Segway_-_Strategic_Marketing

The Segway “will be to the car what the car was to the horse and buggy” (Heilmann, 2001). That is quite a bold statement to make, and the claim entrepreneur and inventor Dean Kamen made in Time magazine when discussing his invention. From the media hype and the amount of venture capital investments the company received, one would think a perpetual-motion machine was going to be produced. As the details of this new revolutionary invention were not initially released to the public, some actually believed in the release of such a futuristic (if not impossible) machine. Kamen actually waited some time before letting the media in on his creation. The fact that information about the product was leaked to make a splash in the media was thought to be a marketing strategy on his part. Let just enough information out to intrigue the public, but not enough for the competitors to know what you are doing – not an uncommon marketing strategy. Nevertheless, Kamen thought he had found the “solution to urban congestion, air pollution, and dependency on fossil fuel” (Rivlin, 2003). If this were to be true, then Kamen might have just as well have found the Holy Grail. These three issues are some of the biggest that plague modern society, and they will just keep on growing exponentially as the BRIC (Brazil, Russia, India, China) countries develop. Unfortunately, Kamen’s vision was certainly premature but also too optimistic. In this paper, we will briefly discuss the product he tried to develop as well as its strengths and weaknesses. More importantly, we will present a detailed marketing plan for a proposed product launch within France, showing an implementation plan, a SWOT analysis (Appendix 1), a market analysis (Appendix 2), as well as a financial analysis for the targeted markets (Appendices 2-4). PRODUCT DESCRIPTION AND PAST FAILURES When someone is able to raise $90 million through venture capitalists (Kemper), they must have a business plan that is inspirational enough to justify some optimism. Dean Kamen had been successful as the inventor of several devices, but had always partnered with larger companies in order to launch his ideas. That was not the case for the battery-operated, two-wheeled, first self-balancing machine in the world. He decided to go at it alone, founded Segway Inc. in 1999, raised enough cash to have a start-up and sold his first unit on Amazon.com in 2002. The Segway is now offered through more than 250 retail points across 60 countries (Segway Milestones). The company says their annual sales growth has averaged 50% since 2002 (Valentino-DeVries, 2007). From these numbers, it would seem Segway Inc. is a success. However, the company had estimated sales at 40,000 units for the first year, whereas they have only sold 50,000 since its launch. So what happened' With a high price of $4,950, it did not get the initial sales the company thought it would. This was followed by a series of issues plagued the company. Early user accidents caused it to be banned from various U.S. cities, as well as different countries around the world (Shalini, 2004). Segway had to recall all of its first 6,000 units due to a low battery condition causing the user to fall (Shalini, 2004). By 2004, Kamen had spent all of the initial investment and had to raise another $31 million to keep his operations afloat (Valentino-DeVries, 2007). With former U.S. President Bush falling from the device in 2003, and the company owner actually dying from a Segway accident in September of 2010, it is a challenge to keep trying to project a safe image of the Segway. Still, we believe that with a good marketing plan, it is possible to penetrate certain markets, notably in France. MARKET SELECTION Segway will be launching customized models, which will be offered as a rental service within France for commercial applications (public rental in massive consumption/travel areas) and industrial applications (equipment for factories, ports, research and development centers, and other public facilities). Within France, Segway’s operational revenues will thus entirely come from service-based sales, such as the rentals themselves and service add-ons, as opposed to sales of the Segway units, which is how revenues are realized in the United States and elsewhere. The Segways will be rented for short-term periods to end-user customers in commercial centers, and in larger batches to industrial clients for use on their campuses. Segway will initially focus on these two market segments in order to gain a profitable and established base within France before branching out into other markets. This will prevent the company from becoming overextended like it became in the United States. COMMERCIAL SECTOR Commercial spaces such as malls, hypermarkets, and supermarkets are the perfect place to begin a Segway launch in France in the commercial sector. France is the European Union’s third largest consumer market after the United Kingdom and Germany (Consumer Goods and Retail Report, 2009). Beyond this, there is a forecasted increase in selling space in France (in thousands of square meters) from 8867.5 in 2009 to 9520.7 in 2012 (Selling Space Increase: Hypermarkets - France, 2009). This is an ever expanding area bringing in new customers every year, and it is in the best interest of these retailers to provide customers with the best and most efficient shopping experience possible, allowing the customers to shop quicker and allowing the