MBA 651 Measurement and Analysis

Perceptual Mapping: MDPREF

Scott Smith Brigham Young University

MBA 651 Measurement and Analysis

Positioning Using Perceptual & Preference Maps

Segmentation: Differentiation: Identification and targeting groups of customers most likely to purchase the products and services being offered. Product differentiation typically occurs in the growth stage of the product life-cycle. The objective of product differentiation is to design and offer a product that has meaningful differences (tangible or intangible) on one or two key dimensions that distinguish it from the competitors. Product positioning is an even more aggressive marketing strategy that occurs after product differentiation has been implemented. Product positioning typically occurs in the maturity stage of the product lives cycle and focuses on targeting a specific product segment with a product having the features and benefits that they most desire. Positioning strategies are implemented to emphasize key differences between your product and your competitors so that you can gain a more competitive or distinct position in the minds of customers. Perceptual Mapping: Statistical Techniques that allow the display of objects in multivariate space. In marketing, managers develop differentiation and positioning strategies by visualizing the competitive structure of their markets as perceived by their customers.

Positioning:

Scott M. Smith

MBA 651 Measurement and Analysis

The Essence of Positioning Studies

There are multiple attributes and benefits that are of value to customers. A single product has difficulty providing outstanding performance across all attributes and benefits. For example, high gas mileage is incompatible with the towing power of a 9 passenger 4x4 Chevrolet Suburban. Markets are segmented to find similar groups of consumers who seek common bundles of attributes and benefits. New benefit bundles can be used to form new concepts. There are differences in products that supply those attributes and benefits.

Scott M. Smith

MBA 651 Measurement and Analysis

Conventional Mapping Two Products on a Snake Chart

Describes it completely | | 0 1 | 2 | 3

Does not describe it at all | | 4 5

* Company A * Company B

1. Company provides adequate insurance coverage for my car. 2. Company will not cancel policy because of age, accident experience, or health problems. 3. Friendly and considerate. 4. Settles claims fairly. 5. Inefficient, hard to deal with. 6. Provides good advice about types and amounts of coverage to buy. 7. Too big to care about individual customers. 8. Explains things clearly. 9. Premium rates are lower than most companies. 10. Has personnel available for questions all over the country. 11. Will raise premiums because of age. 12. Takes a long time to settle a claim. 13. Very professional/modern. 14. Specialists in serving my local area. 15. Quick, reliable service, easily accessible. 16. A good citizen in community. 17. Has complete line of insurance products available. 18. Is widely known name company. 19. Is very aggressive, rapidly growing company. 20. Provides advice on how to avoid accidents.
Scott M. Smith

MBA 651 Measurement and Analysis

Example Plot of Attributes of Laptops on a 2D Perceptual Map

(Plain)

Common

Slow

Easy setup

Toshiba 1960CT

Performance
IBM 701 C
Butterfly Good Value Light

Elegant

Looks
Scott M. Smith

MBA 651 Measurement and Analysis

How to Develop A Perceptual Map Using Attribute Ratings

Generate an Brand by Attribute matrix of inputs consisting of each consumers ratings of each brand on each of the attributes (A1, A2, A3,....) A1 Dell 710 6 Compaq 8100 4 Toshiba Construct 3 A2 3 3 6 A3 7 4 2 A4 ............... A15 2 2 1 5 7 7

Note that in this matrix the columns become the vectors in the map and rows are the points in the map Compute average ratings of each brand on each attribute. Submit data to a suitable perceptual mapping technique (e.g., MDPREF or Factor Analysis). Interpret the underlying key dimensions of the map using the directions of the individual attributes. Explore the implications of how consumers view the competing products.

Scott M. Smith

MBA 651 Measurement and Analysis

How to Develop A Perceptual Map of Market Segments Using Attribute Ratings (INDSCAL, PREFMAP)
Generate an Brand by Attribute matrix of inputs consisting of each consumer segments (S1, S2,...) Ratings of each brand on each of the attributes (A1, A2, A3,....) for each brand (named).

