SegmentationCase

MKTG490
Prof.ConorHenderson


February1,2014
byStefanDoeblitz

TheCompany&Competition

CellulardevicemanufacturerConglomerateInc.,formedajointventurewithPCmanufacturerNetlink,tosella
hybridproductofPDAandsmartphonecalledConneCtor,whichoperatesonPalmOS.
ThisproductwouldfallintotherecentlydevelopingwirelesstechnologyofPDAdevelopment.

Majorstrengthsoftheproduct: Weaknesses:
Transmitsandreceivesbothdataandvoice Ergonomics(bulkierthancellphone)
Webaccess GrayscaleLCDMonitor(moderateresolution)
Messages
Faxes&EMail
PIM
wirelesslinks(voice&datatransfer)
infraredportandUSBsynchronizationcradle

ThePDAindustrybeganin1984,buttheyweretoobulky,expensive,andinaccurate.In1996,PalmInc.produced
moreelegantandreliableproducts.By2001,PDAsincludedmanyapplicationsandcustomization.

PDA/Palmdevice:
Handspring,Palmsbiggestcompetitor,producedsnaponmoduleswithapplicationsthatappealedtotheyouth;
therefore,theygainedconsiderablemarketshare.In2001,however,Palmofferedsimilarfeaturesand
maintainedamarketshareover66%.

PDA/PocketPCs:
ThemainmanufacturersofthistypeareCompaq,HP,Psion,andCasio.Thedeviceshavealargeapplicationsuite
andcomewithmorememoryandrangeoraccessories.Theyarebulkier,heavier,andmoreexpensive.

WirelesstechnologyforPDA:
Since2001,AT&T,Nokia,andothercellphonecompaniesdevelopcellphoneswithPDAfunctions

TheCustomers

Palmoriginallycapturedinnovators:
professional,highincomemales>30,workingintechnologyfield [REMEMBERTHISSEGMENT]
mobileprofessionalsoftenawayfromhome,technicallysophisticated

In2001,PDAschangedinusabilityandpricetoattractmainstreambuyers(students,nonprofessionals,females).
Alighterbasicmodelfor$200withoutfeaturesmaydoit,butthosecustomersmightratherkeepaseparatePC
andcellphoneinstead.Themoresophisticatedusermayspend$350$600foraPocketPC.
Theconsumermarketisgrowingrapidly.Palmcurrentlyholdsa72.1%unitshareandHandspringholdsa13.9%
unitshareasof2000.Themarketispredictedtogrowto60millionusersby2004(in3yearsfromthisreport).

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1stSegmentation(9clusters)
Firstly,Iperformedasegmentation(excludingdiscrimination)fornineclusters:

Someclustershaveshortdistancesdifferencesdonotaccountforlargepercentageofoverall
differences
Mostdistancesat.34orbelow[34+.28+.25)/3.13]amax.of27.8%ofinformationwouldbelostif
wewentmoreabstractbycombiningitdowntofourclusters
Settingamin.of15respondent/cluster,twoclustersdonotmeetcriteria;restmeetsbyfewpeople
Consideringsegmentationofclusters(seeparagraphbelow)Idecidedtoreruntheanalysis

Intheend,theclusters1,8,and6shouldregroupascluster1.
Clusters4and9shouldregroupascluster4.
Clusters2,5,and7shouldregroupascluster2.Thisprocessisexplainedinthenextfewparagraphs.

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2ndSegmentation(4clusters):
Secondly,Iperformedasegmentation(excludingdiscrimination)for6clusters.
Nevertheless,Cluster2didnotmeetthecriteriaof15respondents.Clusters3and6barelymetthatexpectation.

Atleastcluster5stoodoutasasegmentthatisinadequateforthenewproduct.Theyhadnoneedtoshare
informationorusetheInternetormultimediafeatures.Theyalsotendtopayonlybelowaverageprices.

Therefore,Idecidedtoperformanothersegmentationwithevenfewerclusters.
Ifinalizedmydecisionandconcentratedonasegmentationanalysiswith4clusters.Thiswastheonlytimewhen
allclustershadatleast15respondentsandthehitrateforeachcluster60%+(thiswillbeshownlater).

Thedistanceofsegmentedrespondentsisverysignificantsothatloweringthenumberofclusterswouldresult
inalargepercentageofinformationofdifferencesamongcustomersthatwouldnotbeaccountedfor.
Everyclusterhasasignificantamountofrespondentsoftheentirepopulation.Onlycluster3barelymeetsthe
criterionof15respondents.

