Defining Strategy and Positioning

1
Chapter 4

• Defining Strategy and Positioning

2
Five Forces Determining Segment Structural
Attractiveness
3
Barriers and Profitability
Low, risky returns
4
The Boston Consulting Groups Growth-Share Matrix
5
The Strategic-Planning Gap
6
Three Intensive Growth Strategies Ansoffs
Product/Market Expansion Grid
4. Diversification
7
Opportunity Matrix
Success Probability
Opportunities
High
Low

• 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

1
2
High
Attractiveness
4
3
Low
8
Threat Matrix
Threats
Probability of Occurrence
High
Low

• 1. Competitor develops a superior lighting system
• 2. Major prolonged economic depression
• 3. Higher costs
• 4. Legislation to reduce number of TV studio
  licenses

1
2
High
Seriousness
4
3
Low
9
The Value-Delivery Process
(a) Traditional physical process sequence
(b) Value creation delivery sequence
10
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 conceptis most
  important claim becausesingle 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 productsused 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 MappingTwo 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.

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
Joint Space Maps(includes both perception
preference)

• Perceptual Maps

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
Positioning8
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 .............................. Unreliabl
e (A1) Common ..............................
Distinctive (A2) Light .........................
..... Heavy (A3) Short battery life
.............................. Long battery
life (A4) Poor value
.............................. Good value (A15)
19
Perceptual MapsUsing Attribute Ratings contd

• Generate a matrix of inputs consisting of each
  consumers (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
? ????????CButterfly
Elegant
Looks
The six attributes were measured on semantic
differential scales 1) SlowFast operation, 2)
PlainElegant, 3) EasyDifficult setup, 4)
PoorExcellent value, 5) LightHeavy, and 6)
CommonDistinctive.
21
Example Plot of Attributes of Laptops on a 2D
Perceptual Map
(Plain)
Common
????Toshiba 1960CT
Easy setup
Slow
Performance
Light
GoodValue
? ????????CButterfly
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) contd

• 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

Becks

Meister Brau
Heineken

Miller

Coors
Strohs

Michelob

Coors Light

Miller Lite

OldMilwaukee Light
25
Perceptual Map of Beer Market contd (This slide
shows only the attributes)
Heavy
Popular with Men
Heavy
Full Bodied
Special Occasions
Blue Collar
Dining Out
Premium
Good Value
Premium
Budget
Popular with Women
Pale Color
On a Budget
Light
Less Filling
Light
26
Perceptual Map of Beer Market contd (This slide
shows both products attributes)
Heavy
Popular with Men
Heavy

Full Bodied
Old Milwaukee
Budweiser

Becks

Meister Brau
Heineken
Special Occasions

Miller
Blue Collar

Dining Out
Premium
Good Value

Coors
Premium
Budget
Strohs

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

• ObjectiveIntroduce 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 contd

• 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
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 Attract
ive 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 4.0Scree
n 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 4.5Ex
pandability 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 2.5Co
mmon 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 4.0Preferenc
e 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 consumers
  preferences are increasing is determined by
  drawing a vector from the origin to each
  consumers 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 modelignores 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.