A1 Dell 710XN 6 S1 Compaq 8100 4 Toshiba Construct 3 Dell 710XN S2 Compaq 8100 Toshiba Construct

A2 3 3 6

A3 7 4 2

A4 ............... A15 2 2 1 5 7 7

Note that in this matrix the columns become the vectors in the map and rows are the points in the map Compute average ratings of each brand on each attribute. Submit data to a suitable perceptual mapping technique (e.g., MDPREF or Factor Analysis). Interpret the underlying key dimensions of the map using the directions of the individual attributes. Explore the implications of how consumers view the competing products.
Scott M. Smith

MBA 651 Measurement and Analysis

Interpreting MDPREF Perceptual Maps

MDPREF is a Point-Vector Model. The points represent the rows of the preference matrix (brands) and the vectors represent the attributes that are evaluated The vector is of length 1.0 and the perceptual map should show an arrow indicating the direction toward which the 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 attribute vector in that dimensional space (more dimensions add more variance explanation). The longer this line, the greater is the importance of that attribute in this space.

Scott M. Smith

MBA 651 Measurement and Analysis

Interpreting Perceptual and Preference Maps

Technical adequacy What percentage of variance in the raw data is captured in the map? What percentage of the variance of each attribute is captured in the map? Managerial interpretation What underlying dimensions characterize how consumers view the products? What is the competitive set associated with the new concept? How well is the new concept positioned with respect to the existing brands? Which attributes are related to each other?

Which attributes influence customer preferences positively? Negatively?

What improvements will enhance the value of the new concept? Which customer segments have positive perceptions and high preference for the new concept?

Scott M. Smith

MBA 651 Measurement and Analysis

Example Input Data for MDPREF Vector Model Input matrix has attributes on rows and objects on columns
B1 Attractive Light Unreliable Plain Battery life Screen Keyboard Roomy Easy service Expandability Setup Common Value Preference 5.1 6.0 3.4 1.5 3.3 3.5 2.6 5.5 4.5 5.5 5.6 4.1 3.5 7.4 B2 3.6 3.5 4.1 4.1 4.9 5.3 3.5 4.3 4.9 4.3 3.5 3.5 4.8 3.4 B3 3.5 5.0 4.5 2.9 4.3 3.4 2.5 5.4 3.3 5.4 5.6 3.3 4.4 4.8 B3 5.4 3.9 2.1 2.3 4.1 6.4 3.4 3.1 5.0 3.1 5.4 2.9 3.6 6.6 B4 3.9 3.3 4.5 4.5 3.9 5.4 3.8 3.4 4.4 3.4 2.5 4.0 3.6 4.4 B5 4.8 5.3 2.7 2.7 3.0 5.2 3.3 3.3 4.5 3.3 4.2 4.3 2.7 7.4 B6 5.2 5.0 4.5 3.5 3.5 3.3 2.8 4.7 3.3 4.7 5.2 2.2 3.2 7.1 B7 4.0 2.5 3.7 4.3 6.2 6.0 5.0 3.5 4.7 3.5 3.3 4.2 4.7 3.8 B8 5.2 5.5 2.5 2.2 3.5 3.3 4.3 4.3 3.8 4.3 5.8 3.3 3.5 6.9 New 4.0 2.5 3.8 5.2 4.0 4.8 4.7 4.2 4.5 4.2 2.5 4.2 4.0 3.3

Scott M. Smith

MBA 651 Measurement and Analysis

Preference Map Using MDPREF Vector Model

Low battery life Keyboard Toshiba Expandability Elegant Distinct Avant-Garde Fast operation Sanyo TI Good design

Unsuccessful Heavy Reliable

New Concept IBM Compaq AST Exec Dell NEC Samsung

Difficult to use Poor setup

Value Graphics Screen quality

Preference

Scott M. Smith

MBA 651 Measurement and Analysis

Approaches To Creating Perceptual Maps

Perceptual map

Attribute data

Nonattribute data

Similarity

Preference

Factor analysis

Correspondence analysis

Discriminant analysis

MDS
Scott M. Smith

MBA 651 Measurement and Analysis

Attribute Based Approaches

Assumption The attributes on which the individuals' perceptions of objects are based, can be identified Methods Used to Reduce the Attributes to a Smaller Number of Dimensions Factor Analysis Discriminant Analysis Correspondence Analysis Multidimensional Preference Mapping

Scott M. Smith

MBA 651 Measurement and Analysis

Distinctions Between Methods

Factor Analysis :
Combines variables to create new factors and accesses the underlying constructs based on the commonality within each of the variables (variable = common + unique + error)

Factors : New non-correlated variables Factor Scores: Scores of respondents on factors

Discriminant Analysis :
Used to classify the objects or people into predefined groups (user-non user) based on their attributes Discriminant function based on independent variables is used to predict the category

Correspondence Analysis :
Used for convenience of collection of data in binary form (frequency counts) Selection of some attributes or listing of user perceived attributes to reduce attributes

Multidimensional Preference Analysis:

Used to map in joint attribute and brand space, the preference for brands based on the attributes used to evaluate them Underlying dimensions, positioning of brands and positioning of brands with respect to dimensions and attributes
Scott M. Smith

MBA 651 Measurement and Analysis

Factor Analysis Why do we look at dimensions

We study phenomena that can not be directly observed
(ego, personality, intelligence, perceptions of attributes and products)

We have too many attributes or variables

need to reduce them to a smaller set of factors

We identify attribute-variable Items that describe an underlying set of latent factors.

