Bases of Differentiation

1. Bases of Differentiation • Features: characteristics that supplement a product’s basic function - “bare bones” model - optional features Continuously introduce new features - Japanese electronics manufacturers - Contact recent buyers - Survey - Value to customer vs. cost to firm tradeoff

2. Quality Strategic Planning Institute (SPI) found a positive correlation between Quality and ROI. In a study of 525 units, ROI Low Quality 17% Medium Quality 20% High Quality 27% Benefits of Quality - Premium price - Repeat purchase - Loyalty - Positive word of mouth

3. Types of Quality • Performance quality • Conformance quality • Reliability – Maytag • Durability – Volvo has highest mean life • Repairability - Caterpillar

4. Design and style Style - How well the product looks and feels to the buyer. - Packaging of cosmetics - Jaguar - GM hired Pinifarina, an Italian designer, to design the Allante’ - Herman Miller - office furniture - Olivette - office machines - Swatch - watches Design - Integration - Italian design - apparel and furniture - Scandianvian design - functionality aesthetic - German design - austerity and robustness - Braun - design, engineering, and manufacturing - Bang and Olufsen - stereo and television

5. Services • Delivery - speed, accuracy, care - Deluxe Check Printers - shipped in one day after order • Installation - IBM delivers all equipment to the site at same time. - IBM moves competitors equipment as well. • Customer training – General Electric - McDonalds employees attend Hamburger University • Consulting - McKesson Corporation - 12,000 independent pharmacists. Helps set up accounting and inventory systems

6. Personnel • Competence - skill and knowledge • Courtesy - friendly, respectful, and considerate • Reliability - consistency and accuracy • Credibility - trustworthy • Responsiveness - quick response • Communication - make effort to understand and communicate McDonald’s - courteous Singapore - beauty and grace IBM - professional Disney - upbeat

7. Brand and Image e.g., Marlboro Man Identity versus image. Identity - how companies aim to identify itself to its customers. Image - how an individual perceives the company

8. TIDE • Is so powerful; it cleans down to the fiber • All purpose family detergent for extra-tough laundry jobs. • “Tide’s in, dirt’s out” • Great stain fighting qualities

9. CHEER • Color Guard gives “outstanding cleaning and color protection. • Clothes look clean, bright, and more like new.

10. OXYDOL • Contains bleach. • Makes your white clothes really white and your colored clothes really bright. • “So don’t reach for the bleach -- grab a box of Ox!”

11. GAIN • Originally P&G’s “enzyme” detergent • Repositioned as the detergent that gives you clean, fresh smelling clothes • “Freshens like sunshine”

12. BOLD • Detergent with fabric softener • “Cleans, softens, and controls static with fabric softener scent”

13. IVORY SNOW • Ninety-nine percent and forty-four one hundredths percent pure • “Mild, gentle soap for diapers and baby clothes”

14. DREFT • Formulated for baby’s diapers and clothes. • Contains borax - nature’s natural sweetener • “A clean you can trust.”

15. DASH • P&G’s value entry • Attacks tough dirt • “Dash does it for a great low price.”

16. ERA PLUS • Built-in stain removers • “Gets tough stains out and does a great job on your whole wash too.”

17. Positioning – Why? 1. Over-communicated society - 30,000 books published - 10 million tons of news, 94 pounds/year/person NY Times (Sunday) - 4.5 lbs.; 5 million words - Television - 13 hours/day 2. Product explosion 25,000 SKUs UPC - 10 digits 3.Advertising explosion Advertising spending in US is $376.62/year/person versus $17 for the rest of world

18. Developing a positioning What are the points of differentiation? Good points of differentiation should have the following characteristics: • Important • Distinctive • Superior • Communicable • Preemptive • Affordable • Profitable Product needs a USP ( Unique Selling Proposition )

19. PositioningAl Ries and Jack Trout 1. Be the first - pioneering advantage 2. Strengthen current position - give a reason - Avis – We’re No. 2, we try harder - 7-Up – The Uncola 3. Look for the hole: Milky Way candy - lasts longer United Jersey Bank - fast moving bank 4. Deposition/reposition the competition Lenox/Royal Doulton - both from England Lenox made in New Jersey

20. C B A Perceptual Maps • How similar are each of the following brands? A-B 1 2 3 4 5 B-C 1 2 3 4 5 C-A 1 2 3 4 5

21. Mapping Methods in Marketing Perceptual Maps Joint Space Maps Preference Maps Similarity-based methods Attribute-based methods Ideal-point model(unfolding model) Vector model External analysisusing PREFMAP-3 Simple “joint space maps” using modified perceptual mapping methods Positioning–8

22. Attributes of Laptops on a Perceptual Map Common · Toshiba 1960CT Easy setup Slow Performance Light Value · IBM 701 C“Butterfly” Elegant Looks 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.

23. Interpreting Perceptual Maps • The arrow indicates the direction in which that attribute is increasing (The attribute is decreasing in the direction opposite to the arrow). • The 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.

24. Attributes of Laptops on a Perceptual Map (Plain) Common · Toshiba 1960CT Easy setup Slow Performance Light GoodValue · IBM 701 C“Butterfly” Elegant Looks

25. Interpreting Perceptual Maps Attributes that are both relatively important and close to the horizontal (vertical) axis help interpret the meaning of the axis. To position 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).

26. Perceptual Map of Beer Market(only Brands) Old Milwaukee Budweiser Beck’s Meister Brau Heineken Miller Coors Stroh’s Michelob Coors Light Miller Lite OldMilwaukee Light

27. Perceptual Map of Beer Market(Only attributes) Heavy Popular with Men Heavy Full Bodied Special Occasions Blue Collar Dining Out Premium Good Value Budget Premium Popular with Women Pale Color On a Budget Light Less Filling Light

28. Perceptual Map of Beer Market(both products & attributes) Heavy Popular with Men Heavy Full Bodied Old Milwaukee Budweiser Beck’s Meister Brau Heineken Special Occasions Miller Blue Collar Dining Out Premium Good Value Coors Stroh’s Budget Premium Michelob Popular with Women Coors Light Miller Lite Pale Color On a Budget OldMilwaukee Light Light Less Filling Light

29. Two Preference Models Ideal-Point Preference Model Vector Preference Model IncreasingPreference Preference Preference DecreasingPreference Ideal Point Attribute Attribute (eg, sweetness) (eg, service speed)

30. Limitations of Preference Mapping • Provides a static model—ignores dynamics of customer perceptions. • Interpretation is sometimes difficult. • Does not incorporate cost or likelihood of being able to achieve a desired positioning. • Does not incorporate a “probability model” to indicate goodness of a map. • Generally, need about 6 to 8 products to make the technique useful.