stores to process more customers per hour and avoid becoming overly congested. In 2003, the average shopping time spent at a mall is 85 minutes, with 80 euros spent (Mall Shopping Patterns, 2004). The introduction of Segways as shopping aids would allow customers to spend the same amount of money in less time, spend more money in the same amount of time, or ideally spend more money in less time. The Segway will first be introduced for shopper rental in massive consumption areas such as well-developed and matured hypermarkets and large commercial shopping centers. These areas are perfect launch points for Segway because of their large size, which can force customers to travel long distances within the store, and perhaps because of stagnating sales, as the stores have already reached their maturity point. Research has shown that French consumers favor getting all of their shopping done in one stop, as opposed to making multiple trips within the same week. Compared to the rest of Europe, weekly convenience store visits in France are very low: 1.8 visit per week in France as compared to 2.7 in Germany and 3.3 in the Netherlands (Identifying the Convenience Consumer, 2003). As stores and shopping centers become larger and offer more discounts to stay competitive, it is imperative that store managers increase the volume of customers and sales to remain profitable. In partnership with the commercial sites, Segway will roll out a rental model where shoppers will be able to rent Segways for 10 euros per day, or 2 euros per hour, to help speed up their shopping. A brief video will be shown before the rental to demonstrate to proper Segway usage to shoppers, space will be provided to become acclimated to the device, and speed will be limited within the stores to reduce accidents while still allowing shoppers to move faster with more maneuverability than they would by foot. Segway will wholly operate the rental operations within the stores, retaining the profits but also maintaining responsibility for repairs and maintenance, and also working closely with the store to ensure everything is operating safely and smoothly. This rental system will allow customers to traverse the stores in less time, and accomplish their shopping more efficiently, while allowing Segway to recoup the cost of the devices quickly and soon turn a profit on the rentals. The storage space and load bearing capabilities of the i2 cargo model is already a perfect base to begin to build a customized shopping model. Additional customizations will be added to the units as needed. One such customization would be to convert one of the cargo spaces as a seat for small children, allowing families to shop safely and effectively. Depending on the store, different types of cargo bins could be added, such as insulated space for frozen goods, or different shaped compartments for bulkier items. Special Segways will also be produced for disabled persons, allowing them to shop at the same speeds as everyone else. In order to get stores to allow such a system to operate on their premises, a clear value will need to be demonstrated to the sites. The Segway usage will decrease customer throughput time at the stores. The Segways will be partnered with item hand scanners already being offered at many stores, which allow customers to scan products as they take them off the shelves to buy, and then pay for what they scanned at the exit of the store instead of waiting at the end for a cashier to scan each item individually. This combination of the Segway and scanner will help to further reduce shopping times and allow more people to pass through congested stores, all while decreasing costs for the store as less cashiers will be needed. With these benefits, it will be a great advantage for stores that allow Segway to operate within their facilities. Segway will also be able to sell additional services to the shopping centers with the data generated from Segway usage within the stores. GPS trackers can be added to each of the Segways, which will allow the stores to track customer movement patterns, relieve congestion points, and also modify sales and promotional strategies to place goods at areas that the most consumers pass by. The stores could charge vendors higher prices for such prime product placement, and Segway will be able to charge the stores themselves extra for providing this service. To help deter Segway theft, the GPS trackers would have the additional benefit of providing security and allowing the Segway to be tracked at all times. Finally, as another step to mitigate losses and also prevent the Segway from being driven off premises and onto a dangerous road or highway, the Segways will be electronically limited to prevent them from being driven past a certain area in the store parking area, or beyond the front door, depending on the determination of the installation team. In order to roll-out into this market segment, a test store will be chosen where ten Segways will be installed. Segway will work closely with the facility to ensure a proper store layout is in place to allow easy Segway access, and also consult consumers to gain valuable feedback and make any necessary quality improvements. This will also provide the opportunity for real-world testing of the rental model. Once the initial improvements are made and the business model is fully tested, the product will be commercialized and brought into many stores across France. INDUSTRIAL SECTOR In the