We want to know what these factors are. We have an idea of the phenomena that a set of items represent (construct validity).

We find underlying latent constructs

As manifested in individual items We assess the association between these factors We produce usable scores that reflect critical aspects of any complex phenomenon (e.g. Attributes, life style, personality, intelligence, etc.) This is an end in itself in terms of defining structure. Factor analysis is also a major step toward creating measures of the dimensions or constructs that define the behavior or activity of interest.

Scott M. Smith

MBA 651 Measurement and Analysis

The Basic Idea of Factor Analysis

If two items are highly correlated They must represent the same phenomenon If they tell us about the same underlying variance, combining them to form a single measure is reasonable for two reasons Parsimony Reduction in Error Correlated variables can be represented by a regression line

BUT suppose a whole group of variables provide information that represents this underlying phenomena.
FACTOR ANALYSIS looks for the phenomena underlying the observed variance and covariance in a set of variables. These phenomena are called factors or principal components.

Scott M. Smith

MBA 651 Measurement and Analysis

Factor Analysis
Two variable situation

Three variable situation

Refers to common variance or extracted factor

Refers to common variance or extracted factor

Scott M. Smith

MBA 651 Measurement and Analysis

What Happens - Start With Correlation Matrix

Correlation Matrix Correlation OW1RQ1 OW1RQ2 OW1RQ3 OW1SAD1 OW1SAD2 OW1SAD3 OW1RQ1 1.000 .594 .551 .099 .233 .204 OW1RQ2 .594 1.000 .511 .189 .168 .230 OW1RQ3 .551 .511 1.000 .169 .207 .180 OW1SAD1 .099 .189 .169 1.000 .685 .666 OW1SAD2 .233 .168 .207 .685 1.000 .676 OW1SAD3 .204 .230 .180 .666 .676 1.000

Scott M. Smith

MBA 651 Measurement and Analysis

FACTOR ANALYSIS - communalities

A measure of how much variance is or can be accounted for by the observed factors Uniqueness is 1-communality With Principal Components Analysis with all factors, Communality always = 1 (100% of variance is explained by common + unique factors With FA, the initial value is the maximum multiple R2 for the association between a item and any of the other items in the model

FA
Communalities OW1RQ1 OW1RQ2 OW1RQ3 OW1SAD1 OW1SAD2 OW1SAD3 Initial .464 .423 .363 .562 .577 .544 Extraction .702 .632 .538 .756 .774 .704
OW1RQ1 OW1RQ2 OW1RQ3 OW1SAD1 OW1SAD2 OW1SAD3

PCA
Communalities Initial 1.000 1.000 1.000 1.000 1.000 1.000 Extraction .959 .975 .999 .911 .890 .999

Extraction Method: Principal Axis Factoring.

Extraction Method: Principal Component Analysis.

Scott M. Smith

MBA 651 Measurement and Analysis

What Happens
Computing Factors

Eigenvalue/N of items
Total Variance Explained Initial Eigenvalues % of Variance Cumulative % 46.700 46.700 27.634 74.334 8.389 82.723 7.393 90.117 5.426 95.543 4.457 100.000 Extraction Sums of Squared Loadings Total % of Variance Cumulative % 2.802 46.700 46.700 1.658 27.634 74.334 .503 8.389 82.723 .444 7.393 90.117 .326 5.426 95.543 .267 4.457 100.000

Component 1 2 3 4 5 6

Total 2.802 1.658 .503 .444 .326 .267

Extraction Method: Principal Component Analysis.

An Eigenvalue is an index of the strength of the factor. An eigenvalue reports the amount of variance accounted for by the factor. It is the sum of the squared loadings (correlations between the variables and the factor).
Scott M. Smith

MBA 651 Measurement and Analysis

What happens
Factor Loadings

Component Matrixa Component 3 4 -.119 -.447 -.408 .325 .548 .166 .026 .238 .089 -.231 -.117 -.028

OW1RQ1 OW1RQ2 OW1RQ3 OW1SAD1 OW1SAD2 OW1SAD3

1 .609 .614 .593 .728 .767 .764

2 .608 .568 .558 -.512 -.448 -.438

5 .062 .051 -.091 .250 .198 -.457

6 .203 -.158 -.026 .298 -.332 .034

Extraction Method: Principal Component Analysis. a. 6 components extracted.

