E-Commerce: Framing The Market Opportunity

e-Commerce
Rayport, Jaworski
Chapter 2 Enhanced Lecture Slides
Framing the Market Opportunity

Exhibits and Tables
Copyright 2002 by Marketspace LLC
Framing the Market Opportunity Todays Objective
Develop an understanding of the framework of market opportunity analysis
Last Updated: 08/08/01 Copyright 2001 by Marketspace LLC
Chapter 2: Framing the Market Opportunity
Overview of the market opportunity analysis framework Seed the opportunity Uncover unmet or underserved customer needs Identify and choose priority segments Evaluate company capabilities to deliver value Assess the overall opportunity attractiveness Prepare a go/no-go assessment Case study: Schwab Conclusion
Exhibit 2 1: Framework for Diagnosing Market Opportunity

Seed Opportunity in Existing or New Value System
How can a firm generate new business ideas? What value can a company unlock or introduce? Can the new business fulfill an unmet or underserved customer need? Which segments of the market are most attractive to serve? What is their profile?
Uncover Opportunity Nucleus: Identify Unmet and Underserved Needs Investigative Stages
Identify Target Segments
Declare Companys Resource-Based Opportunity for Advantage
Does the firm have the resources and capabilities to support the new business and serve the customer needs? Is the new opportunity attractive from a financial, competitive and technology standpoint? Based on the overall analysis, should the firm launch the new business?
Assess Competitive, Technological and Financial Opportunity Attractiveness
Final Decision
Make Go / No-Go Assessment
Supporting Slide 2 A: Microsoft CarPoint Example

MSN CarPoint identified an opportunity to leverage the Internet to deliver customer value in the car industry
Leverage the Internet to Improve the Consumer Car-Buying Process
Car Buyers Are Dissatisfied With Current Retail Car Buying Process
The retail car-buying process was frustrating and inefficient: Little information available to the consumer Bargaining with salesperson viewed as a hassle Long process overall
MSN CarPoint selected two primary target segments for its service: The intimidated by the process The information seekers MSN CarPoint could leverage Microsofts expertise in software development, the Microsoft brand name and its multitude of online properties Competition was getting fierce with more and more online car services entering the market But the financial opportunity was large: 66% of new car buyers used online services in 2000 In 1996 the first version of CarPoint was shipped By 1998, CarPoint was driving $5 million in car sales a day
Shoppers Who Feel Intimidated by Sales People and Look for More Efficient Way
Microsofts Software and Free Placement on All Its Websites
How Big Is the Online Car-Buying Market? Who Are CarPoints Main Competitors?
Make Go / No-Go Assessment
Exhibit 2 2: Value Types

Networked-economy companies can create value in two ways: liberate trapped value or introduce new-to-the-world value
Create More Efficient Markets Enable Ease of Access Liberate Trapped Value Look at Value System to Discover New Business Opportunities Create More Efficient Systems Schoolbuyersonline.com Covisint BizBuyer Guru.com Ofoto.com FedEx Resure.com Carpoint.com Priceline.com MyYahoo Amazon personalized page Keen.com MyFamily.com Epinions.com Buzzsaw.com iMac - iMovies
Disrupt Current Pricing Power
Customize Offerings
Introduce New-to-theWorld Value
Extend Reach and Access

Build Community
Enable Collaboration Introduce New Functionality/Expertise
Exhibit 2 3: The Customer Decision Process

The Customer Decision Process framework helps analyze and discover customer needs
Customer Decision Process Need Origination Car-Buying Decision Process Car is broken and needs to be replaced Need car for commuting
Prepurchase
Information Gathering
Blue Book
Internet
Dealers
Friends Parents
Evaluation
Evaluate price, features, color, models, gas consumption
Purchase
Purchase Decision
Buy car
Postpurchase
Post-purchase Evaluation and Behavior
Evaluate new car
Perform maintenance services

Exhibit 2 4: The Segmentation Process

Market segmentation is the process of grouping customers based on their similarities Market segmentation allows a company to: - Understand the different behavioral patterns and decision-making processes of different group of consumers - Select the most attractive segments or customers the company should target - Develop a strategy to target the selected segments based on their behavior
Market Segmentation Process Overview
Choose the Segmentation Approach
Select the Segmentation Variables
Construct a Market Map
Identify Most Attractive Segments
Table 2 1: Segmentation Approaches

