# 1 Ganesh Iyer Perceptual Mapping XMBA 206.1 Session 3 Summer 2008.

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1 Ganesh Iyer Perceptual Mapping XMBA 206.1 Session 3 Summer 2008

2 Ganesh Iyer Perceptual Maps l To gain competitive advantage, a firm must correctly position itself, its products, or services against competitive offerings. l 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. l Techniques that help us to construct such mental or Perceptual Maps are called Multidimensional Scaling and Factor Analysis.

3 Ganesh Iyer What is a Perceptual Map l A perceptual map is a visual representation of how target customers view the competing alternatives in a Euclidean space which represents the market l 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

4 Ganesh Iyer Perceptual Mapping Process l Specify the "Relevant" Objects or Products. l Relevance means that the set of products chosen must be the set of competitive products that are relevant for managerial decision-making. l 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)

5 Ganesh Iyer Method 1: Attribute Rating Method Example: Evaluation of a New Laptop concept. l Select a set of laptop computers of interest to be the target group including the new concept…(say 4 products) l 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. l Ensure that consumers are familiar with the laptops that are to be evaluated (e.g., through video presentation, or actual prototypes) l Respondents (target customers) evaluate / rank or rate products.

6 Ganesh Iyer Perceptual Mapping A1A2A3A4 P1 P2 P3 P4 l Data Matrix = 4 (products) X 6 (attributes) X 300 (respondents). Consumers Data MatrixFactor Analysis Perceptual map 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

7 Ganesh Iyer Factor Analysis: Key Concepts l It is difficult to get a clear picture of the market when dealing with so many attributes and products. l All the data/dimensions might not be necessary to capture consumer perceptions. Why? l Highly correlated attributes »Create linear combination of the measures to get a single new dimension of the original attributes. l Take out attributes on which all computers are rated about the same. l 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

8 Ganesh Iyer Light Example Plot of Attributes of Laptops on a 2D Perceptual Map C Butterfly Slow Look/Styling Performance Easy setup Value Common Elegant 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. Toshiba 1960CT

9 Ganesh Iyer C Butterfly Slow Easy setup Light Common Elegant (Plain) Example Plot of Attributes of Laptops on a 2D Perceptual Map Looks/Styling Performance Good Value Toshiba 1960CT

10 Ganesh Iyer Guidelines for Interpreting Perceptual Maps (Laptop) l The arrow indicates the direction in which that attribute is increasing. l 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. l Attribute that are both relatively important (i.e., long vector) and close to the horizontal (vertical) axis help interpret the meaning of axis. l 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). l What practical uses can you now put this map to at this stage?

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

12 Ganesh Iyer Method 2: Overall Similarity Ratings Multidimensional Scaling l Suppose we are interested in developing a perceptual map of the ED market consisting of Viagra, Levitra and Cialis. l 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) l Ask the respondent to rank on a scale of 1-7 the similarity of two products. Do this for all pairs…n products => n(n-1)/2 pairs. »1 is very similar »7 is very different l How different are the products perceived? »What are features distinguish different products l Commercial software implementation »SPSS and SAS.

13 Ganesh Iyer ED Market

14 Ganesh Iyer ED Market Viagra Levitra Cialis Viagra 1 Levitra 2 1 Cialis 6 5.5 1 The numbers are like distances on a perceptual map

15 Ganesh Iyer MDS Perceptual Map 2 5.5 6 What more would you like to know?

16 Ganesh Iyer Multidimensional Scaling l With 3 products, I can perfectly represent the information in two dimensions l With more products to be represented in two dimensions »information loss l Multidimensional scaling (MDS) is a mathematical technique that helps implement this analysis of similarity perceptions with minimum information loss. l 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. l Commercial software implementation »SPSS, SAS modules.

17 Ganesh Iyer Uses of Perceptual Maps l 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 l 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.

18 Ganesh Iyer Learning l Perceptual maps are about How our product is perceived by consumers relative to competition? »Link Segmentation and Positioning l Segmentation, Positioning and Perceptual mapping involve careful and sophisticated quantitative analysis and not vague managerial intuition. l Two important methods to develop perceptual maps »Attribute rating »Similarity rating

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