market opportunity & analysis part 1 - duke university

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Market Opportunity & AnalysisMarket Opportunity & AnalysisPart 1Part 1

CPS 181sSept 4, 2001

QuestionsQuestionsQuestions

What is the framework to market-opportunity analysis?

Is market-opportunity analysis differentin the New Economy?

What are two generic “value types”? How do we identify unmet and/or under-served needs?

What determines the specific customersthat the company is to pursue?

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QuestionsQuestionsQuestions

Who provides the resources to deliver

the benefits of the offering?

How do we assess the attractiveness of

the opportunity?

How do we prepare a “go/no-go”

assessment?

Framework for Diagnosing Market OpportunityFramework for Diagnosing Market OpportunityFramework for Diagnosing Market OpportunitySeed Opportunity in Existing or New Value

SystemSeed Opportunity in Existing or New ValueSeed Opportunity in Existing or New Value

SystemSystem

Uncover Opportunity Nucleus:Identify Unmet and Underserved Needs

Uncover Opportunity Nucleus:Uncover Opportunity Nucleus:Identify Unmet and Underserved NeedsIdentify Unmet and Underserved Needs

Identify Target SegmentsIdentify Target SegmentsIdentify Target Segments

Declare Company’s Resource-BasedOpportunity for Advantage

Declare CompanyDeclare Company’’s Resource-Baseds Resource-BasedOpportunity for AdvantageOpportunity for Advantage

Assess Competitive, Technical and FinancialOpportunity Attractiveness

Assess Competitive, Technical and FinancialAssess Competitive, Technical and FinancialOpportunity AttractivenessOpportunity Attractiveness

Make Go / No Go AssessmentMake Go / No Go AssessmentMake Go / No Go Assessment

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Seed OpportunitySeed OpportunitySeed Opportunity

Value system entire chain of suppliersValue beliefs can be reinvented ortransformedEconomic activities can be harnessed,redirected, or created

Uncover Opportunity NucleusUncover Opportunity NucleusUncover Opportunity Nucleus

Increase customer satisfactionCreate a new experience

Uncoveringunmet needunderserved needs

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Identify Target CustomersIdentify Target CustomersIdentify Target Customers

Identifying and choosing prioritycustomers leads to understanding ofwhy customers are attractedWhat experiences to they seek?What can be offered?

Declare the Company’sResource-Based Opportunity

Declare the CompanyDeclare the Company’’ssResource-Based OpportunityResource-Based Opportunity

Examine distinct capabilities andactivities neededIdentify distinct resources needed

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Is Market-Opportunity Different inthe New Economy?

Is Market-Opportunity Different inIs Market-Opportunity Different inthe New Economy?the New Economy?

Competition occurs across industry boundaries at an unprecedented speedbetween alliances of companies

Customer behavior easy to influence and changeValue chains rapidly being reconfigured

Two Generic “Value types”Two Generic Two Generic ““Value typesValue types””

Trapped Value

New-To-The-World Value

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Guiding QuestionsGuiding QuestionsGuiding QuestionsHigh degree of asymmetric information that trapsvalue?Significant time and resources consumed in the mostefficient manner?Activities becoming more collapsed?Able to collaborate effectively and efficiently?Advice and information to maximize their effectivenessor benefits?Forgoing opportunities because of privacy issues?

Identify Unmet and/orUnderserved Needs

Identify Unmet and/orIdentify Unmet and/orUnderserved NeedsUnderserved Needs

Examine customer decision processSteps the customer goes through?Who is involved and in what role?Different paths customers go through?Where does the process take place?Time the overall process take?Categories and competitors are considered?Choices not considered? Aware of?Which customers are not participating?

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Revealing Unmet orUnderserved NeedsRevealing Unmet orRevealing Unmet orUnderserved NeedsUnderserved Needs

Series of activities or steps of the CustomerDecision Process ?The nature of the ideal experienceHow is the ideal?What are the key frustration points?

Compensating behaviors?Customer success?Underserved needs?

Revealing Unmet orUnderserved Needs...Revealing Unmet orRevealing Unmet or

Underserved Needs...Underserved Needs...

Experience vary according to theirenvironment?Customer beliefs and associations?

Relative competence and role?Current set of company offerings?

Opportunities enhance or transformthe customers’ experience?Will customers define or pay foradded value?

