Market Opportunity & Analysis

Part 2

CPS 181s
Jan 21, 2003
 Future Case Studies
500 words initial post and each response
Raise questions, point out contradictions
What was fascinating, what did you struggle to
understand?
Extrapolate future areas of inquiry
Focus on ideas, depth and critical analysis
Use other resources for research
 Grading
Each Case Study (9) - 40 points
Case Discussion Leader - 50 points
In-Class Assignments - 80 points
Class Participation - 50 points
Midterm Project Progress Report - 100 points
Final Project Presentation - 400 points

Total = 1040 points

Tools & Techniques to Determine
Where Will Business Compete?
Customer needs?
Financial opportunity?
Competitors?
Company resources or partners to fulfill
needs?
 Framework for Diagnosing Market Opportunity
What
What is
is the
the Playing
Playing Field
Field for
for the
the Business?
Business?

Identify
Identify Unmet
Unmet and
and Underserved
Underserved Needs
Needs

5 Conditions Identify
Identify Target
Target Customer
Customer Segments
Segments
To Satisfy
Company’s
Company’s Capabilities
Capabilities that
that Bring
Bring
Opportunity
Opportunity or
or Advantage
Advantage

Assess
Assess Competitive,
Competitive, Technical
Technical and
and Financial
Financial
Opportunity
Opportunity Attractiveness
Attractiveness

Make
Make Go
Go // No
No Go
Go Assessment
Assessment
 Does Segmentation Matter?
 Can you give an example of a company that
segments the market?
 Do you feel segmentation increases profits?
 Does it make any difference in the on-line
world?
 Does it provide any value to the customer?
 Does segmentation facilitate customization or
personalization?
Honda vs Barneys
 Which is Better?
Analysis vs No Analysis
 Real goal is to reach critical mass  Speed not precision (=lost time)
with key customer segment in as
short a time as practical
 Network economics capitalize on
first-mover momentum
 No-analysis blind alleys, partner
negotiations, and customer  Rapidly connect and lock in large
complaints bog a company down if numbers of customers
they don’t sort out a clear  Large customer base provides
opportunity path from the start
lower costs
 Second and third movers
capitalize on the mistakes of other  Old rules no longer apply, a
to get more customers for less company is better off learning by
cost doing
 No-analysis may feel like moving
fast without assessment, but
actually generating more heat
than light
 Trapped Value vs New Value
 Create more efficient  Customize offerings
markets  Radically extend
 Create more efficient reach and access
delivery (value)  Build community
system  Enable collaboration-
 Enable ease of
across people,
access location, time
 Disrupt current pricing
 New functionality or
power (consumer experience
power)
The Consumer Decision Process
Model of On-line Consumer
Behavior
 Tools
Segment Prioritization Chart?
 Segment Prioritization Chart
Occasion

Trip Purpose Personal

Schedulable in Flexible Event Last Minute Business

Flexibility Advance (e.g., (e.g., Going (e.g., Surprise All Other
Who Family Vacation) Home) Birthday Party)

Students on Students Going

Students
Vacation Home

Retirees Retirees
Demographics and Behavior

Families with Low / Mid

Low – Children Income Families
Middle on Vacation Low / Mid
Income / Not Income on Last Minute All Other Trips
Frequent All Other Other Low / Mid Getaways
Fliers Income on Business Trips
Vacation
Families with High Income
Middle – Children Families on
Upper Vacation
Income /
Frequent All Other
Fliers High Income Non-Family Trips
Total
TotalNumber
Number ofofTrips
Trips ==45%–
45%–
55% of the Market
55% of the Market
Groups Group Trips

= Primary Focus = Approximately 45%–55% of the Total Market

 Tools
Segment Prioritization Chart
Analyze which customer segments to
pursue
 Tools
 Segment Prioritization Chart
Competitor Maps (egg diagram)
 Competitor Profiling — Eastman Kodak
 HP

 Olympus
 cameraworks.com
 Snapfish
Purchase  Fuji
Camera
Purchase
Purchase
Accessories
Film

 Moto Photo
Take
Store Pictures
Pictures
on CD Direct Indirect
Eastman Kodak Competition Competition

Share Digitally Manipulate

 Seattle Pictures Pictures  Adobe
Filmworks Systems
Print and Download and
 Geocities Receive Choose Pictures to
Pictures Print

 District
 Shutterfly

 Snapfish  Ofoto

 HP
 Tools
 Segment Prioritization Chart
Competitor Maps (egg diagram)
Underserved areas
competitor strengths
potential collaborators
 Tools
 Segment Prioritization Chart
 Competitor Maps (egg diagram)
 Competitor Mapping to Selected Customer
Segments
Competitor Mapping to Selected Segments for
Priceline

High performance level Medium performance level Low performance level

 Tools
 Segment Prioritization Chart
 Competitor Maps (egg diagram)
 Competitor Mapping to Selected Customer
Segments
 Unconstrained opportunities
 segment interactions
 growth potential
 Tools
 Segment Prioritization Chart
 Competitor Maps (egg diagram)
 Competitor Mapping to Selected Customer Segments
 Opportunity Assessment Chart
 Priceline.com Overall Opportunity Assessment