industrial sector, Segway will target large warehouses, plants, and research and development (R&D) facilities in need of enhanced mobility for personnel. This will potentially be an easier market segment to target than the commercial facilities because the industrial corporations already have licenses and budgets for the operation of light to heavy machinery on their premises. The high-tech research industry is a major target space, as France has the third highest business enterprise research and development expenditure intensity (9.3%) and the fourth highest business enterprise R&D personnel intensity in Europe (R&D expenditure in business enterprises). The nature of these complex industries has created the need for centralized yet highly versatile production environments that integrate R&D functions as well as production. Such operational pressures have brought the French government to promote the formation of specific industry Competitiveness Clusters (Les pôles de Compétitivité) to further enhance collaboration between firms and research institutions (Competiveness Clusters in France, 2009). The demand for cheap and easy transportation on such facilities is high, yet conventional vehicles entail a variety of difficulties either being unsuitable due to their specialized nature to perform specific tasks, limited speed, larger size, limited range or terrain, and/or entailing a setup time overhead. Within these spaces, Segway would be the perfect transportation addition. With quicker movement speeds, collaboration would be increased and facilitated between distant departments. Production and R&D schedules would be more easily met, and line managers would have easier times monitoring their employees. Lastly, unexpected or emergency situations would be able to be handled swiftly and efficiently. In order to address the needs of these corporations, Segway will rent versatile, industry-grade models to corporations on annual (or longer) contracts. As with any business to business transaction, discounts will be given to clients who make large scale purchases or sign longer term contracts. Through many innovative programs, Segway France will realize additional, higher margin profits by selling services instead of simply renting the Segway itself. Segway is already accomplished in providing services along with the Segway such as customer training. By charging for such items, they will realize higher profits with little additional work. To offer more value to the training program, formalized courses that offer Segway licenses to properly trained employees will be created. This would be of the most value to large industrial clients, where the Segways would potentially be driven in dangerous environments. Such a license would ensure that only properly trained employees would operate the Segways, and this could also potentially allow clients to gain discounts on insurance, saving them money in the long run. As the training programs would produce a higher margin for Segway, they would also be able to lower the cost of the device itself for companies who bought training, making the program a win-win for both sides. In the opposite direction, clients would be allowed to highly customize Segways with numerous extra options, at a higher charge, which would allow the companies to adapt the Segway to their business and the make the product more useful for them. One such potential upgrade would be to add higher capacity lithium ion batteries to the Segway, giving them much greater range and usage time, and thus better utility for companies with larger campuses or the need to use the products long periods of time between charges. A related item would be quick charge stations, similar to those being planned for deployment for electric cars. For example, the 2011 Nissan Leaf will have a full recharge time of 20 hours when plugged into the typical home outlet (8 hours with a special high amperage installation package), and around 30 minutes to an 80% charge from a special 480 volt quick charge station (Nissan LEAF Electric Car). Applying a similar ratio to the Segway, with a current charging time of 8 hours from a home outlet, companies could expect to get up to an 80% charge in 12 minutes. This ratio might not be completely exact with what the Segway battery could provide, but any such drastic reduction in charging time would be of great value, and would be of clear benefit to a company with high utilization for the Segway. With these charging stations already in place, Vélib-like stations could be created where employees would take a Segway, drive it to another location in the factory or industrial campus, and then leave the Segway at a fast charge station where another employee would then be able to take it as needed. Restricted access to the system would be limited via employee ID cards, which would need to be swiped in order to take a Segway. This would have the double benefit of allowing a company to know which employee had a Segway out, and also restrict access to those employees who possess a Segway training license. As in the commercial space, additional customizations could be made to the product body. Higher load-bearing capabilities could be added; more rugged wheels or structure could be installed to allow operation in extreme environments; and even towing capabilities could be provided at a company’s request. Also of great importance to companies with heavy machinery or otherwise dangerous workplaces, Segway will