What does this do?: Portable Music Player Revolution (Week 6, Chapter 6)

It's hard to believe that new generations of grade school-aged kids will never have to wind up the tape of a cassette again.  I happened upon a pretty funny video the other day that really highlighted how far personal music players have come in such a short time.  Some companies have found themselves on the outside looking in because they failed to stay in touch with technology trends occurring in the environment around them.

History of Portable Music Players
This is not meant to be a comprehensive summary, but rather cover the three main technology changes over the past 50 years.
In the early 1970s, the first portable cassette player was released.  However, it wasn't until the 1980's when the Sony Walkman was released that people really started buying cassettes and cassette players en masse.

Fast forward a few years to 1982, when the compact disc was released.  Shortly after, portable CD players were the new mode of choice.  The CD player improved on the cassette by allowing the user to quickly skip, repeat, and play their song of choice.  The CD quickly passed cassettes in sales over the next few years.

Finally, in 1999, the mp3 music file was released.  This allowed users to move hundreds of these files onto small mp3 players for portable use.  Although the mp3 was a significant improvement from the previous two, it was not until Apple released the iPod and iTunes in 2001 that the portable music player really changed.

Cassette player vs iPod 4 P's
In hindsight, the launch of the iPod was really the death of cassettes and CDs.  Apple truly revolutionized the Core of what portable music players were.
Product:  The iPod was a tangible good, but intimately tied to the iTunes library where consumers could purchase new music.
Price:  The iPod was priced at roughly an equivalent price to a cassette player when it was launched.  At the time of launch though, the iPod was priced higher than a portable cassette player.
Place:  The iPod could be purchased at one of Apple's stores, at another retailer, or on-line.
Promotion:  The iPod had significant influence on the industry because of its connection with the iTunes store.  Consumers could do in one-click of the mouse what used to take a trip to the store or purchase from a music catalog to secure new music.

Apple created a better tool with the iPod.  Customers value a product that provides ready access to the music of their choice.  The iPod offered a product that was easier to get, cheaper to use, and more user friendly for the consumer.  All those variables put together really make all of the old music players obsolete.  We should all be thankful the days of winding up cassette tape are over.

Office for iPad: A look at the hypothetical STDP (Week 5, Chapter 4/5)

Microsoft launched its Office Apps for iOS at the end of March.  One day after the apps went live, it held the top three spots on the App Store.  Now, similar to other apps, the true test will be to see how long the App is a popular download.  Several other apps have gone before, yet quickly fluttered out after failing to meet customer expectations.  [As an aside, the screenshot below was from 29-March; when I downloaded the Apps today Word, Excel, and PPT still held the top 3 spots]  Now presumably, Microsoft did a thorough STDP analysis on this product release, but I'll take a swing at a simplified version below.

Segmentation
It's quite obvious that Microsoft is pursuing the tablet market, specifically those consumers who use the iPad/iOS.  For this segment, the most obvious observable variable is the purchase or possession of an iPad.  One thing to note in Microsoft's segmentation though, is that the company had to have realized that there would be some cannibalization of its own table market share.  Assuming that some consumers purchasers their table, the Microsoft Surface, solely for access to Office.  It would be safe to assume that some consumers would move towards the iPad, since it is now Office capable.  However, the overall market expansion and profitability were too good to pass up.

Targeting
Since Office is already available to Android powered tablets and it comes pre-installed on the Microsoft tablet, Microsoft is targeting the iOS market and confidence that this market segment will continue to grow.  Based on the Garner data below, Microsoft saw the obvious market share with regard to operating system and decided it would be in their best interest to include iOS in its offering.   The data shown here, is the Worldwide Tablet sales to end users, by operating system.

The next table shows the Worldwide tablet sales to end users, by Vendor.  It's obvious from the data below, that Microsoft wanted an opportunity to target the 70M plus customers using Apple products.  

These customers could also be Office users on their notebook and desktop, but have selected Apple for their tablet needs.  

Differentiation

The Office product has set itself apart as the go-to for workplace and personal document platform.  What Microsoft is looking to do with Office on iPad, is get that large target market above accustomed to using the platform on their tablet.  A quick 4 P analysis below shows that Place is the key marketing-mix element for setting itself apart, but the true revenue stream will come in how they use Pricing.

