Saturday, October 17, 2009

What is a Perceptual Map?

When you reach the point of analysing your own product in the marketing strategy section of your marketing plan, this is when you will come across the necessity of creating the perceptual map. This will help you understand how your product is perceived by consumers relative to competition.
Based on a visual 2D representation of how target customers view the competing alternatives, this comparison will combine both the product’s segmentation and positioning with the aim to understand the correct product position so a competitive advantage can be identified.
In these conceptual maps there are two axes, and all competing products will be assigned to one of the four quadrants that best describes the customer’s perception of that product according to those axes categories. So, if we are analysing a stomach ache relief medicine, for example, we will consider as the two dimensions as taste (good or awful) and efficacy (works fast and well to doesn’t work at all).

From the example above we verify that Product D is seen by the consumers as the one that tastes the best and is also quite efficient. Product D is also the one with the largest market share hence its larger circle representation. Product A and B are percepted as very similar products and product E is the worst perceived product as it neither works well or tastes good.
The product’s position is defined through statistical calculations based on consumer preferences that can be acquired through questionnaires. Other than the simpler version of the conceptual map of competing products as above, products can also be analysed in accordance to the ideal vectors established by the consumers. An ideal vector will indicate the preferred ratio of the two dimensions within the quadrant they apply. Each vector will be defined in the perceptual map as a line from the origin to an arrow indicating the direction in which the vector’s attribute is increasing. The longer the line, the greater is the importance of that attribute in explaining the variance. For a better understanding of how this is done and the calculations involved I would suggest you to read the presentation by the Columbia University Marketing Professor Skander Esseghaier here.

Monday, October 5, 2009

Establishing Critical Success Factors

Under the Situation Analysis section of your marketing plan you should define your business Critical Success Factors (CSF). These are the vital elements for your strategy’s success, or in other words, the CSFs are the factors that you must focus on to achieve the company’s ultimate objectives. Reaching such factors will be decisive to whether your business will be a success or a failure.
The principle of identifying critical success factors was first presented by D. Ronald Daniel in 1961, but it was later in 1986 when J.F. Rockart developed the concept as we know it today.
Rockart defined critical success factors as “the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organisation. They are the few key areas where things must go right for the business to flourish. If results in these areas are not adequate, the organisation’s efforts for the period will be less than desired.”
To make it clear on the areas that these CSFs will usually fall into, Rockart categorised them in different types:

  • Industry CSFs: result from specific industry characteristics;
  • Strategy CSFs: defined through the analysis of the business competitive strategy;
  • Environmental CSFs: through the analysis of the business macro-environment resulting from economic changes, technological advancements, business climate or other related environmental factors.
  • Temporal CSFs: specific to the organisation’s internal needs and changes.
The critical success factors are intrinsically related to the business mission and strategic goals, therefore, it will be through their combined analysis that the CSFs can be clearly identified, having in consideration the above mentioned types.
To help you identify your organisation’s CSFs you can follow the below stages:
  1. Establish the business's mission and strategic goals.
  2. Looking at the mission and objectives, brainstorm ideas regarding the areas of business that need attention so these two can be achieved. The result will be a list of potential critical success factors.
  3. Narrow down your list by considering only the ones that are absolutely essential and that will be definite in whether your business is successful or a failure. Some examples of generic CSFs are cashflow; new product development; new customers’ attraction; secure financing; amongst others. Although there is no rule defining the number of CSFs you should try limiting them to five or fewer absolute essentials. By keeping a small number of CSFs it will be easier for you to have a direction and prioritise which ones are really important for your business.
  4. Identify how you will monitor and measure each of the CSFs.
  5. Communicate your CSFs within the organisation so everyone is focused on what needs to be achieved.
  6. Keep monitoring your CSFs throughout time to ensure your business keeps moving towards its main aims.