1. Xerox 10/98 1 Positioning G Positioning concept G Perceptual mapping G Preference mapping G Positioning the Infiniti G20 car

2. Xerox 10/98 2 Some Key Concepts G Differentiation: Creation of tangible or intangible differences on one or two key dimensions between a focal product and its main competitors. G Positioning: Strategies conceived by firms to ensure that the main differences between the focal product and its competitors occupy a distinct and important position in the minds of current and potential customers. G Mapping: Techniques (using customer-data) that enable managers to develop differentiation and positioning strategies by helping them to visualize the competitive structure of their markets as perceived by their customers. Example data include customer perceptions of existing products (and new concepts) along various attributes, perceptions of similarities between brands, preferences for the products, or measures of behavioral response of customers toward the products.

3. Xerox 10/98 3 Positioning Bases G Life style (self-concept) positioning G Attribute positioning G Benefit positioning G Competitive positioning G Time-based (e.g., usage occasion) positioning

4. Xerox 10/98 4 The Power of Visual Representation

5. An Electrical Engineer reads diagrams such as the one here An organic chemist reads diagrams such as the one here

6. Xerox 10/98 6 Marketers Need to Learn to Read Perceptual Maps!

7. Xerox 10/98 7 What Do You See?

8. Xerox 10/98 8 Can You See Patterns in This Data? Ratings of nine brands of notebook computers on several attributes B1B2B3B3B4B5B6B7B8New Attractive5.13.63.55.43.94.85.24.05.24.0 Light6.03.55.03.93.35.35.02.55.52.5 Unreliable3.44.14.52.14.52.74.53.72.53.8 Plain1.54.12.92.34.52.73.54.32.25.2 Battery life3.34.94.34.13.93.03.56.23.54.0 Screen3.55.33.46.45.45.23.36.03.34.8 Keyboard2.63.52.53.43.83.32.85.04.34.7 Roomy5.54.35.43.13.43.34.73.54.34.2 Easy service4.54.93.35.04.44.53.34.73.84.5 Expandability5.54.35.43.13.43.34.73.54.34.2 Setup5.63.55.65.42.54.25.23.35.82.5 Common4.13.53.32.94.04.32.24.23.34.2 Value3.54.84.43.63.62.73.24.73.54.0 Preference7.43.44.86.64.47.47.13.86.93.3

9. Xerox 10/98 9 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. Does not Describes itdescribe completelyit at all |||||| 012345 Conventional Mapping Using Snake Charts

10. Xerox 10/98 10 An Example Positioning Statement For [target segment], the [concept] is [most important claim] because [single most important support]. Example: For PC users, the IOMEGA Zip drive is the best portable storage device because it is most cost-effective system.

11. Xerox 10/98 11 Uses of Mapping Techniques G Understand the underlying market structure of product categories as perceived by customers. This can help in identifying opportunities through “gaps” in the resulting maps. G Represent customers’ perceptions and preferences in a manner that aids communication and discussion within the product management team. G Evaluate a product (new concept) in the context of existing products in the market. G Explore strategic and tactical options to position new concepts. G Develop a (new) name for a product. G Check how perceptions of your products compare to those of your competitors.

12. Xerox 10/98 12 Uses of Mapping Techniques G Identify aspects of your products that are most favorable to you. G Select who to compete against in a given segment. G Determine exactly how much change is need on key product attributes to move your products to more favorable positions. G Visually determine whether your communications programs are having the desired impact on market perceptions. G Compare perceptions from different demographic, geographic, or psychographic subgroups in your market. G Facilitate strategic decision making in a team.

13. Xerox 10/98 13 Mapping Techniques G Mapping perceptions u Attribute-ratings methods (particularly useful for functional products) u Overall-similarity methods (particularly useful for image- oriented products) G Mapping preferences u Include an overall preference vector in a perceptual map u “External” analysis to fit preferences of individuals on a common perceptual map

