Market Opportunity & Analysis

Part 1
CPS 181s
Jan 16, 2003

Questions
What is the framework for market-opportunity analysis?
Is market-opportunity analysis different in
eCommerce?
What are two generic value types?
How do we identify unmet and/or under-served needs?
What determines the specific customers that the
company is to pursue?

Questions
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?

Where Will the Business

Compete?
Ideally:
Where customer needs are not fully met
Few or no competitors
Large financial opportunities
Company well positioned to meet needs
on its own or thru partners
Very difficult to accomplish - 80% failure rate
for startups

Framework for Diagnosing Market Opportunity

Seed
Seed Opportunity
Opportunity in
in Existing
Existing or
or New
New Value
Value
System
System (playing
(playing field)
field)

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

5 Conditions
To Satisfy

Identify
Identify Target
Target Segments
Segments

Companys
Companys 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

Seed Opportunity
Value

system - entire chain of suppliers

Value beliefs can be reinvented or transformed
Economic activities can be harnessed, redirected, or created

Uncover Opportunity Nucleus

Increase

customer satisfaction
Create a new experience
Uncovering
unmet

need
underserved needs

Identify Target Customers

Identifying

and choosing priority

customers leads to understanding of
why customers are attracted
What experiences do they seek?
What can be offered?

Declare the Companys

Resource-Based Opportunity
Examine

distinct capabilities and

activities needed
Identify distinct resources needed

A General Model of Consumer

Behavior

Is Market-Opportunity Different in
eCommerce?
Competition

occurs

across industry boundaries

at an unprecedented speed
between alliances of companies

Customer

behavior easy to influence and change

because eCommerce is so new
Value chains rapidly being reconfigured

Factors that Predict On-line

Buying Behavior

Two Generic Value types

Trapped

Value

New-To-The-World

Value

Heidi Roizen

Guiding Questions for Finding

Trapped Value
High

degree of asymmetric information between buyers and sellers

that traps value?
Significant time and resources consumed in making the transaction?
Activities becoming more collapsed?
Able to collaborate effectively and efficiently?
Advice and information to maximize their effectiveness or benefits?
Forgoing opportunities because of privacy issues?

Identify Unmet and/or

Underserved Needs
Examine
Steps

customer decision process

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 will take?
Categories and competitors are considered?
Choices not considered? Aware of?
Which customers are not participating?

Revealing Unmet or
Underserved Needs
Series

of activities or steps of the Customer Decision Process ?

The nature of the ideal experience (functionally & emotionally)
How close is the actual customer experience to the ideal?
What are the key frustration points?
Compensating

behaviors?
Customer success?
Underserved needs? (customer awareness)

Avie Tevanian

Revealing Unmet or
Underserved Needs...
Experience

vary according to their environment?

Customer beliefs and associations?
How

do they view relative competence and role?

View (+ or -)Current set of company offerings?

Opportunities

enhance or transform the

customers experience?
Will customers define or pay for added value?

Market Segmentation
Demographics
Geographics
Behavioral
Occasion

(or Firmographics)

(or Situational)
Pyschographics (lifestyles, personality)
Benefits (convenience, quality, ease of use
Beliefs and attitudes

Requirements of an Effective Segmentation

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

measurable and substantial

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

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

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

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

Meaningful
Meaningful

Actionable
Actionable

Substantial
Substantial

Measurable
Measurable

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

Segmentation Approaches

Geographic Segmentation Description

Description
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 was 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

Segmentation
Segmentation
Examples
Examples

Country

Region

Urban vs Rural

Density

Climate

Source: Philip Kotler, Marketing Management, 1997 (Chapter 9, page 257)

Geographic Segmentation Citysearch.com

Citysearch.com
Citysearch.com
Where
Where to
togo,
go,what
whatto
todo,
do,how
howto
toget
get
things
donein
your
city
things donein your city
Citysearch.com
Citysearch.com isis aaleading
leadinglocal
local
portal
and
transactions
company,
portal and transactions company,
providing
providingcontent
contentand
andservices
servicesin
in
select
popular
cities
in
the
US,
and
select popular cities in the US, and
slowly
slowlyexpanding
expandingto
to international
international
cities
cities

Citysearch
Citysearch provides
providescomplete
completecity
city
guides
guidesfor
for40
40 cities
citiesand
and arts
artsand
and
entertainment
entertainment guides
guidesfor
for33
33cities
cities

