A market map is a diagram that shows how different products are positioned in a market based on two key characteristics.
These characteristics are often price and quality, but can also include factors such as performance, design or brand image.
How market maps work
- Products are plotted on a grid with two axes representing key features.
- For example, one axis may show price from low to high, and the other may show quality from basic to luxury.
- Each product is placed on the map according to how consumers perceive it, not just its actual features.
- The above example is for cars and illustrates potential examples.
Purpose of market maps
- Market maps help firms understand their position relative to competitors.
- They allow firms to identify direct competitors offering similar products.
- They help identify gaps in the market where there are few or no competitors.
- For example, a firm may spot a gap for a mid-price, high-quality product.
Using market maps for business decisions
- Firms can reposition products to move to a more profitable part of the market.
- For example, a firm may improve quality and branding to move from a low-price segment to a premium segment.
- If a firm has low price and high quality, then it can definitely increase price.
- Firms can also use market maps when launching new products to target a specific segment.
Link to competition
- Products close together on the map are strong competitors. For example, Ford Focus, Vauxhall Astra and Volkswagen Golf are all quite similar on a market map for cars.
- Products far apart face less direct competition Aston Martin and Robin Reliant are completely different marekt. because they target different consumers.
- This helps firms decide whether to compete on price or differentiation.
Limitations of market maps
- Market maps are based on simplified assumptions and only use two variables.
- They may not reflect all important factors influencing consumer choice.
- Consumer perceptions can change over time, making maps less accurate.
Simple example
In the car market, a map may show:
- low price and basic cars in one area
- high price and luxury cars in another
- A firm may identify a gap for affordable but high-quality cars.
Market maps show how products are positioned in a market and help firms identify competition and gaps for new products.
Related topics
Product differentiation Firms use product differentiation to move their position on a market map. For example, improving design or branding can shift a product towards a higher quality segment.
Competitive advantage – Market maps help firms identify how they can gain a competitive advantage. For example, a firm may choose to compete on low price or high quality depending on gaps in the market.
Price elasticity of demand Different positions on a market map are linked to different elasticity.
For example, products in high-price niche markets tend to have more inelastic demand.
Market segmentation – Market maps often reflect different consumer segments in the market. For example, low-income consumers may be in the low-price segment, while high-income consumers are in the premium segment.
Pricing strategies Market position influences pricing decisions such as penetration pricing or price skimming. For example, firms in a low-price segment may use competitive pricing.
Market structure The number of firms in each area of the map reflects the level of competition. For example, crowded areas suggest strong competition.
Barriers to entry Gaps in the market may attract new firms, but barriers to entry can prevent this. For example, high costs may stop firms from entering a premium segment.
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