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Market SegmentationMarket SegmentationMarket Segmentation

Demographics (or Firmographics)GeographicsBehavioralOccasion (or Situational)PyschographicsBenefitsBeliefs and attitudes

Requirements of an Effective SegmentationRequirements of an Effective SegmentationRequirements of an Effective Segmentation

MeaningfulMeaningfulMeaningful

ActionableActionableActionable

SubstantialSubstantialSubstantial

MeasurableMeasurableMeasurable

Customers must demonstrate needs, aspirations or behavioral patterns that are similar withina 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

A company must be able to reach customers within each segment through effective andtargeted marketing programs

– A customer segment consisting of customers with blue eyes is not actionable, since it isvery hard to identify and reach only customers with blue eyes

Segments must be large and profitable enough to make the investment in serving themworthwhile

– myCFO.com is targeted towards high net worth individuals, helping them manage theirportfolios. Even though the number of those individuals is small, the $ amount managedis sizeable, thus constituting a substantial segment

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

Source: Philip Kotler, Marketing Management, 1997 (Chapter 9, page 269)

In order for a customer segmentation to be effective, it must be meaningful, actionable,measurable and substantial

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Segmentation ApproachesSegmentation ApproachesSegmentation Approaches

Segmentation Type Description Examples — Variables

Geographic Divides the market into differentgeographical units

C ountry / Region / City, City Size, Density(Urban, Suburban, Rural), ISP Domain

Demographic Divides the market on the basis ofdemographic variables

A ge, Gender, Income, Occupation,Education, Nationality, Family Status,Internet Connectivity

Firmographic Divides the market on the basis ofcompany-specific variables

O n-line / Off-line Business, Number ofEmployees, Company Size, Job Function,Purchasing Process

Behavioral Divides market based on how customersactually buy and use the product

O n-line / Off-line Shopping Behavior, Web-page or Site Customer Arrived From,Website Loyalty, Prior Purchases

Occasion (Situational) Divides market based on the situation thatleads to a product need, purchase or use

R outine Occasion, Special Occasion, Time(Time of Day, Day of Week, Holidays),Location (from Home, on the Road), Event(when writing a business plan, whenshopping), Trigger (out of supply)

Psychographic Divides market based on lifestyle and / orpersonality

P ersonality (laid back, type A), Lifestyle(thrill seekers, fun lovers, recluse), Affinity(community builders, belongers, outcasts)

Benefits Divides market based on benefits orqualities sought from the product

C onvenience, Economy, Quality, Ease ofUse, Speed, Information, Selection

Geographic Segmentation — DescriptionGeographic Segmentation Geographic Segmentation —— Description DescriptionGeographic segmentation divides the market into distinct geographical units, such asnations, 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 channelsplay a key role, maintaining the need for a local focus

– Webvan is currently operating only in San Francisco and New York. Entry into newgeographical markets will require the building of the necessary home deliveryinfrastructure

– Many construction sites have a local or regional focus, since relationships with local orregional contractors and suppliers are of critical importance

Country

Region

Urban vs Rural

Density

Climate

DescriptionDescriptionDescription

SegmentationExamples

SegmentationSegmentationExamplesExamples


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Geographic Segmentation — Citysearch.comGeographic Segmentation Geographic Segmentation —— Citysearch.com Citysearch.comCitysearch.com

“Where to go, what to do, how to getthings done…in your city”

Citysearch.com is a leading localportal and transactions company,providing content and services inselect popular cities in the US, andslowly expanding to internationalcities

Citysearch provides complete cityguides for 40 cities and arts andentertainment guides for 33 cities

Citysearch’s offering includes:

– Movie listings

– Job listings

– Restaurant reservations

– Ticket purchases

– City exploration

Citysearch.com“Where to go, what to do, how to get

things done…in your city”

Citysearch.com is a leading localportal and transactions company,providing content and services inselect popular cities in the US, andslowly expanding to internationalcities

Citysearch provides complete cityguides for 40 cities and arts andentertainment guides for 33 cities

Citysearch’s offering includes:

– Movie listings

– Job listings

– Restaurant reservations

– Ticket purchases

– City exploration

Demographic Segmentation — DescriptionDemographic Segmentation Demographic Segmentation —— Description Description

Market division into groups based on customerdemographic variables

Most popular method for distinguishingcustomer groups, highly actionable

Age

Income

Occupation

Nationality

Market division into groups based on businessdemographic variables

Highly actionable, since business demographicdata readily available

Industry

Company size

Location

B2C:Demographic

B2C:B2C:DemographicDemographic

B2B:Firmographic

B2B:B2B:FirmographicFirmographic

DescriptionDescriptionDescription SegmentationExamples

SegmentationSegmentationExamplesExamples


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Firmographic Segmentation Example — Onvia.comFirmographicFirmographic Segmentation Example Segmentation Example —— Onvia.com Onvia.comOnvia.com

“The premier emarketplace for smallbusinesses”

Onvia.com is a site targeting smallbusinesses, aiming to offer themeverything they may need to run theirbusiness

At the same time, Onvia.com providessellers with a better and faster way toacquire new customers, through thesales leads that it generates

Onvia.com’s offering includes:

– Products: over 25,000 businessproducts, ranging from computerhardware to paper clips

