Brand Positioning

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Brand Positioning – Attributes

February 1, 2005

Cola Wars: Pepsi versus Coca Cola

1. What attributes and benefits do soft-drinks offer? Which are physical and which are psychological? Which are "essential" and which are consumers willing to be flexible on?

2. Why did people react so strongly when New Coke was introduced?

3. Comment on the design of the New Coke study – what would you have changed?

Case Discussion

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Brand with attributesresponsive to DCCg

Prospects who experience DCCg, i.e., targets

Specific price (e.g., $1.79)

Media vehicles, Attentional strategy, Brand claims

Specific exchange venues

Competitors Implicated by DCCg

Identify kinds of demand-creating condition

(DCCa - n); Assess state of want-

satisfaction for each kind; Order DCC with a view to

roi and choosing DCCx to target

e.g., domestic US

e.g., calendar 2003, 4

Some version of product category X

Define prospectse.g., people who buy/use

product category X or engage in corresponding activity Y.

State broad price band (e.g., discount, premium)

State tentative ideas for media type

State tentative ideas for exchange venue type

State competitors implicated by choices on other dimensions

What geographic area will we operate in?

What timeframe have we in mind?

What will we offer?

To whom will we offer it?

What price will we charge?

How will we let them know about our offering?

How/where will we engage in exchange with them?

Whom will we compete with?

BRAND POSITIONING

MARKETSEGMENTATION

MARKETDEFINITION

STRATEGICQUESTIONS

Conceptualizing User Wants

Action,Including Brand Use

Environmental Systems

Personal Systems

Motivating Conditions

Desired Attributes

Brands AsPerceived(Brand Beliefs); Brand ConsiderationSet; Brand PreferenceOrdering

Ex-AnteAnalysis

Ex-PostAnalysis

Theory

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How to Learn What Customers Want?

Ask Direct Questions about preference:

What brand do you prefer?What Interest Rate would you like?What Annual Fee would you like?What Credit Limit would you like?

Answers often trivial and unenlightening (e.g. respondents prefer low fees to high fees, higher credit limits to low credit limits)

IntroductionConjoint Overview

Analysis for Brand Positioning

Conjoint analysis is a regression based technique where:– you measure consumers’ preferences, – by confronting them with different product

profiles that contain tradeoffs and – letting them rate their relative preferences.

Dependent variable: Relative Preference Statements

Independent variables: Attributes

Conjoint Analysis

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Basic Assumption

Product is a bundle of attributes who importance is driven by customer needs.– Should we offer our business travelers more room

space or a fax machine in their room?– Should we offer more leisure-time activities (sauna,

exercise room, tennis courts) or more food related services (several dining options, vending machines, in-room kitchen facilities)?

– Should we use a steel or aluminium casing to increase customer preference for our new extrusion equipment?

Conjoint Analysis

Outboard Engine Attributes

Brand NameEvinrude, Force, Johnson, Mariner, Mercury, Yamaha

Price Fuel EconomyReliability

DurabilityVibration and NoiseAccelerationSpeedEmissionsTechnology

Conjoint Analysis

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Credit Card Attributes

Bankcurrent, local, out-of-state

Interest Rates8%, 7%, 6% , variable

Reward Programsfree checking, greater interest on savings

Annual Fee$50, $25, $0

Rebates1%, .5%, none

Credit Line$2000, $5000

Grace Period45 days, none

Conjoint Analysis

Mathematical Representation

y = x1β1 + x2β2 + x3β3 + ... + εor

y = Xβ + εwhere

y = the overall value of the productX = product attributesβ = the value placed on the attributes

Conjoint Analysis

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How Does Conjoint Analysis Work?

We vary the product features (independent variables) to build many (usually 12 or more) product concepts

We ask respondents to rate/rank those product concepts (dependent variable)

Based on the respondents’ evaluations of the product concepts, we figure out how much unique value (utility) each of the features added

(Regress dependent variable on independent variables; betas equal part worth utilities.)

