Perceptual Maps

Perceptual Mapping XMBA 206.1 Session 3 Summer 2008

Ganesh Iyer

Perceptual Maps ●

To gain competitive advantage, a firm must correctly position itself, its products, or services against competitive offerings.

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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.

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Ganesh Iyer

Techniques that help us to construct such mental or Perceptual Maps are called Multidimensional Scaling and Factor Analysis.

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

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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

Ganesh Iyer

Perceptual Mapping Process ●

Specify the "Relevant" Objects or Products.

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Relevance means that the set of products chosen must be the set of competitive products that are relevant for managerial decision-making.

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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)

Ganesh Iyer

Method 1: Attribute Rating Method Example: Evaluation of a New Laptop concept.

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Select a set of laptop computers of interest to be the target group including the new concept…(say 4 products)

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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.

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Ensure that consumers are familiar with the laptops that are to be evaluated (e.g., through video presentation, or actual prototypes)

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Respondents (target customers) evaluate / rank or rate products.

Ganesh Iyer

Perceptual Mapping ● Data Matrix = 4 (products) X 6 (attributes) X 300 (respondents). Consumers

A1

A2

A3

A4

P1 P2 P3 P4 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

Data Matrix Ganesh Iyer

Factor Analysis

Perceptual map

Factor Analysis: Key Concepts ●

It is difficult to get a clear picture of the market when dealing with so many attributes and products.

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All the data/dimensions might not be necessary to capture consumer perceptions. Why?

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Highly correlated attributes » Create linear combination of the measures to get a single new dimension of the original attributes.

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Take out attributes on which all computers are rated about the same.

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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

Ganesh Iyer

Example Plot of Attributes of Laptops on a 2D Perceptual Map Common

Easy setup

Slow

• Toshiba 1960CT

Performance

•ΙΒΜ701 C

Value

“Butterfly” Elegant

Look/Styling 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.

Ganesh Iyer

Light

Example Plot of Attributes of Laptops on a 2D Perceptual Map (Plain) Common

Easy setup

Slow

• Toshiba 1960CT

Performance •ΙΒΜ701 C “Butterfly” Elegant

Looks/Styling Ganesh Iyer

Good Value

Light

Guidelines for Interpreting Perceptual Maps (Laptop) ●

The arrow indicates the direction in which that attribute is increasing.

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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.

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Attribute that are both relatively important (i.e., long vector) and close to the horizontal (vertical) axis help interpret the meaning of axis.

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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).

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What practical uses can you now put this map to at this stage?

Ganesh Iyer

1

Limitations ●

Researcher should be able to clearly conceptualize the attributes

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No perception gap between intended and actual perception of the attributes.

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Works well for hard or functional attributes, (price, product features).

Ganesh Iyer

1

Method 2: Overall Similarity Ratings Multidimensional Scaling ●

Suppose we are interested in developing a perceptual map of the ED market consisting of Viagra, Levitra and Cialis.

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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)

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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

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How different are the products perceived? » What are features distinguish different products

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Commercial software implementation » SPSS and SAS.

Ganesh Iyer

1

ED Market

Viagra Levitra Viagra

Levitra Cialis

Ganesh Iyer

Cialis

1 1 1

1

ED Market

Viagra Levitra Viagra Levitra Cialis

Cialis

1 2

6

1 5.5

1

The numbers are like distances on a perceptual map

Ganesh Iyer

1

MDS Perceptual Map

5.5

6 2 What more would you like to know?

Ganesh Iyer

1

Multidimensional Scaling ●

With 3 products, I can perfectly represent the information in two dimensions

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With more products to be represented in two dimensions »

information loss

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Multidimensional scaling (MDS) is a mathematical technique that helps implement this analysis of similarity perceptions with minimum information loss.

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What are advantages/disadvantages of MDS » » »

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Commercial software implementation »

Ganesh Iyer

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.

SPSS, SAS modules.

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Uses of Perceptual Maps

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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

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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.

Ganesh Iyer

1

Learning ●

Perceptual maps are about “How our product is perceived by consumers relative to competition?” » Link Segmentation and Positioning

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Segmentation, Positioning and Perceptual mapping involve careful and sophisticated quantitative analysis and not vague managerial intuition.

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Two important methods to develop perceptual maps » Attribute rating » Similarity rating

Ganesh Iyer

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