There are several approaches to market segmentation. Academic literature and textbooks often cite the following:
Segmentation Type
Geographic Demographic
Divides
Description
the market into different geographical units the market on the basis of demographic variables the market on the basis of company-specific variables the market based on how customers actually buy and use the product the market based on the situation that leads to a product need, purchase or use
Examples Variables
Country
/ region / city, city size, density (urban, suburban, rural), ISP domain gender, income, occupation, education, nationality, family status, Internet connectivity / offline business, number of employees, company size, job function, purchasing process / offline shopping behavior, webpage or site customer arrived from, website loyalty, prior purchases occasion, special occasion, time (time of day, day of week, holidays), location (from home, on the road), event (when writing a business plan, when shopping), trigger (out of supply) (laid back, type A), lifestyle (thrill seeker, fun lover, recluse), affinity (community builder, belonger, outcast) economy, quality, ease of use, speed, information, selection
Divides
Age,
Firmographic
Divides
Online
Behavioral
Divides
Online
Occasion (Situational)
Divides
Routine
Psychographic
Divides
the market based on lifestyle and / or personality the market based on benefits or qualities sought from the product
Personality
Benefits
Divides
Convenience,
Supporting Slide 2 B: Geographic 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 Peapod is currently operating in Fairfield County, CT, Washington D.C., Chicago, Montgomery County, MD, Boston, Long Island, NY, and Fairfax County, VA; 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: Kotler, Philip. Marketing Management. Upper Saddle River: Prentice Hall, 1997, p.257.
Supporting Slide 2 C: Geographic Segmentation Citysearch.com

For Atlanta, the focus is on art and music; for Las Vegas, its on restaurant, movies and shopping
Citysearch.com
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 While the look and feel of different cities website is very similar, Citysearch customizes the citys homepage to target the interests of city residents or city visitors
Supporting Slide 2 D: Demographic Segmentation Description
Description
Segmentation Examples

B2C: Demographic
Demographic segmentation divides the consumer market into groups based on customer demographic variables It is one of the most popular methods for distinguishing customer groups, highly actionable
Age Income Occupation Nationality
B2B: Firmographic
Demographic segmentation divides the business market into groups based on business demographic variables
Industry Company size Location
Highly actionable, since business demographic data is readily available
Source: Kotler, Philip. Marketing Management. Upper Saddle River: Prentice Hall, 1997, p.258.
Supporting Slide 2 E: Firmographic Segmentation 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 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 and Works.com
Source: Onvia.com site, Industry Standard, February 7, 2000
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 her 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 into groups of buyers whose needs are homogenous Needs-based segmentations are particularly compelling for technology companies; they can prevent companies from developing new technology features because they are cool or just because they are possible
Exhibit 2 5: Actionable and Meaningful Segmentation

While there are a variety of approaches to segmentation, many fail to deliver insightful segmentation. In order for a customer segmentation to be effective, it must be meaningful and actionable.
Meaningful
Customers must demonstrate needs, aspirations or behavioral patterns that are similar within a segment and different across segments
Actionable
Example:
A company must be able to reach customers within each segment through effective and targeted marketing programs
Webvan, the online grocery company, targeted families with high income, Internet connectivity at home, and living close to one another as their attractive market segment
-Webvans
segmentation is meaningful because it is predictive of specific online grocery behavior (e.g., people in families with high income and Internet connectivity at home are more likely to use an online grocery service like Webvan) Webvans segmentation is actionable because it is possible for Webvan to easily identify and reach its target customers (e.g., advertising in upscale cooking magazines)
Exhibit 2 6: Identify Actionable and Meaningful Variables

Finding the right segmentation variables that divide the market into actionable and meaningful segments is difficult Often an intersection of demographic, geographic, situational and behavioral variables can provide a more actionable and meaningful segmentation than variables used in isolation A good starting point is to develop a list of potential variables and then analyze their actionability and meaningfulness
CustomerCentric Variables
Who are the customers? What is their purchase process? What source of information do they use when buying the product?
MicroeconomicsCentric Variables
What is the situation when they buy or use the product? What are the major cost drivers?
Supporting Slide 2 G: Priceline.com Segmentation