14. Xerox 10/98 14 Perceptual Maps Using Attribute Ratings G Select a set of PDA’s which are of interest to the target group of customers (including the new concept of interest). G Identify a set of key attributes on which these pda’s are evaluated by the target group (e.g., through focus groups). G Ensure that customers are familiar with the products of interest (e.g., through video presentation). G Have customers evaluate the products on the chosen set of attributes. Example: Positioning of a new pda concept Light...........................…Heavy (A1) Unreliable..............….............Reliable (A2) Small…...........................Large (A3) Poor Connectivity…………………...Good connectivity (A4) Poor value...........…............…Good value (A5)... Definitely would not buy......................….....Definitely would buy (Preference)

15. Xerox 10/98 15 C1 C2 G Generate a matrix of inputs for the analysis consisting of each customer’s (C1, C2,...) ratings of each brand on each of the attributes (A1, A2, A3,....) G Compute average ratings of each brand on each attribute. Submit data to a suitable perceptual mapping technique (e.g., Factor Analysis). G Interpret the underlying key dimensions of the map using the directions of the individual attributes. G Articulate the implications of how customers’ view the competing products and concepts. A1A2A3A4...............A15 Sharp 580063722 Pilot 500043415 New PDA36277. Sharp 5800 Pilot 5000 New PDA Perceptual Maps Using Attribute Ratings

16. Xerox 10/98 16 Screen quality Connectivity? Image ? Common Large Easy to use Successful Good Communication capabilities Newton 130    Sony PIC 2000 Example Plot of Attributes of PDAs on a 2-D Perceptual Map (Difficult to use) Poor Communication capabilities

17. Xerox 10/98 17 Interpreting Perceptual Maps

18. Xerox 10/98 18 Guidelines for Interpreting Perceptual Maps G The arrow indicates the direction in which that attribute is increasing (The attribute is decreasing in the direction opposite to the arrow). Thus, PDAs positioned farther and farther in the South-West direction are considered to offer “good value,” and those positioned in the North-East direction offer poor value. G 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, “screen quality” and “expandability” are relatively more important than “economical” and “communication capabilities” in explaining how this group of customers discriminates between the PDAs.

19. Xerox 10/98 19 G 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 computers appear to be “Image” for the horizontal axis and “Connectivity” for the vertical axis. This interpretation can be based on attributes most correlated with the axes (Common, value, perceived success, etc. for the horizontal axis), and communication capabilities and connectivity for the vertical axis). G To position a PDA on each attribute, draw an imaginary perpendicular line from the location of that PDA onto that attribute. (These are shown by dashed lines on the map). Thus, Sony PIC 2000 is perceived to be easier to use than the Sharp 5800. Guidelines for Interpreting Perceptual Maps (cont.)

20. Xerox 10/98 20 G Data Input G Submit data to a preference mapping technique, such as PREFMAP-3, to obtain an “external joint space” map showing relationships between brands and preferences for each brand for each customer. Preferences are recovered by the map while keeping all products at their locations as determined by the perceptual map. G Interpret the preference map. Explore alternative locations for the focal product by moving it to different points on the map. C1C2C3C4........ Sharp 58002393 Pilot 50007725 New PDA3835 ….. An entry in this matrix is the stated preference of each customer (C1, C2,...) for each brand. A larger number indicates higher preference for that brand. Preference Maps

21. Xerox 10/98 21 Preference Map (Showing only Preferences and Objects)

22. Xerox 10/98 22 Evaluating Perceptual and Preference Maps G Technical adequacy u What percentage of the total information (variance) in the raw data is captured in the map? u What percentage of the information of each attribute (variance) is captured in the map? G Managerial interpretation (example questions) u What underlying dimensions seem to characterize how customers view the products? u What is the competitive set associated with the target product or new concept? u How well is a target product positioned with respect to the existing products? u Which attributes are related to each other? u Which attributes influence customer preferences positively? negatively? u What improvements will enhance the value of a product or new concept? u Which customer segments have positive perceptions and high preference for the product?

23. Xerox 10/98 23 Limitations G Provides a static model - ignores dynamics of customer perceptions. G Interpretation is sometimes difficult. G Does not incorporate cost or likelihood of being able to achieve a desired positioning. G Does not incorporate a “probability model” to indicate goodness of a map. G Generally, need about 6 to 8 products to make the technique useful.

