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Richard D’Aveni
•Professor of Strategic Management at Dartmouth College’s Tuck School of Business in Hanover, New Hampshire•Author of three books:
•Hypercompetition•Strategic Supremacy•Hypercompetitive Rivalries
• Price-Benefit Positioning Map• Relationship between primary benefit and the
prices of all the products in a given market• Define The Market: Three Steps
• Identify the customer needs• Choose the country or region you wish to
study• Track entire market or a segment
• Ties to last week’s presentation about strategic statement
Drawing Positioning Map
Choose the price and determine the primary benefit The benefit that explains the largest
amount of variance in prices Doing this could be complicated for a
product may offer more than one benefit Companies usually differentiate by
focusing on a different benefit than competitors do
Drawing Positioning Map (Contd.)
Success of strategies depends on values customers place on features
Steps to determine that value: Draw up a list of all benefits Use unbiased data, no gut instinct or
manager’s opinions After gathering data, use regression
analysis
Drawing Positioning Map (Contd.)
Regression Analysis- A method used to find out which benefit
explains most of the variance in product’s prices More reliable than asking people Software packages like Excel, SAS Analytics, for
instance allow executives to perform regression analysis
Final Step in drawing the map Plot positions and draw the expected price line How much customers expect to pay on average
to get different level of benefits
Drawing Positioning Map (Contd.)
Help companies penetrate unattained market Pinpoint benefits valued by customers Locate unoccupied or less competitive
spaces Identify opportunities created by
changes in the relationship between primary benefit and prices
When interpreted within the context of industry and customer knowledge, they help explain why some enterprises perform better than others do.
Interpreting Positioning Maps
Companies spent a great deal of money to offer additional services without knowing if customers want them enough to pay for them
Drain on corporate resources Avoid problems by calculating the
premiums earned for intangible benefits
Valuing Intangible Benefits
2002, Harley-Davidson’s models earned large premiums compared with rival products
2004, new American rivals, such as Victory and Big Dog, earned 41% premium over Harley-Davidson
2006, they created a new image appealing to more social classes
Stock price still floundered
Fall of Harley-Davidson
Companies can employ the price-benefit equation to get ahead of competitors Example of major U.S. hotel chain Major Factor or primary benefit:
Customer Experience Rivals had problems competing
Anticipating shifts in the value of benefits
Extend the use of price-benefit maps Throw more data into the mix
Example: Major U.S. automobile manufacturer Price-benefit map helped identify
opportunity BMW capitalized on an opportunity in
the market in the mid 1990’s When customers’ priorities shift
radically, the benefits they desire also change
Finding Paths of Least Resistance
Companies could use price-benefit maps to Predict the strategic intent of rivals Find ways of preempting them
One method used is to draw maps based on projections of market trends Example “Primo”
Preempting Rivals
Use of past trends to map projected future market moves
Good to eliminate competition Primo moved up and down the
expected line Give customers a range of options As a result one of its competitors quit
Capturing an Evolving Strategy
Price-benefit maps sound early warnings
Suggest responses to competitive threats
Open executives' minds to many possibilities
Allow executives to make decisions based on fact
Conclusion