Priceline.com could segment its market based on the following meaningful and actionable variables:
Personal The reason for the trip Business Scheduled in advance Occasion Flexible trip Lead time for a trip Last minute trip Other Student
Customer lifestage
Demographics Income/occupation
Retired Parent Low-middle Middle-upper Not frequent fliers
Behavior
Number of flight
Frequent fliers
Exhibit 2 7: Priceline.com Segmentation

By combining the variables, Priceline.com can create a market map and identify segments that are easy to reach and that present different behaviors with regards to vacation planning and ticket purchase
Trip Purpose Flexibility Who
Personal
Schedulable in Advance (e.g., family vacation) Flexible Event (e.g., going home) Last Minute (e.g., surprise birthday party) All Other
Business
Students
Students on Vacation
Students Going Home
Retirees Low Middle Income / Not All Other Families Frequent Fliers Middle Upper Income / Frequent Fliers
Families With Children All Other Families Families With Children
Retirees Low / Mid Income Families on Vacation Other Low / Mid Income on Vacation High Income Families on Vacation
Low / Mid Income on Getaways
Last Minute
All Other Trips
Business Trips
High Income Non-Family Trips Groups Group Trips
Exhibit 2 8: What Is a Market Map?

Market mapping is a visual representation of information about economic activities in a market from a consumer perspective
Different data can be used to represent the segments economic activities. Some common data is: - Size (i.e., percentage of consumer in each segment) - Growth rate - Average amount of money spent (or percentage over total) - Average amount of product consumed (or percentage over total)

Market mapping is important because: - It helps identify the location of money and the relative opportunity in the market - It helps select the priority segments and lay out a plan for sequencing the approach to other segments in the future - It provides a easy-to-read representation of the market where additional information can be summarized - It represents a touchstone for identifying future shifts in the market
Exhibit 2 9: Priceline.com Percentage of Airline Trips

The percentage of airline trips conducted by each segment is used as a representation of Priceline.com segments size:
Schedulable in Advance (e.g., family vacation)
Personal
Flexible Event (e.g., going home) Last Minute (e.g., surprise birthday party)
Business
All Other
Students
Students Going Home
Retirees
Families With Children All Other
Low Middle Income / Not Frequent Fliers
Last Minute
All Other Trips Business Trips
Middle Upper Income / Frequent Fliers
High Income Non-Family Trips
Groups
Group Trips
= 5%2%
= 10%2%
= 40%5%
Exhibit 2 10: Priceline.com Segment Prioritization

The identification of the priority segments is based on understanding of which segments will be most likely to find Priceline.com service more attractive. In total, these segments represent 45%-55% of market trips:
Schedulable in Advance (e.g., family vacation)
Personal
Flexible Event (e.g., going home) Last Minute (e.g., surprise birthday party)
Business
All Other
Students
Students Going Home
Retirees
Low Middle Income / Not Frequent Fliers
Last Minute
All Other Trips Business Trips
Middle Upper Income / Frequent Fliers
High Income Non-Family Trips
Groups
Group Trips
= Primary Focus
= Approximately 45%55% of the Total Market
Chapter 2: Segment the Market Exhibit 2 11: Evaluate Capabilities to Deliver Value
A company should define the resources and assets needed to deliver value in the new market, and assess whether they are available or can be created in the company or can be provided through business partnerships
Resources and Assets Needed
Provided by the Company

Types of Capabilities: Customer-facing Internal Upstream
Provided Through Partnerships

Categories of Partners: Complementor partners Capability partners
Supporting Slide 2 H: Capabilities Through Partnerships FreeMarkets

Partnering may be an effective alternative to building or acquiring the capability. FreeMarketss partner program includes six types of alliances: Consulting and Channel Technology

