Product Concept The product concept of Segway is novel that even Steve Jobs of Apple Inc. commented that the product has the potential to change cities. The product is functional for a wide range of urban settings such as in warehouses, airport cargo terminals, and postal service.
However, Segway lacked style because initial feedback described the product as a slimmed down scooter or a skateboard with handles that downgraded the initial innovative perception. Segway has its strong and weak points. Effectively marketing the product meant aligning the strong points with the targeted segment of the market, which gives high premium for the value contributed by the strong points. The problem is that the product targeted mass marketing but carried no uniform strong appeal to market segments.
While it is true that many people hate heavy traffic, not everybody would opt for a Segway, especially since it requires pavement and manual carrying when using stairs that inconvenience users. Thus, the actual product fell short of its publicity as a revolutionary motorized urban transportation. Pricing Methods The pricing strategy for Segway is premium or high-end pricing because the $3,000 price of the Segway was based on the innovativeness and uniqueness of the product.
This finds reflection in the publicity accounts of Segway, which carried the mysterious name ‘IT’ before its launch, as a revolutionary gadget akin to the invention of the Internet. This was a huge claim since the Internet really changed people’s lives. By building-up the Segway this way, the company hoped that people would be willing to pay a higher price for this product as much as people are willing to pay for Internet services and personal computers.
Other pricing considerations such as price flexibility and discrimination (Armstrong & Kotler, 2005), depending on different market segments and geographic location of consumers, appear not to receive any consideration. Apart from capitalizing on the unique value of Segway, which is the public perspective of the product prior to its actual release, it could also be that premium pricing may be meant to meet the cost involved in the development and production of Segway. However, this pricing method failed. The primary reason for the failure of Segway is the inconsistency between the idea of mass marketing and premium pricing.
These address different market segments and customer values. Mass marketing requires a product commonly needed by consumers and saleable at an affordable price while premium pricing pertains to high premium items that fetch a high pricesuch as luxury cars for high-income customers. An executive of another company criticized the hefty price as $2,000 too high. Due to the price, only 6,000 units of Segway sold mostly to government agencies, which is less than the 50,000 to 100,000 units targeted during its launch.
There was strong reliance on the positive media response to the product before its launch that no market studies were made to determine the extent of pick-up of the product by consumers, given its $3,000 price. This proved to be a crucial lapse since the company targeted mass marketing but employed premium pricing and failed to consider possible public responses to this pricing strategy. The importance of marketing studies was already an apparent lesson in the failure of the C5 electric car in 1985 because expected consumer uptake of the product concept and its price are crucial information in marketing strategies.
In addition, there was no indication or communication of the relationship between the price set for Segway and its innovative components, which could have justified the price to consumers. The components of price are the total cost of production plus markup to give way for profit. However, there was no indication that the price of the Segway reflected the cost involved in its production plus a reasonable markup for profit. This does not help in making consumers perceive the value of Segway as equivalent to its price.
Moreover, if the Segway did cost much to develop, there are ways of getting back the cost of product development, especially of the target is mass marketing. Determining the appropriate price depends on a number of factors that requires balance. First encompasses the direct and indirect costs of developing and manufacturing the product. Second is the price that consumers are willing to pay for the product. Third is the price of competing products, which in the case of Segway are close substitutes such as skateboard and scooter.
Fourth is the targeted profit margin. Balancing these factors mean that in the product pricing formula, the price per unit would be total price divided the number of units produced. If the company expected to sell at least 50,000 units in the first year and anticipated production of this number of units, then the price could be lesser than 3,000 because of a higher divisor. However, since the price is high, either total cost is very high or the company expected a very high profit margin.
Of the two reasons, total cost cannot be that high since, product development and initial prototypes were made at home. The company also did not spend anything on advertising or any other form of promotions. Even if the total cost was high, a producer never expects to achieve break even in just the first months, especially so, for a new technological product as Segway. If Segway was initially sold at a lower price, then it could have fetched higher sales allowing the company to get back all expenses for production development and production in the first year.
Place or Distribution The primary distribution channel for Segway is online, primarily through Amazon. com. Although the Internet has become an effective channel for distribution, people would have difficulty buying a new motorized travel gadget on the Internet without the opportunity to see, touch, feel, test the product, and satiate all questions they have about the product. With an unclear product concept, relying on the curiosity of customers is not enough to make a sale. Then again, it boils down again to the price.
Purchasing a high priced product such as Segway is a huge risk, even with refund options. Promotion Promotion encompasses the different facets of marketing communication or the provision of information to consumers about the product and its value to consumers. The goal of marketing communication is to generate the expected customer response, which in the case of Segway is actual purchase. However, communications of the value of Segway relative to its price was unclear perhaps due to the focus on mass marketing.
Recommended Pricing and Marketing Strategies The company could have rationalized the price to meet what customers are willing to pay, clarify the product concept to target a particular market segment or a number of selected segments, use a wider distribution channel including sales in widely accessible shops, and improve marketing communications to express clearly the value of Segway to the target consumers. Conclusion Balancing or harmonizing the components of the marketing mix is the key to a successful marketing strategy. Pricing should be effective and sound.
