Written on 16.17 by Dimas Sugeng Rachmadi
MAPPING YOUR COMPETITIVE POSITION
Most companies have to build fresh competitive advantages and destroy others’ advantages faster than they used to. As innovation pervades the value chain, they must migrate quickly from one competitive position to another, creating new ones, depreciating old ones, and matching rivals’. The process is disorderly and unstable. Senior executives desperately need new tools to help them systematically analyze their own and other players’ competitive positions in hyper competitive markets. One way to do that is to track the relationship between prices and a product’s key benefit over time. However, it isn’t easy to come to grips with either benefits or prices. Most customers are unable to identify the features that determine the prices they are willing to pay for products or services, according to a 2004 survey by Strativity, a global research and consulting firm. Worse, 50% of sales Journal of Air Transport Management 11 (2005) 127–134. If customers don’t know what they’re paying for, and managers don’t know what they’re charging for, it’s almost impossible for companies to identify their competitive positions. Different executives place their firm’s offerings in different spots on a price-benefit map; few know the primary benefit their product offers; and they all overestimate the benefits of their own offerings while underestimating those of rivals. The lack of understanding about competitive positions is palpable in industries such as consumer electronics, where the number of features makes comparisons complicated; in markets like computer hardware, where technologies and strategies change all the time; and when products, such as insurance policies, are intangible. Seven years ago, I came up with a way companies could capture competitive positions graphically to serve as the basis for strategy discussions. Drawn by using simple statistical analysis, a price-benefit positioning map provides insights into the relationship between prices and benefits, and tracks how competitive positions change over time. Executives can use the tool to benchmark themselves against rivals, dissect competitors’ strategies, and forecast a market’s future, as we shall see in the following pages. By creating an accurate map of the competitive landscape, companies can also get everyone in the organization on the same page. During my consulting and research work, I have applied this tool in more than 30 industries, including automobiles, advanced materials, artificial sweeteners, cellular telephones, restaurants, retailing, turbines, tires, motorcycles, and ships. Let me show you how to create and read a positioning map.
Drawing Positioning Maps
In its simplest form, a price-benefit positioning map shows the relationship between the primary benefit that a product provides to customers and the prices of all the products in a given market. Creating such a map involves three steps. Define the market. To draw a meaningful map, you must specify the boundaries of the market in which you’re interested. First, identify the consumer needs you wish to understand.
You should cast a wide net for products and services that satisfy those needs, so you
aren’t blindsided by fresh entrants, new technologies, or unusual offerings that take care of those needs. Second, choose the country or region you wish to study. It’s best to limit the geographic scope of the analysis if customers, competitors, or the way products are used differ widely across borders. Finally, decide if you want to track the entire market for a product or only a specific segment, if you wish to explore the retail or wholesale market, and if you’re going to track products or brands. You
can create different maps by changing these frames of analysis. Choose the price and determine the primary benefit. Once you’ve defined the market, you need to specify the scope of your analysis of prices. You have implicitly decided whether to study retail or wholesale prices when you chose which market to focus on, but you must also consider other pricing parameters. You must choose whether to compare initial prices or prices that include life cycle costs, prices with transaction costs or without them, and the prices of unbundled or bundled offers. These choices depend on the yardstick that customers use in making purchasing decisions in the market under study. Remember to be consistent about the price definition you use while gathering data. Identifying the primary benefit—the benefit that explains the largest amount of variance in prices—can be complicated. A product offers several benefits: basic functions, additional features, durability, serviceability, aesthetics and so on .
Refference D'Avenie Journal,
(Mapping Your Competitive Position Harvard Business review • November 2007 page 2 BY Richard D’Aveni)