Market and sell FreeMarkets B2B Global Marketplace to its existing and new customers AMS, Arthur Andersen, Deloitte & Touche Provide product extensions that add additional functionality to the B2B Global Marketplace Hologix, Microsoft, Xelus Help FreeMarketss customers connect their enterprise systems to the FreeMarkets B2B Global Marketplace Sapiens Help FreeMarkets extend its B2B Global Marketplace to new geographies Mitsubishi Help FreeMarkets add and connect new suppliers to its B2B Global Marketplace National Tooling and Machining Association (NTMA), SMC Business Councils Add services or product extensions to FreeMarketss asset solutions
Integration International Expansion
Supplier Network
Asset Exchange
Supporting Slide 2 I: Capabilities Through Partnerships CarPoint

CarPoint leveraged its internal capabilities to build an online customer interface and promote its new service, but partnered with other companies to provide additional addedvalue services Assets Acquired Through Partnerships
Capability Partners: R&R (provides salesforce and relationships that enabled CarPoint to sign up dealers) AutoNation (provides CarPoints access to extended network of dealers) iCarumba.com (enables consumers to make online appointments with car service providers) Autotrader (offers consumers the ability to order used cars online)
CarPoints Own Assets

Customer-Facing: Microsoft brand name Access to multitude of online properties Marketing expertise Internal: Software product development Technology expertise Availability of funds Upstream: Network of suppliers
Exhibit 2 12: Factors to Assess the Opportunity

In order to determine the type and magnitude of the opportunity, a firm should evaluate a number of factors in four main areas:
Competitive Intensity
Number of competitors Competitors strengths and weaknesses
Customer Dynamics
Unconstrained opportunity Segment interaction Rate of growth
Opportunity Assessment Technology Vulnerability

Technology adoption Impact of new technologies
Microeconomics
Market size Profitability
Exhibit 2 13: Identify Competitors and Assess Competitive Intensity

Competitors can be categorized into two main groups: Direct Competitors: - Firms offering products or services that are close substitute Indirect Competitors: - Firms offering products that perform the same function (substitute producers) and firms that have the potential to provide products or services that are substitutes (adjacent competitors)
To assess the intensity of the competition in an online space a company need to:
Identify the competitors that specifically serve the companys target segments Assess their ability to serve these segments
Exhibit 2 14: Competitor Profiling Eastman Kodak

The Competitor Profiling tool provides a visual representation of the landscape of direct and indirect competition at each stage of the consumer activity that is central to the companys industry:
Intel Olympus

cameraworks.com
Snapfish Purchase Accessories
Purchase Camera Purchase Film
Fuji
Moto Photo
Store Pictures on CD
Take Pictures
Eastman Kodak
Digitally Manipulate Pictures Print and Receive Pictures Download and Choose Pictures to Print Shutterfly

Direct Competition Indirect Competition
Seattle Filmworks
Share Pictures
Adobe Systems
Geocities
District
Snapfish
Ofoto
HP
Supporting Slide 2 J: Competitor Profiling CarPoint
Road & Truck Automobile Magazine Edmunds.com Cars.com Kelley Blue Book
AutoWorld Information CarPrice.com Search Evaluation of Alternatives Autobytel.com CarsDirect.com
eBay AutoTrader.com DealerNet.com
Used Cars
Ford Honda
The Auto Channel
Enthusiasts and Car Clubs
Execute Purchase
AutoNet
MSN CarPoint
Car Accessories and Gifts Finance/Insurance
Direct Competition
Indirect Competition
AutoAccessory
Repair and Service
The Pep Boys
Strauss Discount Auto
CarParts.com ALLDATA.com
Carlender.com PeopleFirst.com GE Capital GEICO Allstate
Supporting Slide 2 K: Competitor Profiling FreeMarkets
IBM Oracle
PeopleSoft Microsoft

Advanstar IHS Group
CommerceOne i2 Technologies Ariba Software Development
mySAP.com
Identify Saving Opportunities for Buyers
EqualFooting
Provide PostBid Analysis
FreeMarkets
Prepare TotalCost RFQ
Direct Competition
Indirect Competition
Ventro Covisint eBreviate Vertical Net

Conduct Online Bidding Events
Identify, Screen and Support Suppliers GlobalSources PartMiner
Ritchie Bros. Auctioneers
Exhibit 2 15: Competitor Mapping to Selected Segments for Priceline