24. Xerox 10/98 24 New Product Design G Role of design in new product development G Conjoint Analysis for product design G Designing a hotel

25. Xerox 10/98 25 Where companies want to put their efforts in new product development: u Getting our new products to the market on time, as planned (76% of companies interviewed) u Improving the appeal of our new products to customers (73%) u Developing our new products faster from concept to introduction (68%) u Developing products that are easier to manufacture, sell, install, and service (61%) u Reducing costs/investments related to new product development and introduction (47%) u Reducing the payback period of our new products (47%) u Increasing the number of new products (44%) Arthur D. Little Worldwide Survey

26. Xerox 10/98 26 Breakdown of Success Factors: Process versus Environment Source: Robert G. Cooper, Winning at New Products (1993)

27. Success measured using four factors: (1) whether it met or exceeded management’s criteria for success, (2) the profitability level (1-10 scale), (3) market share at the end of three years, and (4) whether it met company sales and profit objectives (1-10 scale). Source: Robert G. Cooper, Winning at New Products (1993 ) New Product Management (Spring 1998), Penn State University 27

28. Source: Robert G. Cooper, Winning at New Products (1993) New Product Management (Spring 1998), Penn State University 28

29. Source: Robert G. Cooper, Winning at New Products (1993) New Product Management (Spring 1998), Penn State University 29

30. Source: Robert G. Cooper (1993) New Product Management (Spring 1998), Penn State University 30

31. Xerox 10/98 31 Value of Good Design 80% of a product’s manufacturing costs are incurred during the first 20% of its design (Varies with product category).

32. Xerox 10/98 32 A way to understand and incorporate the structure of customer preferences into the new product design process. In particular, it enables one to evaluate how customers make tradeoffs between various product attributes. The basic output of conjoint analysis are: A numerical assessment of the relative importance that customers attach to attributes of a product category The value (utility) provided to customers by each potential feature of a product What is Conjoint Analysis?

33. Xerox 10/98 33 Why is Conjoint Analysis Useful? G Designing new products that enhance customer value G Forecasting sales/market share of alternative product concepts G Identifying market segments for which a given concept has high value G Identifying the “best” concept for a target segment

34. Xerox 10/98 34 Measuring Importance of Attributes When ordering a computer, how important is… Circle one Not Very Important Price 1 2 3 4 5 6 7 8 9 Performance 1 2 3 4 5 6 7 8 9 Reliability 1 2 3 4 5 6 7 8 9 Delivery time 1 2 3 4 5 6 7 8 9

35. Xerox 10/98 35 Should we offer our business travelers more room space or a fax machine in their room? Should we offer more leisure-time activities (sauna, exercise room, tennis courts) or more food related services (several dining options, vending machines, in-room kitchen facilities)? Given a target cost for a product, should we enhance product reliability or its performance? Should we use a steel or aluminum casing to increase customer preference for the new equipment? How Do We Resolve These “Design” Questions?

36. Xerox 10/98 36 Attributes Price (4 options) Delivery_terms (4 options) Perf. specs Delivery timePrice Exceed by 20% 6 months$600k Exceed by 5% 9 months$700k Meet specs 12 months$800k Short by 5% 15 months$900k Delivery terms Installed, 2-year guarantee Installed, 1-year guarantee Installed, service contract FOB seller, service contract A total of 256 (4x4x4x4) different offerings can be designed from these options! An Example Conjoint Study: Air Pollution Control Equipment Performance specs (4 options) Delivery time (4 options)

37. Xerox 10/98 37 Data for Conjoint Analysis: Paired Comparisons DeluxeMid-levelmodel Performance specsExceed by 20%Exceed by 5% Delivery time12 months6 months Price700k700k Delivery termsInstalled, 1 yearInstalled, service contract Which do you prefer? Which one would you buy?