Positive
Factor

Neutral
Factor

Negative
Factor

Competitive Technical Magnitude of Interaction Likely Rate of Technology Market Size Level of
Vulnerability Vulnerability Unmet Need Between Growth Vulnerability Profitability
Segments
 Tools
 Segment Prioritization Chart
 Competitor Maps (egg diagram)
 Competitor Mapping to Selected Customer Segments
 Opportunity Assessment Chart
 Overall
effect considering all factors
 Managers assess magnitude of company’s impact
Go/No-Go Assessment (Opportunity Story)
=Rough Draft of Business Plan
 Describe target segment within selected value system
 Articulate high-level value system
 Spell out customer benefits
 Identify critical capabilities and resources needed to deliver
customer benefit
 Categorize critical capabilities as in-house, build, buy, or
collaborate
 Describe how company will monetize the opportunity (i.e., how it
will capture some portion of the value that it creates for its
customers)
 Provide an initial sense of the magnitude of the financial
opportunity
 Schwab.com
Launched January 15, 1998
Schwab: Unmet and Underserved Needs (1997 Timeframe)
Process Steps Unmet and Underserved Needs

Plan
Plan Savings
Savings Goal
Goal  Planning tools to simplify goal setting

Determine
Determine Optimal
Optimal Asset
Asset Allocation
Allocation  Education on investing

Receive
Receive Ideas
Ideas and
and Recommendations
Recommendations

Research
Research Stocks
Stocks  Aggregation of investment information

Place
Place Order
Order  Place order and track status anytime, anywhere

Track
Track Portfolio
Portfolio Performance
Performance  Access real time account information

Receive
Receive Dividends
Dividends

Sell
Sell Stock
Stock  Place order and track status anytime, anywhere

Tax
Tax Reporting
Reporting  Download to tax software
 Schwab — Opportunity Attractiveness vs.
Resource Availability
Quality
Information

High Customer
Service

Opportunity Quality
Attractiveness Advice

Low
Price
Low

Full
Management

Low High
Resource Availability

Note: Opportunity attractiveness based on competition level and opportunity financials

Schwab Resource Availability
Company Capabilities Partner Capabilities Overall

Segments

Capability highly addressing segment need

Capability moderately addressing segment need
Capability not addressing segment need
Effectiveness of Different Segmentation Methods

Segmentation Methods
Segmentation
Criteria Clickthrough-
Demographic Geographic Needs-based
based

Meaningful

Actionable -
Online

Actionable -
Offline

Substantial

Measurable

= Low = High
 Needs Based Segmentation: Charles Schwab
Schwab’s market segments fall into three categories

“Saving
“Saving For
For aa Goal”
Goal” “Financial
“Financial Planning”
Planning” “Traders”
“Traders”
 Saving
Saving for
for retirement
retirement  Estate
Estate planners
planners  Hobby
Hobby investors
investors
 Saving for college  Tax planners  Active traders
Saving for college Tax planners Active traders
 Saving
Saving for
for house
house down
down  Trust
Trust fund
fund managers
managers
payment
payment

Source: Jeffrey Veen, Hot Wired Style, Monitor Analysis

 Schwab Segmentation (1997 Timeframe)
High Net Buy and Hold Frequent Trades Other
Blue University
Worth White Retiree
Professional Professional Professional Professional Collar Student
(<$1M) Collar
<$150k >$150k <$150k >$150k

Current Offline
Schwab
Customer
< 30
Single
Not Schwab Customer

> 30
Children
No
Married

Children

Mature
( > 55)

High Priority Secondary Priority Tertiary Priority De-emphasize

 Schwab — Competitor Map to Segments
Segments Schwab Merrill Lynch Ameritrade DLJ Direct

 Comprehensive
 Independent research
financial advisors  High quality
 Advice and  No advice
 Advice for access to service
platinum analysis  Limited research  Service
High Net Worth members
 Portfolio  Bare bones professional
 High quality management service assigned to
information clients with at
service least $1M in
assets
 Lowest price ($8 /  Comprehensive
 Comprehensive trade) research
research  High price IPO center
Buy and Hold  Limited research 
 High level of  Access to tools (company allowing investors
(>$150K)
service analysis profiles and to participate in
 Moderate price earnings IPOs
estimates)  Moderate price
 High quality of  Lowest price
information ($8 / trade)  No price
 Reduced prices  Limited research reduction for
for frequent frequent traders
Eventually:
traders Eventually:
 Multiple channels
 Multiple channels for trading  Marketspeed 3.0
Frequent Traders
for trading  Very high price (including online, providing faster
(<$150K)
(phone, on-line, telephone, web trade execution
branch) and wireless)  Wireless alerts
Eventually:  Free real-time and trading
 Velocity software quotes and  Real-time quotes,
(introduced current financial streaming news
August 1999) news

High performance level Medium performance level Low performance level

 Schwab.com Overall Opportunity Assessment

Positive
Factor

Neutral
Factor

Negative
Factor

Competitive Technical Magnitude of Interaction Likely Rate of Technology Market Size Level of
Vulnerability Vulnerability Unmet Need Between Growth Vulnerability Profitability
Segments
 Case Study – Virtual Vineyards
 What are the market conditions that allow VV to provide value to
suppliers? To end-users. What end-users does VV target?

 What is the business model of VV?

 How has VV established its acknowledged dominance of virtual

retailers in this category? What are the resources that VV has used to
develop this dominance?

 What are the attributes of a high quality retail service when it is

delivered screen-to-screen rather than face-to-face?

 What additional actions might VV take to enhance their position in the

marketplace?

 What are the major problems confronting online firms when they
attempt to craft a unique, sustainable business model?