Chapter 2 Enhanced Lecture Slides Framing Market Opportunity

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Chapter 2 Enhanced Lecture SlidesFraming Market
Opportunity
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Exhibit 2-1Framework for Diagnosing Market
Opportunity
Seed Opportunity in Existing or New Value System
Uncover Opportunity Nucleus Identify Unmet and
Underserved Needs
Identify Target Segments
Declare Companys Resource-Based Opportunity for
Advantage
Assess Competitive, Technical and Financial
Opportunity Attractiveness
Make Go / No Go Assessment
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Supporting Slide 2-ARequirements of an
Effective Segmentation
In order for a customer segmentation to be
effective, it must be meaningful, actionable,
measurable and substantial
Meaningful

• Customers must demonstrate needs, aspirations or
  behavioral patterns that are similar within a
  segment and different across segments
• A distinction between a price sensitive and a
  quality seeking segment is meaningful, since the
  two segments demonstrate distinguishable sets of
  needs

Actionable

• A company must be able to reach customers within
  each segment through effective and targeted
  marketing programs
• A customer segment consisting of customers with
  blue eyes is not actionable, since it is very
  hard to identify and reach only customers with
  blue eyes

Substantial

• Segments must be large and profitable enough to
  make the investment in serving them worthwhile
• myCFO.com is targeted towards high net worth
  individuals, helping them manage their
  portfolios. Even though the number of those
  individuals is small, the amount managed is
  sizeable, thus constituting a substantial segment

Measurable

• Key characteristics of the segments (e.g. size
  and spending patterns) must be easy to measure

Source Philip Kotler, Marketing Management,
1997 (Chapter 9, page 269)
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Table 2-1Segmentation Approaches
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Supporting Slide 2- BGeographic Segmentation
Description

• Geographic segmentation divides the market into
  distinct geographical units, such as nations,
  states or regions
• In the Internet space, geographic barriers are to
  a large extent lifted
• However, there still are many industries where
  local relationships and distribution channels
  play a key role, maintaining the need for a local
  focus
• Webvan is currently operating only in San
  Francisco and New York. Entry into new
  geographical markets will require the building of
  the necessary home delivery infrastructure
• Many construction sites have a local or regional
  focus, since relationships with local or regional
  contractors and suppliers are of critical
  importance

Description

• Country
• Region
• Urban vs Rural
• Density
• Climate

Segmentation Examples
Source Philip Kotler, Marketing Management,
1997 (Chapter 9, page 257)
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Supporting Slide 2-C Geographic Segmentation
Citysearch.com

• Citysearch.com
• Where to go, what to do, how to get things
  donein your city
• Citysearch.com is a leading local portal and
  transactions company, providing content and
  services in select popular cities in the US, and
  slowly expanding to international cities
• Citysearch provides complete city guides for 40
  cities and arts and entertainment guides for 33
  cities
• Citysearchs offering includes
• Movie listings
• Job listings
• Restaurant reservations
• Ticket purchases
• City exploration

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Supporting Slide 2- DDemographic Segmentation
Description
Description
Segmentation Examples

• Market division into groups based on customer
  demographic variables
• Most popular method for distinguishing customer
  groups, highly actionable

• Age
• Income
• Occupation
• Nationality

B2C Demographic

• Market division into groups based on business
  demographic variables
• Highly actionable, since business demographic
  data readily available

• Industry
• Company size
• Location

B2B Firmographic
Source Philip Kotler, Marketing Management,
1997 (Chapter 9, page 258)
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Supporting Slide 2- E Firmographic
Segmentation Example Onvia.com

• Onvia.com
• The premier emarketplace for small businesses
• Onvia.com is a site targeting small businesses,
  aiming to offer them everything they may need to
  run their business
• At the same time, Onvia.com provides sellers with
  a better and faster way to acquire new customers,
  through the sales leads that it generates
• Onvia.coms offering includes
• Products over 25,000 business products, ranging
  from computer hardware to paper clips
• Services critical services that small
  businesses need to run their business, including
  internet access, payroll services and
  long-distance plans
• News and advice Hourly updated news relevant to
  entrepreneurs in the new economy
• A large number of companies are focusing on small
  businesses, trying to provide them with products
  and services, including AllBusiness.com,
  bCentral.com, Business.com, BuyerZone.com,
  KillerBiz.com, Bizbuyer.com, Works.com

Source Onvia.com site, Industry Standard,
February 7, 2000
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Supporting Slide 2- F Needs Based Segmentation

• Consumers and businesses purchase goods and
  services because they satisfy their needs
• The same product may satisfy many different
  needs a person may purchase chewing gum in order
  to freshen her breath, to promote dental health,
  to help them quit smoking, or because she enjoys
  the taste
• Needs based segmentation seeks to understand why
  a purchase is made (i.e., what needs are being
  satisfied) and to divide the market up into
  groups of buyers whose needs are homogenous
• Needs based segmentations are particularly
  compelling for technology companies because they
  can prevent companies from developing new
  technology features because they are cool or
  just because they are possible

