Session #4: Agenda for MM2–
Advanced Marketing Management
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Brief Review of Session 2
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Identifying Competition
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Measuring Competitive Positioning & Customer Preferences
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Overview of Session 2:
Take Away Points from the Sealed Air Case
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Consider state & expected changes in competition;
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Consider state & expected changes in customer needs;
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Must consider customers’ true needs;
Express advantages in terms of customer benefits:
Consider state & expected changes in environment;
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Competitors’ ability & motivation to pursue your customers;
Carefully interpret signals about expected competition;
Consider what is threatened
Technological changes, outlook of economy, etc.
Internal policy very important, but cannot ignore external
realities
2
Overview of Session 2 (cont.):
Secondary Take Away Points from the Sealed Air Case
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Internal issues to consider
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Potential cannibalization
Consistency with prior message to customers
Fit with company policy
Non-obvious implications of marketing mix decisions
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Pricing
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Place (distribution)
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Whether or not competitors decide to enter the market
Perceived quality
Effect of commission level on sales force motivation
Typical of mature market
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Crude but Useful Marketing Strategy Rule #1:
Basic Forces of Change
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Competition
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Imitation: if you make a lot of money, or even seem as though you
may, someone will copy what you do
Particular competitive advantages will generally not last
Customers
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Experimentation: everyone seeks new ways to make money
Learning & taste change: determinants of desirability change
Assimilation: preferences are perishable; expectations increase
Value will generally not last
Beware of the ‘boiling frog’ syndrome
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Identifying Competition:
Strategic Market Definition
5
Strategic Market Definition:
A Market-Orientated Viewpoint
Company
Revlon
Narrow Definition
Cosmetics
Broad Definition
Hope (to be irresistible, attractive,..)
Columbia Pictures Movies
Entertainment
McDonalds
Fast food
Quality, service, cleanliness, value,
dependability, consistency
IBM
Computers
Solutions for information needs
Xerox
Copying
Office productivity
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Levels of Competition
Fast food
ChewingBeer
gum
Product Form
Competition:
Diet Colas
Water
Tea
Regular Colas
Diet Coke Diet Juices
Diet PepsiLemon
limes
Fruit flavoured colas
Category
Competition:
Soft drinks
Coffee
Generic
Competition:
Beverages
Budget
competition:
Food &
Entertainment
Ice
cream
Video rental
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Identifying Competition
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Industry based approaches
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Company based
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Customer based approaches
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Identifying Competition (cont.)
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Industry Based Approach
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A market consists of companies with similar products, technology,
geographical coverage
Measurement-- SIC classification (http://www.osha.gov/cgi-bin/sic/sicser5)
Company Based Approach-- Managerial Judgment
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Against whom do we usually compete (direct competitors, makers of
substitute products)?
Who are potential competitive entrants & how likely are they to enter?
Can competitors be grouped into strategic groups based on assets,
competencies &/or strategies?
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Identifying Competition (cont.)
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Examples of customer based approaches
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Based on observed customer behavior
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Cross elasticities
Brand switching matrices
Based on surveys & experiments
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Product deletion/ substitution
Market structure of product category as perceived by
customers
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Identifying Competition (cont.):
Cross Elasticities Example
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Competitive structure of eggs (cross price elasticities)
Sales by Egg Size
Price of
Large
Medium
Large
-3.324
Medium
1.360
Private Label
20-pack
-2.144
2.756
Private Label
1.996
-3.106
0.886
20-pack
1.386
-2.030
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Identifying Competition (cont.):
Brand Switching Matrix Example
Brand bought at time t+1
Brand
bought
at time t
A
B
C
D
A
B
C
D
.60
.25
.01
.03
.37
.70
.04
.01
.02
.03
.69
.18
.01
.02
.26
.78
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Identifying Competition (cont.):
Surveys & Experiments
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Product deletion/ substitution
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Questions such as- what brand would you buy if ours were
not available/ more expensive?
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Measuring Competitive
Positioning & Customer
Preferences
MMII Spring 2001
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Crude Rule of Marketing Strategy # 2:
Customer Decisions
Customer decisions
are based on perceptions.