help to improve workplace safety. Electronic limiters could be added to the units to limit their speeds in dangerous or sensitive locations of the plants. For very dangerous areas with heavy machinery operating or places such as jet runways where access truly needs to restricted to certain areas only, special Segway roads could be marked off on the ground, where if the Segway unit deviated off the specified path, the operator would be warned and have a limited amount of time to return to the path before the unit ceased moving. This area would be defined with wires implanted under the ground. Workplace efficiency is another area Segway will help employers improve upon. By installing GPS or RFID trackers in a similar fashion to those described for commercial centers, employee movement could be tracked and mapped out. Frequent movement patterns could then be easily charted, and from there the company would be able to determine whether their warehouse or factory was efficiently laid out, and rearrange the space to reduce employee movement times or reduce congestion, saving both time and money. The factory maintenance staff could also monitor the positions of parked Segways in real-time, and reposition units as needed if stations remained unoccupied for too long. All of these extra installation options would be chargeable by Segway. One such company Segway could model their industrial service industry after is Fenwick, a French company producing forklifts. Fenwick was able to install trackers to the forklifts it sold to clients, giving clients much more valuable information about their own operations that they otherwise would not have had access to. Fenwick also offers a training school for forklift operators much in the same way Segway will. With these extra offerings, Fenwick was able to turn their service industry into 50% of their revenues over a 15 year period (Ulaga, 2008). This is certainly a goal for Segway to aim for. Lastly, but certainly not of the least importance, customized, useful, and attentive service would allow Segway to be involved in the day-to-day operations of its clients, creating a much tighter, long-lasting relationship. This would make Segway an integral part of operations, and not one the other company could easily break the relationship with. Trained sales staff would be tasked with maintaining a deep, lasting relationship with the clients, which would increase the probability of future sales to the customers. In a study on life insurance sales, Crosby, Evans, and Cowles found that the quality of the relationship between sales staff and clients appears to increase the probability of future sales, and having expert salespeople increases the probability of any individual sale (Lawrence A. Crosby, 1990). While insurance and the Segway are obviously different products, the lessons of a deep, personal business relationship spans all industries. These relationships may take time and effort to build up, but the future rewards are high, and an opportunity Segway cannot afford to pass up. By creating all this extra value for clients and charging for it, Segway comes out ahead with higher margins and profits, and the customers win by gaining valuable information and improvements within their own operations that they would not otherwise had the opportunity to realize. CONCLUSION AND FUTURE PLANS We have now seen how Segway could successfully enter both the commercial and industrial markets in France as a rental service. By capitalizing on the ever expanding commercial spaces, the Segway would prove to be beneficial to the shopper and at the same time increasing sales at the stores. In the industrial space, as facilities increase in size and quick and easy collaboration is a great necessity, transportation of personnel will be an area Segway can step into and provide a great benefit. By also shifting a part of Segways resources to the service provider industry in the same manner many well established companies have profitably done, while targeting the important industrial and manufacturing sector in France, Segway will be able to begin to build a solid, established base within France. From there, Segway can begin to move into other related areas, such as Charles de Gaulle airport, the sixth busiest airport in the world (Paris-Charles de Gaulle Airport). With its large passenger volumes and time sensitive needs of the people traveling there, as well as the great distances employees need to travel, this would be a natural extension to the product. Also, because of the simplicity and non-France specific nature of the business model in commercial centers, it would be relatively easy to roll out to other types of centers in France, Europe and other parts of the world, allowing Segway to rapidly expand once the model is proven to consumers. By positioning itself in places people visit on a regular basis and aiding people in accomplishing tasks more easily, Segway will achieve greater, positive brand recognition. With this flourishing business model in place, Segway will be able to reduce its price, ascertain its position within various sectors and maybe one day appeal to the masses. Beware, here comes the VolkSegway; the Segway of the people! BIBLIOGRAPHY Identifying the Convenience Consumer. (2003, October). Datamonitor Analysis. Mall Shopping Patterns. (2004). ICSC Research Quarterly, 11(2). Competiveness Clusters in France. (2009, February 17). 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