Product:  Office (Word, Powerpoint, Excel, Note)

Place: Apple App Store

Pricing: Free download, for full access to platform will require Office 365 subscription

Promotion: Emphasis on ease of Office use on iOS

It's easy to see how Microsoft is looking to lure in potential customers with the free version for document viewing, but to get the creation and editing options, the user must pay for the Office 365 service.  This service costs $10 per month or $100 per year.

Positioning

Microsoft has found a valuable place in customer's minds as so many people are on the go these days and prefer the ease of a tablet over their notebook computer. I can personally think of dozens of times where Office on my iPad would have made life easier.

Microsoft's decision was certainly based on a more robust STDP analysis than what I showed, but it should offer some insight into the key decisions that were made in the marketing process.

Segment Decisions in Electric Automobiles (Week 4, Chapter 4/5)

I thought it would be fitting to discuss the electric automobile industry, since that will be the marketing plan focus for the quarter.  The electric vehicle industry provides a fuel-efficient means of transportation.  It is also attractive to those consumers who are green conscious, since the majority of these vehicles are zero-emission vehicles.  The industry is still in its infancy and makes up on about 2% of the market at this point.

Before I dive into talking about company's segment decisions in the electric automobile industry, it would be good to ensure that we're on the same page about market segmentation.  The goal in market segmentation is for the company is to divide up the market into groups of potential customers with distinct characteristics, behaviors, and needs.  The company can then choose which segment to target with their product.

Market Segments in the Electric Automobile Industry
The companies competing in the niche market of electric vehicles have two main segments to choose from.  The first segment is those consumers who are seeking the benefits that electric cars have to offer with regard to fuel efficiency.  These consumers are trying to avoid the high cost of gas and view electric vehicles as a viable alternative.  The second segment is made up of consumers who are green conscious.  These consumers have bought into the green movement and want a vehicle that is not going to negatively impact the ecosystem.
It is tough to break out demographics for each of these categories because age and gender are not good indicators of who will be pursuing an electric vehicle.  Two profiles that do stick out though are lifestyle and income.  The lifestyle is in line with the second benefit category listed above, green conscious consumers.  The income demographic comes into play as we look at the company's target market and differentiation techniques.

Big Auto

The main players in the US electric automobile market from the traditional gas-powered vehicle industry are GM, Nissan, and Ford.  The currently offer the Chevy Volt, Nissan Leaf, and Ford Focus respectively.  Since electric vehicles only make up 2% of the current market, these companies have no real incentive to make a big push into the electric market.  There are no government regulations mandating a move away from gas, so why bother.  What these companies are doing, is providing an electric vehicle to keep the consumers from moving away from their brand to a competitors electric vehicle offering.  There is no massive overhaul to innovate beyond what the current market desires.
Big auto is only going after those consumers on the lower to middle economic categories.  None of the cars shown to the right would be confused with a luxury car offering.  These industry players seem OK with what they are currently offering to the market, since there isn't a massive demand for the vehicles.

The Disruptor
Tesla made a big splash in the electric car market back in 2012 with their two electric vehicles.  In fact, even two years later, they are still experiencing a back-order for their Model S and Model X.  Tesla decided that instead of just satisfying a consumers desire to have an eco-friendly car, they would offer a vehicle that would be viewed as a luxury car.  Tesla founds its current home with consumers that have more disposable income.  They also set themselves apart from big auto because the design of these cars from the start was for electric vehicles.  They didn't turn a gas-powered vehicle into an electric car.
Just providing a luxury electric vehicle alone is not why Tesla is so popular.  It is because they are revolutionizing the ease of use of electric vehicles.  It's easy to operate a gas-operated vehicles today, since there are fuel stations all over.  The problem for the electric vehicles is that a consumer must always be wary of where a charging station is or how much of a charge they have. Tesla is working on setting up charging stations within some select west coast metropolises and creating electric routes up the west coast.  They are breaking the mold of the electric vehicle as most people see them as simple commuter cars.

