Strategic Analysis and Planning with MATRIX V5
Tutorial Step 14 - Perceptual Maps

Whilst it has been criticised for oversimplifying what can be sometimes be complex commercial problems, the two-dimensional Perceptual Map has become a particularly useful vehicle for management to draw attention to an emerging market opportunity, a new strategic direction, or a changing market condition.

The 'Customer Matrix' example illustrated to the right was developed by Cliff Bowman, Professor of Business Strategy at Cranfield School of Management. A proactive supplier will always consider how to maintain initiative within the market. A useful starting point is to consider competitive position as a perceptual map in which 'Perceived Price' is plotted against 'Perceived Use Value'. If the supplier determines that his solution is 'average' when compared to the competition, the alternative courses of action are:

• to achieve the status of lowest cost producer and offer lower prices than the competition - i.e. move West. Here Bowman sites the work of Porter, and emphasises the need for all organisations to become low cost (if not lowest cost) producers so that at the very least market fluctuations can be accommodated.
• to move North by adding Perceived Use Value. Here Bowman is at pains to point out that market segmentation plays a critical role in determining what customers do actually value and that any advantage must be sustainable.

Bowman then goes on to explore the interactive nature of these axes. For example an increased share obtained by adding value can result (through economies of scale) in lowest cost producer status. The move North West - sequentially adding Perceived Use Value and cutting price - may offer the company the best strategy to tackle the market and offer global potential, but the company must be nimble in order to maintain its competitive position.

Perceptual Maps And MATRIX V5

Below - An example of a Perceptual Map produced by MATRIX V5, the software application for business strategists.

1. Each 'bubble' represents a Niche. The colour of each bubble matches the colour of the Niche in the Segmentation Matrix.
2. Underlying data for each axis (Critical Success Factor) is entered via the Criteria Scorecard. There are no limits to the number of different 'Critical Success Factors' and supporting Criteria that can be created.
3. The diameter of each bubble is directly proportional to the Volume or Revenue accruing to the supplier. Corresponding data was entered via the Market History And Forecast Data Editor.
4. Where 'Pie' format has been selected, the diameter of each pie is directly proportional to the Volume or Revenue accruing to the Niche. Corresponding data was entered via the Market History And Forecast Data Editor.
5. The Angle of the 'Pie Slice' is directly proportional to the Supplier's share. Corresponding data was entered via the Market History And Forecast Data Editor.

A 'key' can be revealed on the left-hand side of the chart by clicking and dragging the chart edge. 'Hotspots' accessed by moving the cursor over the map provide on-screen information about the Niche, Volume (or Revenue), Critical Success Factors, and other relevant information. The map can also be copied and pasted into a compatible graphics or presentation package by means of the Right-Hand Mouse Click / 'Copy to Clipboard' function.

The 'Select Perceptual Map' Dialogue

MATRIX V5 is an 'expert user' software tool which provides great flexibility when plotting Perceptual Maps. Tabs on the 'Select Perceptual Map' dialogue give the user choice in the format and detail of the plot.

To open the 'Select Perceptual Map' dialogue, click the 'Perceptual Map' button (above) which is located upon the toolbar.

To display the Perceptual Map shown earlier, the following settings are required within the ‘Select Perceptual Map’ Dialogue:

1. Plot: Select X-Axis Plot (Competitive Strength) ‘Product Design’, and Y-Axis Plot (Competitive Strength) ‘Price’
2. Format: Select ‘Bubble’
3. Scope: Select ‘HandyMan PLC / All Niches’. Tick the ‘Use Niche Colours’ Tick Box
4. Data: Select ‘Revenue’
5. Time: Drop Down Start Year ‘2006’ and End Year ‘2010’
6. Axes: Ensure the ‘Reverse X-Axis’ Tick Box remains blank. Tick the ‘View X-Axis Scale’ and ‘View Y-Axis Scale’ Tick Boxes
7. Also, tick the ‘View Key’ Tick Box

Clicking the ‘Plot’ button now reveals the required example.

The Tabs In Detail ...

1. Scope
Options include

• Host company , which shows the total distribution of business for the Host company.
• Competitor . Note that sizes and positions of the bubbles will change (reflecting differing abilities to compete in different Niches.
• All Suppliers into the 'Active' Niche - i.e. the Niche currently in focus.

2. Format
Options include representations as spot , bubble or pie chart.

3. Plot
Select a Market Attractiveness Factor, 'Overall Market Attractiveness', a Critical Success Factor, or 'Overall Competitive Strength' for each axis.

4. Data
Depending upon the options selected in File / Preferences (Input and Analysis), enables either Volume , or Revenue based analysis. Note that the area covered by each 'bubble' or 'pie' MAY be different in each case but the co-ordinates of the pies (for equivalent Niches / Suppliers) will remain identical.

5. Time
Enables the user to define the 'Start' and 'End' dates for the plot.

6. Axes
Enables a 'Conventional' representation for the Perceptual Map in which the 'Strong' mark is to the right, or the 'Reverse X-Axis' view in which the 'Strong' mark is to the Left . Also enables scales to be plotted on both Axes.

<PREVIOUS  NEXT >
MATRIX V5 Home Page