However, Segway lacked style because initial feedback described the product as a slimmed down scooter or a skateboard with handles that downgraded the initial innovative perception. Segway has its strong and weak points. Effectively marketing the product meant aligning the strong points with the targeted segment of the market, which gives high premium for the value contributed by the strong points. The problem is that the product targeted mass marketing but carried no uniform strong appeal to market segments.
While it is true that many people hate heavy traffic, not everybody would opt for a Segway, especially since it requires pavement and manual carrying when using stairs that inconvenience users. Thus, the actual product fell short of its publicity as a revolutionary motorized urban transportation. Pricing Methods The pricing strategy for Segway is premium or high-end pricing because the $3,000 price of the Segway was based on the innovativeness and uniqueness of the product.
This finds reflection in the publicity accounts of Segway, which carried the mysterious name ‘IT’ before its launch, as a revolutionary gadget akin to the invention of the Internet. This was a huge claim since the Internet really changed people’s lives. By building-up the Segway this way, the company hoped that people would be willing to pay a higher price for this product as much as people are willing to pay for Internet services and personal computers.
Other pricing considerations such as price flexibility and discrimination (Armstrong & Kotler, 2005), depending on different market segments and geographic location of consumers, appear not to receive any consideration. Apart from capitalizing on the unique value of Segway, which is the public perspective of the product prior to its actual release, it could also be that premium pricing may be meant to meet the cost involved in the development and production of Segway. However, this pricing method failed. The primary reason for the failure of Segway is the inconsistency between the idea of mass marketing and premium pricing.
These address different market segments and customer values. Mass marketing requires a product commonly needed by consumers and saleable at an affordable price while premium pricing pertains to high premium items that fetch a high pricesuch as luxury cars for high-income customers. An executive of another company criticized the hefty price as $2,000 too high. Due to the price, only 6,000 units of Segway sold mostly to government agencies, which is less than the 50,000 to 100,000 units targeted during its launch.
There was strong reliance on the positive media response to the product before its launch that no market studies were made to determine the extent of pick-up of the product by consumers, given its $3,000 price. This proved to be a crucial lapse since the company targeted mass marketing but employed premium pricing and failed to consider possible public responses to this pricing strategy. The importance of marketing studies was already an apparent lesson in the failure of the C5 electric car in 1985 because expected consumer uptake of the product concept and its price are crucial information in marketing strategies.
In addition, there was no indication or communication of the relationship between the price set for Segway and its innovative components, which could have justified the price to consumers. The components of price are the total cost of production plus markup to give way for profit. However, there was no indication that the price of the Segway reflected the cost involved in its production plus a reasonable markup for profit. This does not help in making consumers perceive the value of Segway as equivalent to its price.
Moreover, if the Segway did cost much to develop, there are ways of getting back the cost of product development, especially of the target is mass marketing. Determining the appropriate price depends on a number of factors that requires balance. First encompasses the direct and indirect costs of developing and manufacturing the product. Second is the price that consumers are willing to pay for the product. Third is the price of competing products, which in the case of Segway are close substitutes such as skateboard and scooter.
Fourth is the targeted profit margin. Balancing these factors mean that in the product pricing formula, the price per unit would be total price divided the number of units produced. If the company expected to sell at least 50,000 units in the first year and anticipated production of this number of units, then the price could be lesser than 3,000 because of a higher divisor. However, since the price is high, either total cost is very high or the company expected a very high profit margin.
Of the two reasons, total cost cannot be that high since, product development and initial prototypes were made at home. The company also did not spend anything on advertising or any other form of promotions. Even if the total cost was high, a producer never expects to achieve break even in just the first months, especially so, for a new technological product as Segway. If Segway was initially sold at a lower price, then it could have fetched higher sales allowing the company to get back all expenses for production development and production in the first year.
Place or Distribution The primary distribution channel for Segway is online, primarily through Amazon. com. Although the Internet has become an effective channel for distribution, people would have difficulty buying a new motorized travel gadget on the Internet without the opportunity to see, touch, feel, test the product, and satiate all questions they have about the product. With an unclear product concept, relying on the curiosity of customers is not enough to make a sale. Then again, it boils down again to the price.
Purchasing a high priced product such as Segway is a huge risk, even with refund options. Promotion Promotion encompasses the different facets of marketing communication or the provision of information to consumers about the product and its value to consumers. The goal of marketing communication is to generate the expected customer response, which in the case of Segway is actual purchase. However, communications of the value of Segway relative to its price was unclear perhaps due to the focus on mass marketing.
Recommended Pricing and Marketing Strategies The company could have rationalized the price to meet what customers are willing to pay, clarify the product concept to target a particular market segment or a number of selected segments, use a wider distribution channel including sales in widely accessible shops, and improve marketing communications to express clearly the value of Segway to the target consumers. Conclusion Balancing or harmonizing the components of the marketing mix is the key to a successful marketing strategy. Pricing should be effective and sound.
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