Tuesday, 30 August 2011

Bubbles & Business Strategies !!

Perceptual Mapping seems to be the easiest tool to understand with bubbles, sort of arrows and distances telling the story, but the other side of story of when and how to apply the tool and acting on the basis of the conclusions is something that determines the actual strength of the tool. The screen actually shows the projections of the bubbles/attributes in a multidimensional space, and hence selecting the suitable dimensions which reduces the error is also important.

The perceptual mapping concept is being used from quite some time by the companies, as early as in 1968 Nestle company conducted a study which used perceptual mapping, to determine if regional differences in product perceptions can be exploited by repositioning certain brands through selective advertising changes by using the attributes based on social benefits, convenience and taste of the products. This mapping data has also been used by the financial companies in the sectors like Insurance, in determining what influences the customer to go for insurance products. This can also be extended to better classification of funds, which were earlier primarily classified on the basis of investment strategies and assets by looking at the aspects of risks, assets, returns and costs involved. Similar classifications of hedge funds into different classes have come also come up using the cluster analysis.

General applications of Perceptual mapping include:

  • Analysing similarity between the brands, to position consumers relative to brands in terms of their preferences, or to study how demographic and psychometric variables relate to consumer choice. Hence can suggest changes in perceptions required to reposition the brand to appeal to other segments.
  • The analysis can help in launch of new products, by identifying the attributes of the current products in the products and similarities of the existing products and come up with a new product which takes care of missing attributes. The simple price and quality can be the attributes which can help in taking such decisions whether to go with the launch of the product and identify potential competitors.
  • Analysing the perceptions of consumers on various attributes offered by the company and the competitors can help the company, identify the shortcomings and improve its operations. In the case of Airlines, Affordability, Onboard comforts, Entertainment and Services being offered may be important attributes and the perceptual mapping can help the company in understanding the areas where there is a scope of improvement and also identify the other attributes of such users who want such improvements.
  • The perceptual mapping can also help in bundling of products, and identifying the attributes that go together.
  • The perceptual mapping approach was also used in a case to identify how managers chose the outsourcing models and it was found that the purchasing managers choose sourcing locations using multiple criteria instead of only focusing on cost. But some perceptions are biased by cultural stereotypes and do not reflect reality, which suggests that managers have to be careful when using their subjective judgment in choosing sourcing locations. Thus perception mapping can also help in identifying the possible misjudgement by the managers in making decisions.
  • Perceptual mapping can also be used to determine how brands should be repositioned once they are located on a set of perceived product characteristics. For example, a brand may be close to another in the company's line on certain product dimensions, causing an unacceptable level of cannibalization.
Bubbles do make sense !!

Author Name: Javed Ali Khan Pathan

Group: Finance 2

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