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Cluster2isthemostinappropriatesegment:
Donotliketoadoptnewtechnologyproducts
DonotneedthePIMfeature
Placeahighvalueonthemonitor(ConneCtoroffersmoderate)
DoesnotuseInternetandmultimediafeatures(Email,Web,Mmedia)
Payapricewellbelowtheaverage
CellPhoneShopper(irrelevant:adoptlate,usemessaging,cellphone,remoteaccessallatalowprice)

Cluster3isalsoinappropriate:
Donotadoptnewtechnologyproducts
DonotuseMessage,Cell,Email,Web,multimedia(allmainstrengthsofConneCtor)
Ergonomicsareveryimportanttothem(newproductisbulky)
Constantneedtoshareinformation
Willingtopayahighprice
HighNotchCommunicator(irrelevant:adoptlate,noInternet,cellormessaging,highergonomics,youthful)

Cluster1isanappropriatesegment:
Payaverageprice,settleformoderateergonomics&monitor,andhavemoderateneedforinformationsharing
OnlysegmentveryinclinedtousePIMfeatures&Email
Importanceofwebandmultimedia
ConnectedManager(2ndtarget:primaryPIMuser,needswebandmultimedia,nobadindications)

Cluster4isthemostappropriatesegment:
Importanceofwebandmultimedia
Onlysegmentofinnovators
Nohighneedforremoteaccesstoinformation
PayhighpriceforgreatInternet,multimedia,butalsogoodergonomics(ConneCtorisratherbulky)
Settleformoderatemonitor
ProfessionalInnovator(1sttarget:adoptfirst,webandmultimediause,payhighprice,income)

Cluster1
Slightlyabove40&averageincome
Occupation:salesneedtostayintouchwitheveryone
Designandmonitorofproductdonotmatter;connectivityismostimportant
OwnaPC,usecellphone
SecondhighestreadershipintheBusinessWeekmagazine.
AllthesedescriptionsfittheoriginalPDAuserandareagreatalternativesecondtargetgroup.

MainTarget:Cluster4
Slightlybelow40&veryhighincome&higheducationwillingtopayhighprice
Professionals(executives,lawyers,consultants)
OwnaPDAalreadyfamiliaritywithproducttype
Clearinnovatorsadoptnewtechnology
Donotspendmuchtimeawayfromthejob
HighneedforaPDA
OwnPCs,usecellphones
HighestreadershipinBusinessWeekmagazine
ThedescriptionofCluster4isalsoverysimilartotheoriginalcustomers.

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Thesegmentationinto4clustershadthehighesthitrate(71.88%).Theothertwosegmentationsresultedinahit
rateof65%(5clusters)androughly50%(6clusters).

Cluster1hasthelowesthitrateoutofallthesegmentswithonly60.7%.Thissegmenthasratheraveragescores
onalmosteveryquestion,whichcanmakeitdifficulttotarget.Wemayneedtofindoutmoreinformationabout
thissegmentbeforeinvesting.

Cluster4hasthehighesthitrateof91.90%.Thisresultsinalmostcompletecertaintyatpredictingcluster
membershipandeffectivelyreachingthissegment,thetargetgroupforConneCtor.

Thebestwaystoadvertisetoourtargetgroup:
BusinessWeekmagazinearticle
OffertradeinsforanoldPDA
Salespresentationsatcorporateevents
Specialtytechnologystoresandtechconventions
Free2weektrialofferssenttooffices(lawyers,consultants,etc.)
Onlineadvertising(CNN,NYTimes,financialandlawsites)theycareforandusetheweb

Positioning:

Sophisticated,innovative,improved,highpricedPDAthatprovidesforgreatfeatureusability

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Assumptions

Inthesurvey,onlyrespondentswhohadorwouldconsideraPDAandiftheirjobincludedtimeawayfromthe
officewereretainedforfurtheranalysis.

Questions513assumethatpeopleareawayfromtheoffice(remoteaccess).Whileawayfromyouroffice
(includingremotelocations)Cluster,4,forexample,consistsofpeoplewhodonotspendmuchtimeawayfrom
theiroffice.Thiscausesconfusionastohowaccuratelytheiranswersshouldbeinterpreted.

Theinformationdoesntstatewhehtermarketgrowthisbasedonenteringnewmarkets(youthandfemale)oran
actualgrowthofthetraditional,techsophisticated,maleandhighincomeconsumer.Thelatteriswhatmatters
fortheConneCtorproduct.

RisksandRecommendations

AttractstraditionalPDAuser,butourmaintargetcaresaboutergonomics,too
RISK: Ifleftunchanged,disappointmaintargetsegmentinacrucialaspect
RECOMMENDATION: Improveergonomics

ConneCtorisnotdesignedtofitthemainstreammarket;instead,theoriginalPDAuser.
TargetgroupiswillingtopayahighinvoicepriceforaPDAthatoffersallitsfeature
RISK: Saturated:targetmarketalreadyhasPDAsmarketConneCtorheavilytoencourage
productswitchproductshouldbeofferedwithallfeatures
RECOMMENDATION: Provideincenticesforswitching(tradein,discounts,etc.)
Createmultimediauseandstorage.Improveallwebfeatures(insteadofinfosharing)

Lastly,itisunclearastowhatthepurposeofthePDAuseforinnovativeprofessionalsis.
RISK: Productperformancedoesntalignwithintendedpurpose
RECOMMENDATION: Findoutwhetherpurposeofuseisprofessionalorpersonal.
Forprofessionaluse,forinstance,offercustomization(lawyers,consultants,etc.)