1. Differentiation and Positioning Differentiation: “The creation of tangible or intangible differences on one or two key dimensions between a focal product and its main competitors” Positioning: “The set of strategies that firms develop and implement to ensure that the differences occupy a distinct and important position in the minds of consumers”

2. Perceptual Maps Key research tool for positioning: Perceptual Map A perceptual map is a spatial representation in which competing brands are plotted To create a map we need – Data: Attribute and Preference data – Methodology: Factor Analysis solution

3. Perceptual Map of Automobiles (from WSJ, 1984) Has a Touch of Class A Car to be Proud to Own Distinctive Looking Pontiac BMW Porsche Lincoln Cadillac Mercedes Chrysler Buick Chevrolet Oldsmobile Has Spirited Performance Appeals to Young People Fun to Drive Sporty Looking Very Practical Provides Good Gas Mileage Affordable Datsun Toyota VW Conservative looking Appeals to Older People Ford Dodge Plymouth

4. Many Attributes? Popular with men Popular with women Good Value Heavy Full Bodied Special Occasion On a Budget Bud4672237 Beck’s7343553........................ Stroh’s3236552 Respondent 1 Use Factor Analysis. Basic idea: Perceptions about several attributes reflect the same underlying perception of a ‘deeper’ characteristic.

5. Input to Factor Analysis Vectors of attributes can be plotted based on factor loadings. Individual brand’s location on the perceptual map is based on factor scores. HeavyPop/MenPop/WomenFull BodiedBlue CollarGood ValueSpec Occ Beck's Budweiser Coors Ratings of the brands on each attributes averaged across all respondents Coors light Heineken Meister Brau Michelob Miller Miller Lite Stroh's

6. Perceptual Map of Beer Market (only Brands) Meister Brau Stroh’s Beck’s Heineken Old Milwaukee Miller Coors Michelob Miller Lite Coors Light Old Milwaukee Light Budweiser

7. Perceptual Map of Beer Market (only attributes) Popular with Men Heavy Special Occasions Dining OutPremium Popular with Women Light Pale Color On a Budget Good Value Blue Collar Full Bodied PremiumBudget Light Heavy Less Filling

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

9. Guidelines for Interpreting Perceptual Maps The arrow indicates the direction in which that attribute is increasing – The attribute is decreasing in the direction opposite to the arrow. – In the map on previous slide, a beer positioned farther and farther in the North East direction are popular with men, whereas a beer positioned in the South West direction is less popular with men. 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 in helping you to interpret the map. – Thus, “Good value” and “Less filling” are relatively more important than “Pale color” and “Blue collar” in explaining how this group of customers discriminates between the different beers.

10. Guidelines for Interpreting Perceptual Maps Attributes that are both relatively important and close to the horizontal (vertical) axis help you in articulating the meaning of the axis. – Here, the two dimensions along which these customers seem to discriminate between the beers appear to be “Budget-Premium” for the horizontal axis and “Light-Heavy” for the vertical axis. – This interpretation can be based on attributes most correlated with the axes (Premium, Special occasions, Blue collar, Budget, etc. for the horizontal axis, and Heavy, Light, Pale color for the vertical axis). To position a particular beer on an attribute, draw an imaginary perpendicular line from the location of that beer onto that attribute. – Use both the direction and closeness to the attribute to interpret

11. How to read the perceptual map Meister Brau Budweiser Beck’s Heineken Old Milwaukee Miller Coors Michelob Miller Lite Coors Light Old Milwaukee Light Heavy

12. What about demand? Should we always seek out the “gaps” in the map? No – we need to think about demand Two things required to ideal positioning: – No strong competitors in the same location – Demand is sufficiently large How do we add the demand aspect to the map?