A Methodology to Support Product-Differentiation Decisions

Abstract

Choosing the right set of new products to offer is a key driver of profitability. New products often share some design attributes with existing products, thus, firms need to decide which attributes to keep common and which to differentiate. We propose and empirically implement a new methodology that can help managers to navigate the complex decision of where to focus differentiation, using "looks-like" prototypes that typically become available in the later stages of the product-development process. Our methodology complements early stage product-positioning methods, such as conjoint analysis and perceptual mapping. It also offers a way to estimate the impact of context dependence on choice. Finally, our methodology provides a way to test empirically whether perceptual mapping based on pairwise similarity judgments is appropriate for a product category. Using data obtained from a major wristwatch manufacturer, we are able to suggest guidelines on how to differentiate the firm's offerings and estimate the magnitude of context dependent effects. We also find that for wristwatches, attributes that drive perceptions differ from those that drive choice. Overall, our approach can help avoid falling into the trap of focusing variety on attributes that are costly to differentiate and have little impact on choice.Keywords product differentiation, product similarity, consumer choice, "Looks like" prototype, context dependence, conjoint analysis, perceptual mapping Choosing the right set of new products to offer is a key driver of pro tability. New products often share some design attributes with existing products, so rms need to decide which attributes to keep common, and which to differentiate. We propose and empirically implement a new methodology that can help managers navigate the complex decision of where to focus differentiation, using "looks like" prototypes that typically become available in the later stages of the product development process.Our methodology complements early stage product positioning methods such as conjoint analysis and perceptual mapping. It also offers a way to estimate the impact of context dependence on choice.Finally, our methodology provides a way to test empirically whether perceptual mapping based on pairwise similarity judgments is appropriate for a product category. Using data obtained from a major wristwatch manufacturer, we are able to suggest guidelines on how to differentiate the rm's offerings, and estimate the magnitude of context dependent effects. We also nd that for wristwatches, attributes that drive perceptions differ from those that drive choice. Overall, our approach can help avoid falling into the trap of focusing variety on attributes that are costly to differentiate and have little impact on choice.

Political differentiation and consolidation of choice in a U.S. media malaise environment: indirect effects of perceived alikeness on voter participation

“…Different product attributes can have low or high market impact on the selection process (Ramdas et al 2010). For example, among cars, outer body panels that shape a car's appearance are more likely than the characteristics of its axles to influence someone's decision.…”

Contribution to flexible service coordination in mobile prosumer environments

“…In the analysis phase, recommendation systems use techniques to analyze the information on user needs, processed in the previous stage in order to quantify its importance and thus, estimate the value of service for the target customers and the company. One of these techniques, the conjoint analysis (Ramdas, Zhylyevskyy, & Moore, 2010), consists of a multivariate statistical technique which studies the joint effects of service components on consumers. This technique is often used along with the graphic technique of perceptual mapping (Ramdas et al, 2010), which helps marketers to visually display the perceptions of customers or potential customers.…”

“…One of these techniques, the conjoint analysis (Ramdas, Zhylyevskyy, & Moore, 2010), consists of a multivariate statistical technique which studies the joint effects of service components on consumers. This technique is often used along with the graphic technique of perceptual mapping (Ramdas et al, 2010), which helps marketers to visually display the perceptions of customers or potential customers. Related to service development, Quality Function Deployment (QFD) (Akao, 1990) tools have been proposed to transform the needs of users into service design requirements, which are more easily understandable by developers.…”