Conjoint OverviewConjoint Analysis

First Step: Create Attribute ListAttributes assumed to be independent (Brand,

Speed, Color, Price, etc.)Each attribute has varying degrees, or “levels”

Brand: Coke, Pepsi, SpriteSpeed: 5 pages per minute, 10 pages per minuteColor: Red, Blue, Green, Black

Each level is assumed to be mutually exclusive of the others (a product has one and only one level level of that attribute)

Conjoint Attributes

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Rules for Formulating Attribute Levels

Levels are assumed to be mutually exclusive

Attribute: Add-on features

level 1: Sunrooflevel 2: GPS Systemlevel 3: Video Screen

If define levels in this way, you cannot determine the value of providing two or three of these features at the same time

Conjoint Attributes

Traditional Conjoint: Full Profile Analysis

Using a 100-pt scale where 0 means definitely

would NOT and 100 means definitely WOULD…

How likely are you to purchase…

1997 Honda AccordAutomatic transmission

No antilock brakesDriver and passenger airbagBlue exterior/Black interior

$18,900

Your Answer:___________

Traditional Conjoint

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Strengths of Traditional Conjoint

• Good for both product design and pricing issues

• Can be administered on paper, computer/internet

• Shows products in full-profile, which many argue mimics real-world

• Can be used even with small sample sizes

Traditional Conjoint

Credit Card Attributes

BrandMasterCard, Visa, Discover

Interest Rate18%, 15%, 12%

Annual FeeNone, $10, $20

Credit Limit$1000, $2500, $5000

Conjoint Data

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How much do you like this credit card offering? 0 = Terrible, 10 = Excellent

MasterCard

18% interest

No annual fee

$1000 credit limit

Score= ___________(1)

Conjoint Data


MasterCard

12% interest

$20 annual fee

$5000 credit limit

Score= ___________(2)

Conjoint Data

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Visa

18% interest

$10 annual fee

$5000 credit limit

Score= ___________(3)

Conjoint Data


Discover

18% interest

$20 annual fee

$2500 credit limit

Score= ___________(4)

Conjoint Data

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Discover

12% interest

$10 annual fee

$1000 credit limit

Score= ___________(5)

Conjoint Data


Discover

15% interest

No annual fee

$5000 credit limit

Score= ___________(6)

Conjoint Data

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Visa

12% interest

No annual fee

$2500 credit limit

Score= ___________(7)

Conjoint Data


MasterCard

15% interest

$10 annual fee

$2500 credit limit

Score= ___________(8)

Conjoint Data

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Visa

15% interest

$20 annual fee

$1000 credit limit

Score= ___________(9)

Conjoint Data

Part-Worths of Attribute-LevelsSome product attributes are “defining”

All credit cards have a brand name, interest rate and credit limit.

Not possible to estimate importance of a defining attribute, only importance of changes in the attribute-levels (e.g., 12% vs. 15% interest rate).

Other product attributes are “optional”Apartments need not have balconies, so a natural zero

“0” can occur for the attribute.

Implication: One level of each attribute is not estimable

Conjoint Data

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Conjoint Data

Question Rating Visa Discover 15% 12% $10 $20 $2,500 $5,0001 0 0 0 0 0 0 0 02 0 0 0 1 0 1 0 13 1 0 0 0 1 0 0 14 0 1 0 0 0 1 1 05 0 1 0 1 1 0 0 06 0 1 1 0 0 0 0 17 1 0 0 1 0 0 1 08 0 0 1 0 1 0 1 09 1 0 1 0 0 1 0 0

Default Card: MasterCard; 18% interest; No annual fee; $1000 credit limit.

