)
• Impractical when the number of products are
  large.
• Commercial software implementation
• SPSS, SAS modules.

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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.

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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.
• Two important methods to develop perceptual maps
• Attribute rating
• Similarity rating

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Multi-dimensional Scaling (MDS)
AlgorithmTechnical Note
0. First have the computer assign points in an
m-dimensional space which represents the
similarity distances. (The computer actually
starts with a large value of m). 1. Compute the
distances between each of the two points in this
space 2. Compute the implied ranking that would
be generated (or implied dissimilarities).
This will result in the error or the stress of
these predictions 3. Change an individual point
to reduce the stress. Go to step 1 until you
cant improve the stress 4. Now reduce the
number of dimensions by 1 and try to generate an
entirely new map
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A commonly-used stress formula in MDS
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Number and Labeling of Dimensions

• Stress values less than 0.05 are considered good
  and maps with stress values greater than 0.20 are
  not generally meaningful
• Interpret the dimensions in the map
• Infer meanings of dimensions
• May need inputs from respondents to interpret the
  map