Essay About Cluster Segmentation Breaks And Biggest Cluster

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ConneCtor – Team 8 – Abdullah T, Deepika P, Som P, Tejaswini HQuestion 1Based on the segmentation results (in the Appendix) K-means and Hierarchical approach, we conclude that segmentation of the market into 4 clusters is most appropriate.4 cluster segmentation breaks down the biggest cluster produced by earlier segmentations and extracts customers who have the need for features offered by ConneCtor but also Have the willingness to pay more. Score higher on the early/innovator spectrum Dendogram output for 5 clusters (Figure 4) shows the amount of information lost if the number of clusters is reduced from 5 to 4 by combining cluster 2 and 5 into 1 cluster.  The amount of information lost by doing so is only 0.34 out of total distance of 3.13 (simply 10 % of the total information) whereas information lost by reducing the 4 cluster segmentation is high (Figure 3).The following are the reasons why other cluster sizes are not appropriate, 2 cluster segmentation – Indicates that cluster 1 has strong preference for PIM and smart phone features. This preference does not match with the low average willingness to pay. This cluster is big, representing 58% of the market, and it is possible that information about customers who are willing to pay is lost.3 clusters segmentation- Produces cluster 1 with the same information and size. It further produces an insignificant cluster 3, which is not the addressable market for ConneCtor5 cluster segmentation- Cluster 2 and 5 are almost the same and can be combined into one. The 4 unique clusters identified are –Cluster 1 – Segment that seems to have a strong need for a PIM device with email and web surfing capability but has a very low willingness to pay for a device like ConneCtor.Cluster 2 – Segment that mostly needs a messaging device, e.g. pager, for constant communication. This segment has a below average interest in tech devices and a very high price sensitivity.Cluster 3 – This is a very small segment that does not crave innovation but has a high willingness to pay for a device that allows remote access to information/system e.g. PC with VPN. This segment does not show preference for PIM or smartphone functions and hence cannot be the target for ConneCtor.Cluster 4 – Segment that clearly appreciates innovative technology and shows a high willingness to pay for the same. This segment has an average need for a PIM and high interest in a modern smart phone like device that has multimedia, email and web surfing functions. Since, the clusters sizes and cluster characteristics obtained through K-means and Hierarchical segmentations are very similar, either of the two approaches can be used to determine the optimum clusters. We chose the Hierarchical method because the dendograms help in understanding relationships between clusters.Question 2As described in the case, ConneCtor is a combination of PIM and a smart phone. The ‘Customer-Product fit’ (Table 9.1) in Appendix shows the match between ConneCtor’s features and Cluster 4’s requirements. We can see that there are very few misalignments between what the product offers and the level of customer preferences.

We see that cluster 1 also seem to has a strong preference for a device like ConneCtor but has a very low willingness to pay. It is a healthy segment with 36% of population. Assuming that Conglomerate Inc. intends to continue with a product in the high price range for ‘niche’ customers who have interest in innovative tech products, it will need to target cluster 4. Also, Cluster 4 represents 23 % of the market which is an attractive segment in terms of market potential. Thus, among the 4 clusters, cluster 4 is the best fit.Going forward if Conglomerate Inc. can bring down the cost of the device through better supply chain process and lower component costs, then they can target cluster 1 by dropping the price of ConneCtor.  Alternately, they can create a lower cost version with fewer capabilities. For e.g, Cluster 1 does not care much about ergonomics, so a version that trades ergonomics for lower cost will sell well with this cluster.Question 3The discrimination data, shown in Table 3.3, helps in profiling and targeting the customer segment. Cluster 4 represents Innovators, which include highly skilled professionals such as lawyers, executives and consultants. Most of these people are highly educated and highly paid. 89% of them already own a PDA and almost everyone has access to a PC.The discrimination table in the appendix shows that their work does not take them away from office. However, the high percentage of PDA ownership shows that they are likely to buy a product that provides better email, web surfing and multimedia features on the go while being less bulky. Conglomerate Inc’s marketing plan should position the ConneCtor as an upgrade to the PDA. Since our target segment is affluent, paying for an upgrade should not be an issue. The plan should include heavy advertising in the magazines such as Business Week and PC Magazine which are heavily read by our target segment.We should run ads during financial and business TV programs that these professionals are more likely to watch. Since the segment is interested in surfing web and already owns a PDA and a PC, online advertising will also be effective in reaching them. Attractive mobile ad showcasing the product aesthetic and benefit would help draw the target customers in as well.Question 5 Data Collection oversight (not included younger tech savvy generation). One concern we have is during the survey, the marketing company only looked at customers across specific occupation types. It seems like the survey was conducted with a preconceived notion about potential customers. The survey only focused on retail consumers and ignored businesses that might be likely to buy ConneCtor for their employees such as those in sales.Further, the company did not consider that the device could have a wide appeal from non working segment such as students. The initial product design ignored the potential of a multimedia feature. Had non-working customers and students been included in the survey, it would have shown a stronger appeal towards the usability (ergonomics features), email, phone, media options of the product. That would have given ConneCtor even more conclusive data and help drive product design focusing on those features.  With this oversight, they might be giving up on a potential large and lucrative segment.