The Competitor Mapping tool helps identify competitors serving the same target segments and their ability to do so:
Target Segments Priceline
No
Travelocity
Southwest
AA E-Fares
Students Flexible Events
frequent flier miles prices 24% of bids get matched
Special Fare
deals
Very
Low Only
watch selection
Large
low prices (especially 21 days prior)
Often
not enough
notice
Poor
selection
Low
prices
Vacation planning tools Large selection Can select schedule Not as low prices
Very
low prices
Often
Low / Middle Income Families With Children
Inconvenient
Limited
not enough
flight schedules
Low
destinations
Tiring
notice
Poor
quality of service
trip (multiple stops, low service)
selection seats
Limited
Last-minute
prices
Considerable
Last-Minute Travelers
cheaper than consolidators

Only
Typically very high last-minute prices Large selections
Lower
prices than other airlines, but not real bargains destinations
Limited
selection but customers may be flexible low prices
42% of reasonable bids get matched
Limited
Very
High performance level
Medium performance level
Low performance level

Exhibit 2 16: Priceline.com Overall Opportunity Assessment

The overall business opportunity can be assessed by rating all the factors together as a whole and identifying the impact of each of them.
Positive Factor
Neutral Factor
Negative
Factor
Competitive Technical Magnitude Interaction Vulnerability Vulnerability of Between Unmet Need Segments
Likely Rate Technology Market Size Level of of Growth Vulnerability Profitability

Exhibit 2 17: Craft an Opportunity Story

Once the analysis is complete, the management team should craft an opportunity story The story is a rough outline of the business plan It should enable the team to decide whether or not to pursue the opportunity
Opportunity Story
Target segment overview High-level value proposition Expected customer benefits Critical capabilities and resources needed Why these capabilities will be a source of advantage Categorization of capabilities How the company can monetize the opportunity Initial assessment of financial opportunity
Overview of the market opportunity analysis framework Seed the opportunity Uncover unmet or underserved customer needs Identify and choose priority segments Evaluate company capabilities to deliver value Assess the overall opportunity attractiveness Prepare a go/no-go assessment Case study: Schwab Schwab launched Schwab.com in January 1998. How could Schwab have assessed that opportunity?
Conclusion
Schwab Case Study Defining Existing or New Value System

Schwab started by analyzing the different values the company could create or release to its customers:
How?
Making
markets more efficient or eliminating steps in current value systems
Release Trapped Value
Compressing
Enabling
ease of access current pricing power offerings
Disrupting
Customizing
Extending
reach / access
Create New Value
Building
community across multiple people, locations and time
Collaborating
Introducing
new-to-the-world functionality or experience

Schwab Case Study Unmet and Underserved Needs

An analysis of the decision-making process highlighted the need for a one-stop-shop that would aggregate investment information and provide personalized help
Process Steps Plan Savings Goal Unmet and Underserved Needs (1997 timeframe)
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
Schwab Case Study Market Segmentation

To segment the brokerage services market, demographic (lifestage and income/occupation) and behavior (trading frequency) variables can be used to generate actionable and meaningful segments:
High Net Worth (<$1M) Current Offline Schwab Customer
< 30
Buy and Hold

Professional <$150k Professional >$150k
Frequent Trades
Professional <$150k Professional >$150k
Other White Collar
Blue Collar
Retiree
University Student
Not Schwab Customer
Single
Married
Mature ( > 55)
Children
No Children
> 30
High Priority
Secondary Priority
Tertiary Priority
De-emphasize
Schwab Case Study Resource Availability Analysis

An assessment of available resources and assets within Schwab or through partners highlights what type of services can be provided by the company:
Company Capabilities Services Valued by Customers Partner Capabilities
Offering: Mutual Fund Managers for OneSource
Overall
Established Brand
Multiple Channels
Technology Leadership
Content: Hoovers, S&P, H&Q
Advice: Independent Advisors
Low Price
Quality Information
Customer Service
Quality Advice
Full Management
Capability highly addressing segment need Capability moderately addressing segment need Capability not addressing segment need
Schwab Case Study Assessing Competitive Intensity