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Exhibit 2-3 Priceline.com Segmentation
Occasion
Trip Purpose
Personal
Business
Flexibility
Who
Business Trips
All Other Trips
Last Minute
Students on Vacation
Students Going Home
Students
Retirees
Retirees
Low Middle Income / Not Frequent Fliers
Low / Mid Income Families on Vacation
Low / Mid Income on Getaways
Other Low / Mid Income on Vacation
Demographics and Behavior
Middle Upper Income / Frequent Fliers
High Income Families on Vacation
High Income Non-Family Trips
Group Trips
Groups
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Exhibit 2-4Priceline.com Number of Airline
Trips
Occasion
Trip Purpose
Personal
Business
Flexibility
Who
Business Trips
All Other Trips
Last Minute
Students on Vacation
Students Going Home
Students
Retirees
Retirees
Low Middle Income / Not Frequent Fliers
Low / Mid Income Families on Vacation
Low / Mid Income on Getaways
Other Low / Mid Income on Vacation
Demographics and Behavior
Middle Upper Income / Frequent Fliers
High Income Families on Vacation
High Income Non-Family Trips
Group Trips
Groups
52
102
405
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Exhibit 2-5 Priceline.com Segment
Prioritization
Occasion
Trip Purpose
Personal
Business
Flexibility
Who
Business Trips
All Other Trips
Last Minute
Students on Vacation
Students Going Home
Students
Retirees
Retirees
Low Middle Income / Not Frequent Fliers
Low / Mid Income Families on Vacation
Low / Mid Income on Getaways
Other Low / Mid Income on Vacation
Demographics and Behavior
Middle Upper Income / Frequent Fliers
High Income Families on Vacation
Total Number of Trips 4555 of the Market
High Income Non-Family Trips
Group Trips
Groups
Primary Focus
Approximately 4555 of the Total Market
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Exhibit 2-6Segmenting Individual
CustomersAmazon.com Homepage for Two Different
Customers
Targeting Individual Customers
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Exhibit 2-7 Competitor Profiling Eastman
Kodak

• HP

• Olympus

• cameraworks.com

• Snapfish

Eastman Kodak

• Fuji

PurchaseCamera
Purchase Accessories
Purchase Film

• Moto Photo

Take Pictures
Store Pictureson CD
Direct Competition
IndirectCompetition
Digitally ManipulatePictures
SharePictures

• Seattle Filmworks

• AdobeSystems

Download and Choose Pictures to Print
Print and Receive Pictures

• Geocities

• Shutterfly

• District

• Ofoto

• Snapfish

• HP

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Exhibit 2-8 Competitor Mapping to Selected
Segments for Priceline
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Exhibit 2-9Priceline.com Overall Opportunity
Assessment
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Exhibit 2-10 Schwab Defining Existing or New
Value System
ReleaseTrappedValue
Create NewValue
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Exhibit 2-11Schwab Unmet and Underserved
Needs (1997 Timeframe)
Unmet and Underserved Needs
Process Steps
Plan Savings Goal

• Planning tools to simplify goal setting

Determine Optimal Asset Allocation

• Education on investing

Receive Ideas and Recommendations
Research Stocks

• Aggregation of investment information

Place Order

• Place order and track status anytime, anywhere

Track Portfolio Performance

• Access real time account information

Receive Dividends
Sell Stock

• Place order and track status anytime, anywhere

Tax Reporting

• Download to tax software

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Supporting Slide 2- GSchwab Opportunity
Attractiveness vs. Resource Availability
Quality Information
High
Customer Service
Quality Advice
Opportunity Attractiveness
Low
Low Price
Full Management
Low
High
Resource Availability
Note Opportunity attractiveness based on
competition level and opportunity financials
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Supporting Slide 2- H Schwab Resource
Availability
Partner Capabilities
Segments
Company Capabilities
Overall
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Supporting Slide 2-I Effectiveness of
Different Segmentation Methods
Segmentation Methods
Segmentation Criteria
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Supporting Slide 2- J Needs Based Segmentation
Charles Schwab
Schwabs market segments fall into three
categories
Source Jeffrey Veen, Hot Wired Style, Monitor
Analysis
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Supporting Slide 2- K Types of Needs and Tools
to Surface Them
Standard Tools
New Tools
ManifestedNeeds
LatentNeeds
Tool highly surfaces need
Tool moderately surfaces need
Tool does not surface need
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Exhibit 2-12 Schwab Segmentation (1997
Timeframe)
Other White Collar
Blue Collar
Retiree
University Student
High Net Worth (lt1M)
Buy and Hold
Frequent Trades
Current Offline Schwab Customer
A
lt 30
C
I
Single
gt 30
L
D
G
N
No Children
O
P
B
Not Schwab Customer
J
K
Married
Children
E
H
M
Mature( gt 55)
F
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Exhibit 2-13 Schwab Competitor Map to Segments
Medium performance level
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Exhibit 2-14 Schwab.com Overall Opportunity
Assessment