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Business-to-Business Marketing Differentation Strategies

Business-to-Business Marketing Differentation Strategies. Haas School of Business UC Berkeley Fall 2008 Week 7 Zsolt Katona. 1. Today. Case Discussion: Barco Differentiation in practice: Perceptual Maps Industrat: What happened so far? Industrat Decision 6. Competitive continuum.

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Business-to-Business Marketing Differentation Strategies

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  1. Business-to-Business MarketingDifferentation Strategies Haas School of Business UC Berkeley Fall 2008 Week 7 Zsolt Katona 1

  2. Today • Case Discussion: Barco • Differentiation in practice: Perceptual Maps • Industrat: What happened so far? • Industrat Decision 6

  3. Competitive continuum 1 firm “few” firms many firms Monopoly Oligopoly “Perfect” competition

  4. Competitive “continuum” Oligopoly Scope for strategy Monopoly ~ Perfect comp.

  5. Segment 1 Att2 Segment 2 Att1 Att2 Segment 1 Segment 2 Att1 Basic way to avoid competition: Differentiation Vertical differentiation: Horizontal differentiation:

  6. Competitor Analysis Goal: To understand competitors strength and weaknesses and to discover untapped opportunities. Method: - Perceptual mapping. (i) Along what relevant dimensions is competition taking place? (ii) How are competitors positioned along those dimensions?

  7. Perceptual Mapping • Usedmainly for: • Segmentation and Positioning • Designing differentiation strategy • Identify new product opportunities • Avoid cannibalization • Output: • Identifies perceptual dimensions along which consumers evaluate products in the category • Identifies the location of brands along these dimensions • Identifies consumers’“ideal points” (= segments). • Limitations: • Static (descriptive) • Interpretation may be subjective • Aggregation

  8. Two approaches • Compositional (uses product attributes) • obtain “important” product attributes (focus groups) • obtain ratings on attributes (survey) • obtain “relevant” attributes (factor analysis) • Decompositional (uses holistic evaluations) • obtain perceived distance measures between products • compose map (multidimensional scaling)

  9. Factor Analysis Factor analysis is a statistical method used to determine the few underlying dimensions of a larger set of correlated variables. It is the “analyst’s data-mining tool”. Correlation of two variables: Correlation table: V1 c = -1...0..1 V2 V1 V2 V3 V4 V1 .2 .1 1 .9 V2 .9 1 .3 .2 V3 .2 .3 1 .8 .1 .2 .8 1 V4

  10. Factor Analysis 1 0 • Factor Analysis rearranges any correlation matrix in such a way that it is only composed of blocks of “high” and “low” figures: • Factors are listed in order of their contribution to overall variation in the data. • How many factors we have depends on how much variance we want to explain • Easy-to-use tool to discover correlation structures. • Danger: do not infer “causality” 1 0 1

  11. Example: B2B communication product

  12. Extract 2 most important factors:

  13. Ease of Use Telephone New product opportunity Personal visit Effectiveness Teletype NBVT Closed-circuit television Represent products in the space of the 2 factors

  14. Decompositional Method: MDS of 10 U.S. cities Subjective Geographic Locations of 10 U.S. cities… …based on… perceived airline distances between cities.

  15. Map of the U.S. based on subjective judgment Source: Reproduced with permission from a Research Study of R.N. Shepard.

  16. MDS of major beer brands: MDS in a blind-taste test:

  17. Example with Business Schools

  18. Compositional vs. Decompositional • Compositional • More objective in interpreting dimensions and diagnosing competitive situation • May frame consumers • Easier data collection • Can be done with fewer brands • Research may miss key dimensions • More suitable for non-existing products • Decompositional • More general • Allows only few dimensions • More likely to provide surprises • Interpretation may be subjective • Needs at least 7 brands (substitutes)

  19. B2B Challenges • Small number of customers • Different decision makers might have different perceptions • Who do you want to make happy?

  20. Key lessons: Differentiation is a fundamental way to avoid competition Product differentiation needs to be embedded in a consistent strategy including all other elements of the value delivery system (distribution, communication, pricing). Strategy needs to be consistent over time. Strategy needs to be clear to competitors (“strategic posture”) 21

  21. Industrat Stock Prices 22

  22. Sales 23

  23. Costs 24

  24. Awareness 25

  25. Corporate Marketing 26

  26. Sales Force Training 27

  27. Segmentation Suspension Communication Aggregate Instrumentation Consumer Resistance

  28. Market Shares: Instrumentation 29

  29. Market Shares: Communication 30

  30. Market Shares: Consumer 31

  31. Buying Process: Instrumentation 32 Production Manager Engineering Manager Purchasing Manager General Manager

  32. Buying Process: Communication 33 Production Manager Engineering Manager Purchasing Manager General Manager

  33. Buying Process: Consumer 34 Production Manager Engineering Manager Purchasing Manager General Manager

  34. R&D 35

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