Eight weeks. That’s all that separated the launch of Apple’s revolutionary iPhone, on June 29, 2007, and Motorola’s next-generation Razr2 (pronounced Razr Squared) cellular telephone, on August 24. Before unveiling the successor to the Razr, which PC World magazine in 2005 ranked 12th on a list of the 50 greatest gadgets of the past 50 years, Motorola’s top management team was more worried than usual. With sales of the American communication giant’s other cellular telephones tapering off, the company’s fate rested squarely on the Razr2. Moreover, senior executives like chairman and CEO Edward J. Zander wondered if the iPhone had changed the competitive dynamics of the market in ways they hadn’t foreseen. Had the iPhone created a new niche or would it take the Razr2 head-on? How much extra could they charge for the Razr2’s new features? Should Motorola play up the Razr2’s noise-filtering technology, which it had patented? The executives couldn’t wait for the results of focus group sessions or sample surveys. They needed a fast, yet reliable way of capturing changes that were emerging in the market so they could finalize strategy quickly.
Mapping Your Competitive Position
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A price-benefit positioning map helps you see, through your customers’ eyes, how your product compares with all its competitors in a market. You can draw such a map quickly and objectively, without having to resort to costly, time-consuming consumer surveys or subjective estimates of the excellence of your product and the shortcomings of all the others.
Creating a positioning map involves three steps: First, define your market to include everything your customers might consider to be your product’s competitors or substitutes. Second, track the price your customers actually pay (wholesale or retail? bundled or unbundled?) and identify what your customers see as your offering’s primary benefit. This is done through regression analysis, determining which of the product’s attributes (as described objectively by rating services, government agencies, R&D departments, and the like) explains most of the variance in its price. Third, draw the map by plotting on a graph the position of every product in the market you’ve selected according to its price and its level of primary benefit, and draw a line that runs through the middle of the points.
What you get is a picture of the competitive landscape of your market, where all the products above the line command a price premium owing to some secondary benefit customers value, and all those below the line are positioned to earn market share through lower prices and reduced secondary benefits.
Using examples as varied as Harley-Davidson motorcycles, Motorola cell phones, and the New York restaurant market, Tuck professor D’Aveni demonstrates some of the many ways the maps can be used: to locate unoccupied or less-crowded spaces in highly competitive markets, for instance, or to identify opportunities created through changes in the relationship between the primary benefit and prices. The maps even allow companies to anticipate—and counter—rivals’ strategies.