- Three Competitors: A third competitor has been added into the Market.
- Product Correlation: The means to set more granular correlations between Feature and Product Customer Distributions has been added.
The Building Block workflows have so far only touched lightly on the types of differentiation that Products can exhibit within a Market. In fact, only three types of Products have been described (see BB-103 Monopoly vs Commodity vs Orthogonal):
- Commodity Products
- Orthogonal Products
- Semi-Orthogonal Products
But, in fact, this is just the tip of the iceberg. These three types are rarely seen in real-world Markets.
In this workflow, we explore what happens when a third Product, positioned somewhere between the first two incumbent Products, is introduced into the Market.
Our story begins after George Jetson gets fired for the last time, and George Jetson starts his own company. His product, Jetson Gears, is very similar to Spacely Sprockets (correlation = 0.9), but his years of industry experience also leads him to borrow the best concepts from Cogswell Cogs (correlation = 0.5).
Unfortunately George is dismayed to discover that, despite offering a Product which provides Customers with a level of value equal to that of the incumbents, he picks up the lowest Market Share.
Products need to have a ‘Product’ name and a Price. An optional Cost field can be added to help a downstream Market Simulation node calculate the ‘Profit Maximizing Price’.
The Product Correlations determine the correlation between each of the Customer Distributions within the WTP Matrix with respect to each other.
The ‘Correlation Pairs To Matrix’ node does not need to be configured. It simply converts the list of correlation values into a Correlation Matrix.
As Spacely Sprockets and Jetson Gears are highly correlated (0.9) they are said to have little Horizontal Differentiation. Jetson Gears has more Horizontal Differentiation with respect to Cogswell Cogs (correlation = 0.5). The two Products with the most Horizontal Differentiation are Spacely Sprockets and Cogswell Cogs (correlation = 0.2).
The ‘Matrix Distributions’ node can only generate Normal Distributions, but the output Customer Distributions are correlated in accordance to the Input Correlation Matrix.
George Jetson needs to very sharply discount his Product to pick up Profitability and Market Share.