Market Change
As noted above, some of the actions that Tesla is currently taking could set the stage for a massive shift in the electric car market in the future.  Once Tesla is able to establish the required infrastructure to sustain electric vehicles outside of metropolitan areas, they will start shifting their segment focus.  In the coming years, Tesla has announced it will start offering more economical offerings in the electric car market.  If big auto continues to sit on the sideline of innovation, they will be left behind.  There are dozen of stories about companies who were left behind because they failed to see the change in the market.  The Innovator's Dilemna is a great book on how companies can deal successfully with innovation.  

Positioning to Simplify Marketing-Mix (Week 4, Chapter 4/5)

Positioning
I'm again relying on the article by Miklos Sarvary to provide the definition.  He states that, "positioning is defined as the marketer's effort to identify a unique selling proposition for the product".  At this point in the marketers journey, s/he has already segmented the market and targeted the particular segment the company decided to pursue.

Creating a Positioning Statement
One of the tools that Sarvary comments on is the positioning statement.  There are three questions that the statement must address.
1. Who are the customers?
2. What is the set of needs that the product fulfills?
3. Why is the product the best option to satisfy those needs?
To effectively answer the questions above, the statement will be formed in a way that is directed towards the potential customers.  The third question being addressed by the positioning statement really helps align the company behind one of the 4 P's.  The element that stands out will help the company determine its primary point of differentiation.

Simplifying Marketing-Mix
As stated above, the company can determine any one of the four P's as its primary.  The key is that the company clearly determines its position in the market and ensures its products are differentiated from competitor's products.  An example of this positioning and marketing-mix simplicity is Trader Joes.  Trader Joe's has made a niche for themselves in the grocery market by differentiated themselves through price.  There are no gimmicks, coupons, or clubs at Trader Joes.  They offer their own labeled, cost competitive products to the consumer.

Trader Joe's and companies like them succeed because they have made strategic decisions on the companies positioning in the market.  It is important to remember that before a positioning statement can be made and further honed through branding and differentiation, the company must complete the other steps in the marketing process.  Market segmentation and target market selection need to be completed to allow a proper positioning to be done.  This will allow the company to focus on the right customers through the correct marketing-mix element.

Segmentation --> Customer Obsession (Week 4, Chapter 4/5)

Market Segmentation
According to Miklos Sarvary, "Market segmentation consists of dividing the market into groups of potential customers - called market segments - with distinct characteristics, behaviors, or needs".   He also points out two types of segmentation in the article.  The first is segmentation based on benefits sought by customers.  The second is segmentation based on observable characteristics of customers.  Each marketer has a choice of how to go about these two segments, but generally it is easier in practice to identify a segment based on a demographic.  However, to be a truly effective marketer, these demographic segments must correlate in some manner to the benefits sought by customers.  Honing in on the benefits is the key step to work towards customer obsession.

Segmentation as a facilitator to customer obsession
Now some may see the word obsession and feel that it is a bit extreme, but look at the successful companies in the market and it isn't to far off.  Apple, Google, Disney, and USAA are just a few of the companies that come to mind when we talk about customer obsession.  These companies strive day-in, day-out to provide for the needs and benefits sought by their customers.  

Andreas von der Heydt has written several fantastic blog posts on his LinkedIn page about customer satisfaction and obsession.  One of the posts, titled "Help, I'm Customer Obsessed" lists two fundamental rules of customer obsession.
1. Make sure that you do everything to make your customers happy.
2. Customers first, then brand, then revenue, then profit.
The first point really goes back to your decisions made during market segmentation.  It is critical that the correct segment is chosen based off the benefits desired and the make-up of that segment.  If your company is trying to market a product to a customer segment that is not interested, the business will suffer.  
The second point gets right at the heart of being customer obsessed.  If company's always live by the default that customers are first, then their decision making process will be simplified.  This again, goes back to ensuring that the correct market is selected. 
Now both of the comments above do not mean that the company has to get their market segment perfect the first time.  The company will most likely need to be flexible to changes in the environment and economy some time after their initial assessment was done.  The key here is to continually assess the benefits being sought by your particular segment.



Sarvary, Miklos. "Market Segmentation, Target Market Selection, and Positioning". HBR No. 501-018