Editor's note: Arup K. Sen is president of Marketing Decisions Group, Inc., Clarence, New York
"War belongs to the province of business competition, which is also a conflict of human interest and activities." -Karl von Clausewitz
Karl von Clausewitz, a great Prussian general, wrote a book entitled "On War" which describes the strategic principles behind most successful wars. The key point in his book was that two ingredients are necessary to be successful in a war: strategy and tactics. To survive the intensely competitive environment of the '90s, firms must be cognizant of not only their own strategies and tactics but also those of their competitors.
Marketing today for a company is not just being customer-oriented, it is being competitor-oriented as well. Firms must assess the strengths and weaknesses of their competitors, develop their strategies and tactics based on that information and then launch their marketing attack. In short, marketing is the war where the enemy is the competition and your success is determined by the number of customers you win over.
The fierce competition engendered by the limits on corporate growth is forcing organizations into aggressive new postures. The victory belongs to the side that does a better job of marketing research. Every organization should know how it compares with its competitors with regard to its overall image, its specific brands and the products it offers to the marketplace. If a company can determine its position in this complex and competitive environment, it can target its advertising, marketing, and product strategies more accurately and effectively, thus using a rifle approach rather than a shotgun approach.
Continued monitoring of the progress over time is essential to measure the effectiveness of these strategies and to signal any necessity to regroup. Several research techniques and analytic procedures exist to arm an organization with self evaluation and competitive intelligence.
The research procedures discussed in this article apply to both business-to business market research as well as consumer market research. The particular issues and attributes will differ based on the needs of the organization, but the primary objectives of the research should be to identify the position of the company and its products as well as the competitors in the market place.
Unfortunately, knowing the positions which various competitive alternatives have in the market does not necessarily explain purchase preference or product success. It is necessary to also evaluate the relative consumer importance placed on all key product or service attributes.
This research plan is very actionable, systematic, and is designed to communicate results effectively. In order to accomplish the objectives as discussed, this analysis will proceed as follows:
1. First and foremost it is imperative that the number of attributes be reduced to a manageable size so that brands, products, and companies can be evaluated more exactly and with greater understanding.
2. Next, the extent to which these dimensions are important to the overall image of each brand, product, and company, must be determined.
3. Finally, a graphical display of the competitive environment of these dimensions is sought.
A brief description of each step of the complete analysis is as follows:
I. Factor analysis
While factor analysis in marketing research has been around since the 1940s, the advent of the computer has made the extensive computations easy to carry out and the methodology more practical to use.
The objective of factor analysis is to examine the commonalty across the various rating scales and the attributes used in such a rating process. This is accomplished by:
- reducing the existing set of attributes to a manageable size, e.g., three factors rather than 15 attributes, and
- comparing the existing brands and products in question with the ideal on each of the factors.
This process allows for a new set of variables which is easier to work with and perhaps even easier to understand.
For example, you may find out that consumers really use only three basic dimensions to evaluate your company, brand or products. These may be such broad factors as customer service, price/ value relationship, and company reputation.
Using factor analysis you will discover that the 15 or 20 attributes in the original data have overlapping meanings and that they reduce to three or four underlying fundamental dimensions.
II. Multiple regression analysis
The purpose of this statistical procedure is to identify how well the attributes of each brand and product, as well as the ideal, predict and/or affect the overall competitive position. Furthermore, this analysis ranks the importance of each of these factors in the prediction of overall brand and product.
The primary function of the multiple regression technique is to be able to profile each of the major brands or products and the extent to which those dimensions, both individually and in combination, affect its overall position in the market. In addition, it identifies which dimensions are uniquely important in describing each particular brand or product.
Let's look at three factors: customer service, price/value relationship, and company reputation. Applying this technique, we could determine that price/ value relationship is considered most important among the three factors as well as the degree of its importance. This information helps in formulating the marketing strategy and advertising message.
III. Perceptual mapping
Perceptual mapping is another step in this overall analysis which will further simplify this task by taking consumer judgments of overall similarity or preference and converting these results into easy- to-interpret spatial maps. This technique will show the spatial relationships among the brands, companies and products on major dimensions identified as important.
Perceptual mapping is a technique for visually portraying consumer perceptions of competitive brands. By consolidating data on brand perceptions in a two-dimensional space, perceptual mapping allows for:
- Identification of the cluster of brands that are perceived to be similar/competitive versus dissimilar/non-competitive.
- Identification of perceived strengths and weaknesses of a particular brand compared with the competition.
Based on this comparative analysis, marketing strategies can be developed to enable:
A) Repositioning of a brand based on an assessment of the opportunities and vulnerabilities of the current position and
B) Identifying new product opportunities based on any evident "gaps" in the current marketplace.
With this series of statistical techniques the researcher is armed with ammunition to predict product, brand, company position and to model the market for new and/or repositioned products.