All importances (part-worths) measured relative to these levels.Conjoint Data

My Ratings

Question Rating Visa Discover 15% 12% $10 $20 $2,500 $5,0001 4 0 0 0 0 0 0 0 02 7 0 0 0 1 0 1 0 13 8 1 0 0 0 1 0 0 14 5 0 1 0 0 0 1 1 05 4 0 1 0 1 1 0 0 06 8 0 1 1 0 0 0 0 17 9 1 0 0 1 0 0 1 08 6 0 0 1 0 1 0 1 09 6 1 0 1 0 0 1 0 0


All importances (part-worths) measured relative to these levels.Conjoint Data

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Multiple Regressiony = β0 + β1x1+ … + βkxk + ε

βi = the expected change in the dependent variable (y) for a unit change in xi, holding fixed the other independent variables (x’s).

Allows for statistical adjustments and couter-factual analysis.

Provides a measure of the effect of xj relative to xk.

Regression Analysis

Regression Results

Rating = 4.00 + 2.00 Visa + 0.00 Discover +1.00 15% + 1.00 12% - 1.00 $10 - 1.00 $20 + 2.00 $2,500 + 3.00 $5,000


All importances (part-worths) measured relative to these levels.

Part-Worth Analysis

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Analysis of Part-Worths

Brand Name: MasterCard = 0Visa = 2Discover = 0

Implication: MasterCard and Discover valued equally. Visa valued more.

Part-Worth Analysis


Interest Rate:18% = 015% = 112% = 1

Implication: Consumers are indifferent to a 15% or 12% rate, but both are preferred to an 18% rate.

Part-Worth Analysis

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Annual Fee:None = 0$10 = -1$20 = -1

Implication: Consumers are indifferent to a $10 or $20 annual fee, but prefer no annual fee to either amount.

Part-Worth Analysis

Analysis of Part-WorthsCredit Limit:

$1000 = 0$2500 = 2$5000 = 3

Implication: Consumers prefer a $5000 to either a $2500 or $1000 limited. The change from $1000 to $2500 is twice as important as the chance from $2500 to $5000.

Part-Worth Analysis

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Analysis Across Attributes

Brand Name: MasterCard = 0Visa = 2Discover = 0

Interest Rate:18% = 015% = 112% = 1

Annual Fee:None = 0$10 = -1$20 = -1

Credit Limit:$1000 = 0$2500 = 2$5000 = 3

Value of Visa vs. MasterCard = Value of $2500 vs. $1000 Credit Limit

Value of 15% vs. 18% Interest = Value of $0 vs. $10 Annual Fee

Value of $5000 vs. $2500 Credit Limit = Value of 15 vs. 18% Interest

Part-Worth Analysis

Attributes Play Two RolesDesired attributes are the basis of consideration

set formation and preference orderings.

Market DefiningAttributes that form consideration sets are market

defining – without them there is no hope of attracting a prospect.

Brand PositioningOther attributes play a role in brand positioning –

consumers are willing to tradeoff one attribute level for another.

Theory

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Screening Rules

“A Choice Model with Conjunctive, Disjunctive, and Compensatory Screening Rules”

Conjunctive rule: alternative must be acceptable on all attributes.

Disjunctive rule: alternative must be acceptable on a least one attribute.

Compensatory rule: really good attributes can make up for really bad attributes.

Challenge Paper

A partial listing of offerings and features of digital camerasfrom Nov. 2002 Consumer Reports

Source: http://www.consumerreports.org/main/detailv2.jsp?CONTENT%3C%3Ecnt_id=163145&FOLDER%3C%3Efolder_id=162691&bmUID=1034956296813