– Services: critical services thatsmall businesses need to run theirbusiness, including internet access,payroll services and long-distanceplans

– News and advice: Hourly updatednews relevant to entrepreneurs inthe new economy

A large number of companies arefocusing on small businesses, trying toprovide them with products andservices, including: AllBusiness.com,bCentral.com, Business.com,BuyerZone.com, KillerBiz.com,Bizbuyer.com, Works.com

Onvia.com“The premier emarketplace for small

businesses”

Onvia.com is a site targeting smallbusinesses, aiming to offer themeverything they may need to run theirbusiness

At the same time, Onvia.com providessellers with a better and faster way toacquire new customers, through thesales leads that it generates

Onvia.com’s offering includes:

– Products: over 25,000 businessproducts, ranging from computerhardware to paper clips

– Services: critical services thatsmall businesses need to run theirbusiness, including internet access,payroll services and long-distanceplans

– News and advice: Hourly updatednews relevant to entrepreneurs inthe new economy

A large number of companies arefocusing on small businesses, trying toprovide them with products andservices, including: AllBusiness.com,bCentral.com, Business.com,BuyerZone.com, KillerBiz.com,Bizbuyer.com, Works.com

Source: Onvia.com site, Industry Standard, February 7, 2000

Needs Based SegmentationNeeds Based SegmentationNeeds Based Segmentation

Satisfying customer needs

Needs based segmentation seeks to understand

why a purchase is made (i.e., what needs are beingsatisfied)

divide the market up into groups of buyers

Particularly compelling for technology companies

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Schedulable inAdvance (e.g.,

Family Vacation)

Flexible Event(e.g., Going

Home)

Last Minute(e.g., Surprise

Birthday Party)All Other

Families withChildren

All Other Families


All Other Families

Priceline.com SegmentationPricelinePriceline.com Segmentation.com SegmentationPersonal

Business

Groups

Low –Middle

Income / NotFrequent

Fliers

Middle –Upper

Income /Frequent

Fliers

Students

Retirees

Trip Purpose

Flexibility

Who

Retirees

Business Trips

Students onVacation

Group Trips

All Other Trips

Low / MidIncome Families

on Vacation

Students GoingHome

Other Low / MidIncome onVacation

High IncomeFamilies on

Vacation

Low / MidIncome onGetaways

Last Minute

Dem

og

rap

hic

s an

d B

ehav

ior

Occasion

High Income Non-Family Trips


Family Vacation)


Home)

Last Minute(e.g., SurpriseBirthday Party)

All Other


All Other


All Other

Priceline.com Number of Airline TripsPricelinePriceline.com Number of Airline Trips.com Number of Airline Trips

Personal

Business

Groups

Low –Middle


Fliers

Middle –Upper

Income /Frequent

Fliers

Students

Retirees

Trip Purpose

FlexibilityWho

Retirees

Business TripsBusiness Trips

Students onStudents onVacationVacation

Group TripsGroup Trips

All Other TripsAll Other Trips

Low / MidIncome Families

on Vacation

Students GoingStudents GoingHomeHome

Other Low / MidOther Low / MidIncome onIncome onVacationVacation

High IncomeHigh IncomeFamilies onFamilies on

VacationVacation

Low / MidLow / MidIncome onIncome onGetawaysGetaways

Last MinuteLast Minute

Dem

og

rap

hic

s an

d B

ehav

ior

Occasion

= 5%±2% = 10%±2% = 40%±5%


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Family Vacation)


Home)

Last Minute(e.g., SurpriseBirthday Party)

All Other


All Other


All Other

Priceline.com Segment PrioritizationPricelinePriceline.com Segment Prioritization.com Segment Prioritization

Personal

Business

Groups

Low –Middle


Fliers

Middle –Upper

Income /Frequent

Fliers

Students

Retirees

Trip Purpose

FlexibilityWho

RetireesRetirees

Business Trips

Students onStudents onVacationVacation

Group Trips

All Other Trips

Low / MidLow / MidIncome FamiliesIncome Families

on Vacationon Vacation

Students GoingStudents GoingHomeHome

Other Low / MidOther Low / MidIncome onIncome onVacationVacation

High IncomeFamilies on

Vacation

Low / MidLow / MidIncome onIncome onGetawaysGetaways

Last MinuteLast Minute

Dem

og

rap

hic

s an

d B

ehav

ior

Occasion

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

Total Number of Trips =45%–55% of the Market

Total Number of Trips =45%–55% of the Market


Amazon.com Homepage for Two Different CustomersAmazon.com Homepage for Two Different CustomersAmazon.com Homepage for Two Different Customers

TargetingIndividualCustomers

TargetingTargetingIndividualIndividualCustomersCustomers

market opportunity & analysis part 1 - duke university

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