MAPPING YOUR COMPETITIVE POSITION

By Richard A. D’Aveni

Mickenson Pierre

Richard D’Aveni

•Professor of Strategic Management at Dartmouth College’s Tuck School of Business in Hanover, New Hampshire•Author of three books:

•Hypercompetition•Strategic Supremacy•Hypercompetitive Rivalries

• Price-Benefit Positioning Map• Relationship between primary benefit and the

prices of all the products in a given market• Define The Market: Three Steps

• Identify the customer needs• Choose the country or region you wish to

study• Track entire market or a segment

• Ties to last week’s presentation about strategic statement

Drawing Positioning Map

Choose the price and determine the primary benefit The benefit that explains the largest

amount of variance in prices Doing this could be complicated for a

product may offer more than one benefit Companies usually differentiate by

focusing on a different benefit than competitors do

Drawing Positioning Map (Contd.)

Success of strategies depends on values customers place on features

Steps to determine that value: Draw up a list of all benefits Use unbiased data, no gut instinct or

manager’s opinions After gathering data, use regression

analysis

Drawing Positioning Map (Contd.)

Regression Analysis- A method used to find out which benefit

explains most of the variance in product’s prices More reliable than asking people Software packages like Excel, SAS Analytics, for

instance allow executives to perform regression analysis

Final Step in drawing the map Plot positions and draw the expected price line How much customers expect to pay on average

to get different level of benefits

Drawing Positioning Map (Contd.)

Mapping The Cell phone Market

How Apple Set the Pace with the iPod

Help companies penetrate unattained market Pinpoint benefits valued by customers Locate unoccupied or less competitive

spaces Identify opportunities created by

changes in the relationship between primary benefit and prices

When interpreted within the context of industry and customer knowledge, they help explain why some enterprises perform better than others do.

Interpreting Positioning Maps

Companies spent a great deal of money to offer additional services without knowing if customers want them enough to pay for them

Drain on corporate resources Avoid problems by calculating the

premiums earned for intangible benefits

Valuing Intangible Benefits

2002, Harley-Davidson’s models earned large premiums compared with rival products

2004, new American rivals, such as Victory and Big Dog, earned 41% premium over Harley-Davidson

2006, they created a new image appealing to more social classes

Stock price still floundered

Fall of Harley-Davidson

Companies can employ the price-benefit equation to get ahead of competitors Example of major U.S. hotel chain Major Factor or primary benefit:

Customer Experience Rivals had problems competing

Anticipating shifts in the value of benefits

Extend the use of price-benefit maps Throw more data into the mix

Example: Major U.S. automobile manufacturer Price-benefit map helped identify

opportunity BMW capitalized on an opportunity in

the market in the mid 1990’s When customers’ priorities shift

radically, the benefits they desire also change

Finding Paths of Least Resistance

Finding Opportunity in the Crowded Midsize-Car Market

Companies could use price-benefit maps to Predict the strategic intent of rivals Find ways of preempting them

One method used is to draw maps based on projections of market trends Example “Primo”

Preempting Rivals

Use of past trends to map projected future market moves

Good to eliminate competition Primo moved up and down the

expected line Give customers a range of options As a result one of its competitors quit

Capturing an Evolving Strategy

Price-benefit maps sound early warnings

Suggest responses to competitive threats

Open executives' minds to many possibilities

Allow executives to make decisions based on fact

Conclusion

Questions?

The End