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Semantic Scales: Input
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Ask customers directly to assess different products or
services (e.g., MBA programs)
1
Job opportunities:
limited
Size of promotion: very small
Quality of instruction:
low
Social activities:
poor
Tuition:
inexpensive
2
3
4
5
6
7
plentiful
very large
high
rich
high
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Example: Truck Cabin
Perceived Performance
Comparison on Rating Scale
Performance Deviation
Compared to Competition
Attributes:
Killer
Our
Main
Company Competitor (from most (A) to least (L) important)
Weakness
A: Ease of maintenance *
A
B: Fuel efficiency *
B
C: Cab durability
D
D: Roominess and comfort *
E: Quality of materials
F: Safety features
G: Ease of steering
H: Location of controls *
I: Windshield design
J: Instrumentation *
L
K: Ease of entry
L: Outer appearance
-2
-1
1
2
3
4
Poor
Excellent
* Statistically significant difference (p‹0.05) Secondary
Performance
Performance
Weakness
Key
Strength
7
6
C
5
F
4 G
E
3
H
2 I
1
0
J
K
1
2
Possible
Overkill
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Semantic Scales: Summary
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Input
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ratings of product attributes,
importance & ideal values by
individuals
Results
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ratings of various product attributes
for different objects
importance rating of product
attributes
ideal rating of product attributes
Advantages
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simple to do
easy to interpret results
Assumptions & Limitations
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product = set of attributes
can customers rate different
attributes?
are customers willing to answer
truthfully?
When customers think of “product” in terms of a few & well-defined attributes.
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MDS: Input
Let customers assess the dis/similarity of different items
Wharton
Harvard
Stanford
LBS
IMD
Insead
Wharton
Harvard
Stanford
LBS
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Example: U.S. Car Market
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MDS: Summary
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Input
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similarity among objects
Advantages
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Results * inferred
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number of dimensions used
to distinguish objects
relative positioning of objects
along these dimensions
preferences of these
dimensions (ideal values)
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insights about perceptions
(customers may not know)
competition from customers’ view
no need to describe features
Assumptions & Limitations
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need to infer attribute levels
no indication of attribute
importance
 When customer perceptions of “products” are shaped by aggregated factors that cannot
be articulated easily.
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Conjoint Analysis: Design
Job A
Location:
Salary:
Exposure to
top-level
mgmt:
Crime level:
Job B
London
Average for W.E.
Minimal
Average for big
W.E. city
Job D
Location:
Salary:
Exposure to
top-level
mgmt:
Crime level:
Job C
London
20% below average
About 25% of proj.
20% below average
Job E
Eastern Europe
Average for W.E.
Majority of projects
20% below average
Job G
Location:
Salary:
Exposure to
top-level
mgmt:
Crime level:
Location:
Salary:
Exposure to
top-level
mgmt:
Crime level:
Location:
Salary:
Exposure to
top-level
mgmt:
Crime level:
About 25% of proj.
50% above average
Location:
Salary:
Exposure to
top-level
mgmt:
Crime level:
London
20% above average
Majority of projects
50% above average
Job F
Eastern Europe
20% below average
Minimal
50% above average
Job H
South Africa
Average for W.E.
Location:
Salary:
Exposure to
top-level
mgmt:
Crime level:
Location:
Salary:
Exposure to
top-level
mgmt:
Crime level:
Eastern Europe
20% above average
About 25% of proj.
Average for big
W.E. city
Job I
South Africa
20% below average
Majority of projects
Average for big
W.E. city
Location:
Salary:
Exposure to
top-level
mgmt:
Crime level:
South Africa
20% above average
Minimal
20% below average
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Conjoint Analysis: Summary
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Input
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Judgment of attribute
combinations
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Advantages
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Rankings or ratings
choice-based
Results
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relative importance of attributes
relative utility for different levels for
each attribute
force tradeoffs
insights about preferences
(customers may not know)
Assumptions & Limitations
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utility of product = sum of utility
from attributes
 Customers may be unable or unwilling to indicate their preferences for some attributes.
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Conjoint Analysis in Markstrat
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Final Note on Assessing Customer
Perceptions & Preferences
 All methods can give excellent information, when
employed appropriately.
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Summary
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A Market-Orientated Viewpoint
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Levels of Competition
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What do (/could) customer purchase from us
Many possibilities
3 Methods for Identifying Competition
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Industry based approaches (SIC)
Company based (Managerial judgment)
Customer based approaches: Identifying Competition Based on
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Observed Customer Behavior (e.g., cross elasticities, brand switching matrix)
Surveys & Experiments (e.g., product deletion/ substitution)
Measuring Competitive Positioning & Customer Preferences
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Semantic Scales
MDS
Conjoint Analysis
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