Connector Report
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ConneCtor, a new hybrid product integrating features of a Personal Digital Assistant (PDA) with a cellular phone is being examined for entry into the market. A joint venture, Netlink, between a major US wireless carrier, Conglomerate Inc., and a PC manufacturer, is underway to develop, produce and market this product. ConneCtor encompasses many features that were once only available on two separate devices, therefore opening up a large potential market.
Issue Statement
To position ConneCtor within a set target market, that is chosen from distinct segments. This will enable us to better satisfy customers needs and wants, thus in turn generating a profit.
Performing a SWOT Analysis (Figure 1) will enable us to determine if ConneCtor has the potential to survive in any given market. The results were positive allowing us to continue our research. We now begin to examine the potential market clusters. We will identify the number of distinct segments present in the market. The data that is used in this analysis has been collected by Happy Valley Consultants and the customers surveyed have been screened to encompass individuals who have or would consider a PDA and individuals who spend time away from the office.
Analysis of Alternatives
We began by observing the different cluster combinations in order to find distinct groups which are easily identifiable. We found that 7 clusters did not allow us to differentiate between the segments and information was overlapping amongst the clusters. When we considered 4 clusters, the segments seemed to have distinguishable preferences over PDA features. However, after further analysis, clusters 1 and 4 were found to be very similar and contained overlaps. Individuals shared preferences for cell phone usage, email and web access. Both groups had innovator qualities since they were above average for adopting new technologies (Table 1). When we examined a 3 cluster grouping, we found that the segments were easily identifiable and each one possessed a set of distinct features and characteristics. Cluster 1 and 4 from the 4 cluster analysis seemed to be merged through commonalities into one group (Cluster 1).
Cluster 1 was found to be the only group above average in adopting new technologies (Table 2). These findings allowed us to identify 3 distinct segments present in this market. This allows us to cater to a larger target market which encompasses similar needs and wants. Segments are measurable, accessible, actionable, and are large enough to be profitable. Our next step was to profile the clusters and select a target market for our marketing campaign. With the help of the GE matrix (Table 3) and the cluster characteristics we were able to categorize the specific clusters. We classified each cluster and defined each groups attributes (Figure 2). We name the three groups: The Innovators, Visual Users and the Big-Spenders. After profiling our three clusters we decided to target the Innovators. This segment matches many of the main product attributes and technical strengths: PIM function, cell phone, email, fax, web, etc. Innovators are also more likely to adopt a new technology and upgrade the product. Being technologically sophisticated, this group can manage the new technology and quality constraints faced within the web surfing experience.
Discriminant Analysis (Using 3 Clusters)
Discriminant Analysis aided us in determining which segment descriptors are the best predictors of PDA users and allowed us to better understand certain segments to better position our product. We then found that our predicted clusters were well estimated, having a hit rate of 76.88% (Table 4). By examining the Correlation of variables within each discriminant function (Table 5), we found that the most significant characteristics of an individual using a PDA are as follows: level of education, level of income, ownership of a PDA and PC, a Business Week reader and working in sales. Our target market will therefore possess a high level of all these attributes. By looking at Table 6, we can compare the characteristics we selected in Table 5 to the different segments. We will choose the market, which contains features that are most influential in owning a PDA. Through this analysis (Figure 3), we found that the Innovators are the group to target.
Innovators are the obvious choice for a target market. They are high-income professionals which are innovative and are very forward-thinking. They are extremely knowledgeable about technology and would need no assistance with the PDA. Even though this group is willing to pay less than cluster 3 for the PDA, they are still willing to pay above the average price of $324. Innovators easily adopt new products and would appreciate the various features that Netlinks PDA has to offer. This is also the largest of the segments where 74 of the actual cluster out of 93 cases match the predicted cluster (Table 4). The Innovators also show huge potential in growth, in an expanding technological world.
Cluster 2, the Visual Users, would have a hard time managing the backlit grayscale LCD screen of moderate resolution. They like to view things on high resolution and like big monitors for viewing information. They are not very innovative and most do not own a PDA. Even though the PDA offers instant messaging, they would not need all of the other features that Netlinks product has to offer. This group has a high use for cell phones. With a cell phone one can send many instant messages. They are lower in weight than the PDA. Cell phone companies are adding similar features to the PDA to their phones and this would deter Visual Users from purchasing a PDA.
Cluster 3, the Big-Spenders, is the group with the lowest income. Although this segment looks appealing because they are willing to spend a lot on a PDA, they will not adopt new products very easily. They would definitely benefit from some of the features the PDA has to offer such as quick information sharing capabilities, however, most do not already own a PDA. The participants in this group according to Table 6, own less PCs than the average. This means that they are also slow in adopting new technologies.
Segmenting the Market through Discriminant Analysis
Discriminant Analysis allowed us to find the most operationally significant function, and determine the variables that are highly correlated within that function, to locate the target market and help distinguish one segment from one another. We found that it is better to use 3 cluster segmentation than 4 or 7 clusters because the hit rate for 3 cluster segmentation is fairly higher compared to the others (Table 7). Also, the target market within the 3 segments