Schwab was not providing a better service to its target customers than its competitors. Merrill Lynch was better positioned to serve the high net worth segment than Schwab:
Segments Schwab
Independent
Merrill Lynch financial

Advice
Ameritrade
DLJ Direct
Comprehensive
advisors B. High Net Worth

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

Schwab Case Study Overall Opportunity Assessment

The overall assessment of the opportunity for entering the online brokerage space in 1997 was positive:
Positive Factor
Neutral Factor
Migration from offline to online brokerage was likely to occur fast High degree of competitive intensity New competitors entering the market
New technologies were a threat But hard to develop
Negative Factor
Competitive Vulnerability
Technical Vulnerability
Magnitude of Unmet Need
Interaction Between Segments
Likely Rate of Growth
Technology Vulnerability
Market Size
Level of Profitability
Framing the Market Opportunity Conclusion

After todays lesson, you should be able to answer the following questions: 1. What is the market opportunity analysis framework and what are its main stages? What are the two generic value types? What is the customer decision process and what is it used for? How can a company identify the most attractive customers? Where can a company find the resources to deliver value to customers? What factors should be taken into account when assessing the market opportunitys attractiveness? How can a go/no-go assessment be prepared?
2. 3. 4. 5.
6.
7.

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Chapter 2 Enhanced Lecture Slides

Framing the Market Opportunity

Copyright 2002 by Marketspace LLC

Framing the Market Opportunity Todays Objective

Develop an understanding of the framework of market opportunity analysis

Last Updated: 08/08/01 Copyright 2001 by Marketspace LLC

Chapter 2: Framing the Market Opportunity

Chapter 2: Framing the Market Opportunity

Exhibit 2 1: Framework for Diagnosing Market Opportunity

Identify Target Segments

Declare Companys Resource-Based Opportunity for Advantage

Assess Competitive, Technological and Financial Opportunity Attractiveness

Make Go / No-Go Assessment

Supporting Slide 2 A: Microsoft CarPoint Example

Leverage the Internet to Improve the Consumer Car-Buying Process

Microsofts Software and Free Placement on All Its Websites

Make Go / No-Go Assessment

Last Updated: 08/08/01 Copyright 2001 by Marketspace LLC

Chapter 2: Framing the Market Opportunity

Exhibit 2 2: Value Types

Disrupt Current Pricing Power

Introduce New-to-theWorld Value

Extend Reach and Access

Enable Collaboration Introduce New Functionality/Expertise

Chapter 2: Framing the Market Opportunity

Exhibit 2 3: The Customer Decision Process

Evaluate price, features, color, models, gas consumption

Post-purchase Evaluation and Behavior

Evaluate new car

Perform maintenance services

Chapter 2: Framing the Market Opportunity

Exhibit 2 4: The Segmentation Process

Market Segmentation Process Overview

Choose the Segmentation Approach

Select the Segmentation Variables

Construct a Market Map

Identify Most Attractive Segments

Last Updated: 08/08/01 Copyright 2001 by Marketspace LLC

Table 2 1: Segmentation Approaches

Supporting Slide 2 B: Geographic Segmentation Description

Country Region Urban vs. rural Density Climate

Last Updated: 08/08/01 Copyright 2001 by Marketspace LLC

Supporting Slide 2 C: Geographic Segmentation Citysearch.com

Supporting Slide 2 D: Demographic Segmentation Description

Age Income Occupation Nationality

Industry Company size Location

Highly actionable, since business demographic data is readily available

Last Updated: 08/08/01 Copyright 2001 by Marketspace LLC

Supporting Slide 2 E: Firmographic Segmentation Onvia.com

Onvia.com The premier emarketplace for small businesses

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

Last Updated: 08/08/01 Copyright 2001 by Marketspace LLC

Supporting Slide 2 F: Needs-Based Segmentation

Last Updated: 08/08/01 Copyright 2001 by Marketspace LLC

Exhibit 2 5: Actionable and Meaningful Segmentation

Exhibit 2 6: Identify Actionable and Meaningful Variables

Last Updated: 08/08/01 Copyright 2001 by Marketspace LLC

Supporting Slide 2 G: Priceline.com Segmentation