Citysearchs
Citysearchsoffering
offeringincludes:
includes:

Movie
Movie listings
listings
Job
Job listings
listings
Restaurant
Restaurantreservations
reservations
Ticket
Ticketpurchases
purchases
City
Cityexploration
exploration

Demographic Segmentation Description

Description
Description

B2C:
B2C:
Demographic
Demographic

B2B:
B2B:
Firmographic
Firmographic

Market division into groups based on customer

demographic variables
Most popular method for distinguishing
customer groups, highly actionable

Market division into groups based on business

demographic variables
Highly actionable, since business demographic
data readily available

Source: Philip Kotler, Marketing Management, 1997 (Chapter 9, page 258)

Segmentation
Segmentation
Examples
Examples

Age

Income

Occupation

Nationality

Industry

Company size

Location

Needs-Based Segmentation
With

actionable and meaningful dimensions identified..

Management
Needs
why

can begin identifying how to satisfying customer needs

based segmentation seeks to understand

a purchase is made (i.e., what needs are being satisfied)

divide

the market up into groups of buyers

Segments

Particularly

size, growth rate, financial attractiveness

compelling for technology companies

Priceline.com Segmentation
Occasion

Trip Purpose
Flexibility
Who
Students

Demographics and Behavior

Retirees

Low
Middle
Income / Not
Frequent
Fliers

Middle
Upper
Income /
Frequent
Fliers

Families with
Children
All Other Families

Families with
Children

Personal

Schedulable in
Advance (e.g.,
Family Vacation)
Students on
Vacation

Flexible Event
(e.g., Going
Home)

Last Minute
(e.g., Surprise
Birthday Party)

Business

All Other

Students Going
Home

Retirees
Low / Mid
Income Families
on Vacation
Other Low / Mid
Income on
Vacation

Low / Mid
Income on
Getaways

Last Minute

All Other Trips

High Income
Families on
Vacation

All Other Families

High Income Non-Family Trips

Groups

Group Trips

Name your Price needs willing buyers and sellers

Business Trips

Priceline.com Number of Airline Trips

Occasion
Trip Purpose
Flexibility
Who

Personal

Schedulable in
Advance (e.g.,
Family Vacation)

Flexible Event
(e.g., Going
Home)

Students on
Vacation

Students Going
Home

Students

Demographics and Behavior

Retirees

Low / Mid
Income Families
on Vacation

All Other

Other Low / Mid

Income on
Vacation

Families with
Children

Middle
Upper
Income /
Frequent
Fliers

All Other

Last Minute

All Other Trips

Retirees

Families with
Children

Low
Middle
Income / Not
Frequent
Fliers

Low / Mid
Income on
Getaways

High Income
Families on
Vacation

All Other
High Income Non-Family Trips

Group Trips

Groups

= 5%2%

Business

Last Minute
(e.g., Surprise
Birthday Party)

= 10%2%

= 40%5%

Shows location of money and relative opportunity

Business Trips

Priceline.com Segment Prioritization

Occasion
Trip Purpose
Flexibility
Who
Students

Demographics and Behavior

Retirees

Low
Middle
Income / Not
Frequent
Fliers

Middle
Upper
Income /
Frequent
Fliers

Families with
Children
All Other

Families with
Children

Personal

Schedulable in
Advance (e.g.,
Family Vacation)

Flexible Event
(e.g., Going
Home)

Students on
Vacation

Students Going
Home

Business

Last Minute
(e.g., Surprise
Birthday Party)

All Other

Last Minute

All Other Trips

Retirees
Low / Mid
Income Families
on Vacation
Other Low / Mid
Income on
Vacation

Low / Mid
Income on
Getaways

Business Trips

High Income
Families on
Vacation

All Other
High Income Non-Family Trips

Groups

= Primary Focus

Group Trips

= Approximately 45%55% of the Total Market

Total
Total Number
Numberof
ofTrips
Trips ==45%
45%
55%
of
the
Market
55% of the Market

Amazon.com Homepage for Two Different Customers

Targeting
Targeting
Individual
Individual
Customers
Customers

Lise Buyer

Journal Grading
Observe,

critically analyze, question, point out

contradiction, discuss something you found fascinating,
propose new areas of inquiry
Consideration also given to responses
Pluses
Additional

Research
Case site interaction
Consideration of proposed questions

Minuses
Too

Short (500 words)

Reiterating the case pass out
Grammar/Spelling (only if its blatant)