Eigenvalue of factor 1 = .612 + .612 .592 + .732 + .772 + .762 = 2.802

Scott M. Smith

MBA 651 Measurement and Analysis

Rotation to Make the Solution more Interpretable

Makes solution more interpretable Orthogonal (Uncorrelated, or geometrically, having spatial representations at 90 degree angles) or Oblique (correlated factors, or geometrically having spatial representations at angles other than 90 degrees). ROTATION IS FOR INTERPRETATION PURPOSES Varimax is the most commonly used.

Scott M. Smith

MBA 651 Measurement and Analysis

Real Example
To further examine attendance success at offshore US and domestic Japanese trade shows, and to explore the role of prior trade show attendance success in generating interest in that show in the future, an orthogonal principal components factor analysis was conducted. All factors with Eigenvalues of 1.0 or greater were retained in the final solutions, yielding four-factor solutions for both the US and Japanese shows, explaining 74 percent and 78 percent of each set of variables common variance, respectively. With factors identified, factor scores were then regressed upon a measure of future interest for each respective trade show[1]. Therefore, the results from factor analyses presented in Tables IV and V are useful in two predominant ways:
(1) to identify underlying dimensions of Japanese attendance objective success at a US and domestic show; and (2) to address effectively issues of multicollinearity between independent variables (trade show success ratings) when exploring the impact of success of prior trade show attendance on interest in future attendance.

Because a factor is a qualitative dimension, the researcher is required to name each factor based on an interpretation of the variables loading most heavily on it.

Scott M. Smith

MBA 651 Measurement and Analysis

Success of Japanese Attendees at a US Show

Scott M. Smith

MBA 651 Measurement and Analysis

Success of Japanese Attendees at a Japanese Show

Scott M. Smith

MBA 651 Measurement and Analysis

How Do We Evaluate the Quality of the Solution?

1. 2. Does it make sense? Are the values in the reproduced matrix small?

3.
4. 5.

Are the final communalities large when the number of factors is small?
Is it useful? Think of why you did the analysis to begin with.

OR
Dont evaluate, just accept it as reality. Try using theory to validate

1. 2.

Scott M. Smith

MBA 651 Measurement and Analysis

Basic Concepts of Multidimensional Scaling(MDS)

MDS uses proximities among different objects as input Proximity : value which denotes how similar or how different two objects, are perceived to be MDS uses this proximities data to produce a geometric configuration of points (objects), in a two-dimensional space as output

Scott M. Smith

MBA 651 Measurement and Analysis

Advantages of Attribute-based MDS

Attributes can have diagnostic and operational value Attribute data is easier for the respondents to use Dimensions based on attribute data predicted preference better as compared to non-attribute data

Scott M. Smith

MBA 651 Measurement and Analysis

Disadvantages of Attribute-based MDS (MDPREF)

If the list of attributes is not accurate and complete, the study will suffer accordingly Respondents may not perceive or evaluate objects in terms of underlying attributes May require more dimensions to represent them than the use of flexible models

Scott M. Smith

MBA 651 Measurement and Analysis

Application of MDS With Nonattribute Data (KYST)

Similarity Data Reflect the perceived similarity of two objects from the respondents' perspective Perceptual map is obtained from the average similarity ratings The power of the technique lies in the ability to find the smallest number of dimensions for which there is a reasonably good fit between the input similarity rankings and the rankings of the distance between objects in the resulting space

Preference Data An ideal object is the combination of all customers' preferred attribute levels Location of ideal objects is to identify segments of customers who have similar ideal objects, since customer preferences are always heterogeneous

Scott M. Smith

MBA 651 Measurement and Analysis

Evaluating the MDS Solution

The fit between the derived distances and the two proximities in each dimension is evaluated through a measure called stress

The appropriate number of dimensions required to locate the objects can be obtained plotting the stress values against the number of dimensions

Scott M. Smith

MBA 651 Measurement and Analysis

General Issues in MDS

Perceptual mapping has not been shown to be reliable across different methods, but methods like KYST (for similarities or dissimilarities data) are pretty good. The effect of market events on the perceptual maps cannot be ascertained The interpretation of dimensions is difficult When more than two or three dimensions are needed, the usefulness is reduced

Scott M. Smith