Lecture Notes: Market Mapping

Introduction to Market Mapping

• Definition: A tool to analyze competition in a specific market (e.g., airline market, chocolate bar market).
• Output: Market map with two variables.
• Common Variables: Often includes price, but could also use other factors like quality, customer age, etc.

Example: Airline Market (Price vs. Quality)

• Variables: Price (high to low), Quality (high to low)
• Quadrants on the Map:
  • High Price, High Quality: Saturated with competition (Airlines A, B, C, D, E)
  • High Price, Low Quality: Gap in the market
  • Low Price, High Quality: Gap in the market
  • Low Price, Low Quality: Gap in the market

Analyzing Gaps in the Market

1. High Quality, Low Price: Customer dream but may not be financially viable due to high costs and low revenue.
2. High Price, Low Quality: Likely low demand; customers unwilling to pay high prices for low quality.
3. Low Quality, Low Price: Potentially high demand; low competition; example of successful businesses (Ryanair, EasyJet).
   • Reason for Success: Low competition in the segment, leading to higher sales and profits.

Applications of Market Mapping

• Entry Strategy: Helps new businesses identify potential market gaps and areas to enter.
• Repositioning: Helps existing businesses identify new quadrants to target or reposition their brands/products.
• Segment Targeting: Can be used to target different customer segments (e.g., older or younger demographics).

Pros of Market Mapping

1. Identify Market Gaps: Helps both new and existing businesses identify potential areas for entry or repositioning.
2. Avoid Overcrowded Markets: Highlights saturated areas to avoid poor business decisions.
3. Simple Tool: Easy to use for analyzing competition and making informed decisions.
4. Encourages Market Research: More research reduces risk.

Cons of Market Mapping

1. No Guarantee of Success: Gaps in the market do not guarantee success (e.g., high price, low quality).
2. Limited by Variables: Uses only two variables which can oversimplify complex markets. Missing nuances like ethical considerations.
3. Potential Bias: Accuracy depends on who creates the market map. Poor data or biases can lead to poor decision-making and wasted investments.

Conclusion

• Market mapping is a useful but simplistic tool for analyzing market competition and identifying opportunities and threats.
• Effective application requires careful consideration and market research to validate findings.