38. Xerox 10/98 38 Data for Conjoint Analysis: Full-Profile Ratings or Rankings ProductPerf_spec Del_time Price Del_terms Example bundle Preference number score 1Exceed_20% 6_months $600k Inst_2yr 100 2Exceed_20% 9_months $700k Inst_ser 80 3Exceed_20% 12_months $800k FOB_ser 40 4 Exceed_20% 15_months $900k Inst_1yr 20 5 Exceed_5% 6_months $700k Inst_1yr 70 6 Exceed_5% 9_months $600k FOB_ser 75 7Exceed_5% 12_months $900k Inst_ser 65 8Exceed_5% 15_months $800k Inst_2yr 70 9Meet_specs 6_months $700k Inst_ser 50 10Meet_specs 9_months $900k Inst_2yr 20 11Meet_specs 12_months $600k Inst_1yr 40 12Meet_specs 15_months $700k FOB_ser 30 13Short_5% 6_months $900k FOB_ser 5 14Short_5% 9_months $800k Inst_1yr 10 15Short_5% 12_months $700k Inst_2yr 10 16Short_5% 15_months $600k Inst_ser 0

39. Xerox 10/98 39 Example Part Worth for Attributes

40. Xerox 10/98 40 Example Part Worths for Attribute Options

41. Xerox 10/98 41 U(P) =  a ij x ij a i=1 k j=1 P:A particular product/concept of interest U(P):The utility associated with product P a ij :Utility associated with th jth level (j = 1, 2, 3...k j ) on the ith attribute k j :Number of levels of attribute i m:Number of attributes x ij :1 if the jth level of the ith attribute is present in product P 0 otherwise Conjoint Utility Computations

42. Xerox 10/98 42 G The relevant market consists of products P 1, P 2,...P N. Some of theses may be existing products and, others concepts being evaluated. G (Assume) Each consumer will prefer to buy the product with the highest utility among those available Then forecasted market share for products P i is given by: Where K is the number of consumers who participated in the study Market Share Forecasts

43. Xerox 10/98 43 G Market consists of three products and three customers Product Market Share Computation (Air Pollution Control Equipment) Waste watchThermatrixWahlco Performance specs Exceed 5% Exceed 20%Meet Specs Delivery time 9 months 9 months6 months Price $800k $900k$600k Delivery terms FOB_ser Inst_1YrInst_ser

44. Xerox 10/98 44 Market Share Computation: (Air Pollution Control Equipment) Sunoco Mattel ICI Base 0 0 0 Meet specs 5 10 10 Exceed 5% 35 0 40 Exceed 20% 40 0 50 12 months 20 5 3 9 months 30 20 8 6 months 40 10 10 $800k 5 20 2 $700K 8 35 5 $600K 10 50 10 Inst_ser 6 5 10 Inst_1Yr 8 10 20 Inst_2Yr 10 20 30 Customer’s Utility

45. Xerox 10/98 45 Computed Utility for Products Market Share Computation: (Air Pollution Control Equipment) Waste Watch ThermatrixWahlco Sunoco 70 78 61 Mattel 40 30 75 ICI 50 78 40 G Maximum Utility Rule: If we assume customers will only buy the product with the highest utility, the market share for Thermatrix is 2/3 and 1/3 for Wahlco. G Share of preference rule: If we assume that each customer will buy each product in proportion to its utility relative to the other products, then market shares for the three products are: Waste Watch: 30.3% Thermatrix: 34.8 Wahlco: 34.9

46. Xerox 10/98 46 Situations Where Conjoint Analysis Might Be Valuable G The new concept involves important tradeoffs affecting design, production, marketing, or other operational variables G Product/service is realistically decomposable into a set of basic attributes G Product/service choice tends to be high involvement G Factorial combinations of basic attribute levels are believable G Desirable new-product alternatives can be synthesized from basic alternatives G Product/service alternatives can be realistically described, either verbally or pictorially. (Otherwise, actual product formulations should be considered) G Perceptions of hypothetical combinations are reasonably homogeneous across members of the target group

47. Xerox 10/98 47 Some Resources for Keeping up with Conjoint Analysis G http://www.nevada.edu/~huc/html/conj.html G http://www.sawtooth.com

48. Cheap (<$25)  Amplifies human voice only Hands-free  operation Multiple functions  Light weight  Durable  Listening Enhancer Contributes to benefit  Distracts from benefit 1,000-4,000 Hz operation Standard Batteries Press-mold Manufacture Piezo-Electric Speaker Customer Benefits Technical Aspects Relationship Between Technical Features and User Benefits (“The House of Quality” Concept)

49. You can’t always go by customer opinion. A turkey, if you ask a turkey, should be stuffed with grasshoppers, grit and worms. -- Adapted from Changing Times