A selection of tested products (Within types, in performance order)Brand & model

Sony DSC-F707 MS 5x · · · ·Canon PowerShot G2 CF 3x · · · ·Olympus Camedia C-3040 Zoom SM 3x · · ·Olympus Camedia D-40 Zoom SM 2.8x · ·Fujifilm FinePix F601 Z SM 3x · · ·Sony Cyber-shot DSC-S75 MS 3x · · · ·HP PhotoSmart 812 SD 3x ·Kodak EasyShare DX4900 CF 2x ·Olympus Camedia E-10 CF, SM 4x · · ·Canon PowerShot S40 CF 3x · ·Casio QV-4000 CF 3x · · · ·Kyocera Finecam S4 SD 3x · · ·Panasonic Lumix DMC-LC5 SD 3x · · · ·Sony Cyber-shot DSC-P71 MS 3x · · ·Sony CD Mavica MVC-CD400 CD-R/RW 3x · · ·Minolta Dimage S404 CF 4x · ·Toshiba PDR-3310 SD 3x · · ·Kyocera Finecam S3 SD 2x · · ·

3- TO 5-MEGAPIXEL CAMERAS

Challenge Paper

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Empirical Application

Alternatives are described on 8 attributes

*Attributes unique to APS cameras at the time of the study

Attribute Levels

Basic body style Low and standard Mediumfeatures High

Mid-Roll NoneChange* Manual

Automatic

Annotation* NonePre-SetCustomized ListCustom List 1Custom List 2Custom List 3

Camera Operation NoFeedback* Yes

Attribute LevelsZoom None

2x4x

Viewfinder RegularLarge

Camera Settings NoneFeedback LCD

ViewfinderBoth

Price $41 - $499

Challenge Paper

Alternative Approach

Traditional choice model:Pr(i) = Pr(xi’β + εi > xk’β + εk for all k)

Proposed choice model:Pr(i) = Pr(xi’β + εi > xk’β + εk for all k

such that I(xk,γ) = 1)

Threshold levels

Challenge Paper

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Empirical Application – Conjunctive Model

Proportion Screening on Each Attribute

40%

8%6%

4% 4% 4% 5%

19%

4%

22%

41%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Body S

tyle

Mid-Roll

Cha

nge*

Annota

tion1

*

Annota

tion2

*

Annota

tion3

*

Annota

tion4

*

Op. Fee

dbac

k*Zoo

m

Viewfin

der

Setting

sPric

e

*Attributes unique to APS offerings at time of study. Challenge Paper

0%

10%

20%

30%

40%

50%

60%

70%

10%

20%

30%

41%

59%

<$276 <$356 <$425 <$499 >$499

Empirical Application – Conjunctive Model

Distribution of Price Threshold

• Respondents who “almost always” take their camera when attending “social gatherings away from” home have higher price thresholds.

Challenge Paper

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Empirical Application

Findings

• Conjunctive model fits data best

• 92% of respondents are forming consideration sets

• Results show which attributes, which levels, and who is screening

• Respondents tend to screen alternatives using familiar attributes

• After controlling for the their effect in forming considerationsets, screening attributes are “less important” than indicated by the standard choice model

Challenge Paper

Market Simulations

Make competitive market scenarios and predict which products respondents would choose

Accumulate (aggregate) respondent predictions to make “Shares of Preference” (some refer to them as “market shares”)

Market Simulators

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Which Color is Preferred?Consider the following utilities:

Blue Red YellowRespondent #1 50 40 10Respondent #2 0 65 75Respondent #3 40 30 20

---- ---- ----Average: 30 45 35

Red has the highest average preferenceBut, does any one respondent prefer red?

Market Simulators

Which Color is Chosen?Assume each respondent “chooses” preferred color:

Blue Red Yellow ChoiceRespondent #1 50 40 10 BlueRespondent #2 0 65 75 YellowRespondent #3 40 30 20 Blue

---- ---- ----Average: 30 45 35

Blue “chosen” twice, Yellow once

Market Simulators

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Why Conduct Market Simulations?

• Simulations better reflect real-world behavior– Represent idiosyncratic preferences of segments and

individuals (remember, you don’t have to appeal to the “fat” part of the market to carve out a profitable business)

• A “choice laboratory” for testing multitude of real-world possibilities

• Results expressed in terms that make sense to management and are actionable

Market Simulators

Brand Positioning

Business

Transcript of Brand Positioning