Market Opportunity & Analysis
Part 1
CPS 181s
Jan 16, 2003
Questions
 What is the framework for market-opportunity
analysis?
 Is market-opportunity analysis different in
eCommerce?
 What are two generic “value types”?
 How do we identify unmet and/or under-served
needs?
 What determines the specific customers that
the company is to pursue?
Questions
 Who provides the resources to deliver
the benefits of the offering?
 How do we assess the attractiveness of
the opportunity?
 How do we prepare a “go/no-go”
assessment?
Where Will the Business
Compete?
Ideally:
Where customer needs are not fully met
Few or no competitors
Large financial opportunities
Company well positioned to meet needs
on its own or thru partners
Very difficult to accomplish - 80% failure rate
for startups
Framework for Diagnosing Market Opportunity
Seed Opportunity in Existing or New Value
System (playing field)
Uncover Opportunity Nucleus:
Identify Unmet and Underserved Needs
5 Conditions
To Satisfy
Identify Target Segments
Company’s Capabilities that Bring
Opportunity or Advantage
Assess Competitive, Technical and Financial
Opportunity Attractiveness
Make Go / No Go Assessment
Seed Opportunity
 Value
system - entire chain of suppliers
 Value beliefs can be reinvented or
transformed
 Economic activities can be harnessed,
redirected, or created
Uncover Opportunity Nucleus
 Increase
customer satisfaction
 Create a new experience
 Uncovering
 unmet
need
 underserved needs
Identify Target Customers
 Identifying
and choosing priority
customers leads to understanding of
why customers are attracted
 What experiences do they seek?
 What can be offered?
Declare the Company’s
Resource-Based Opportunity
 Examine
distinct capabilities and
activities needed
 Identify distinct resources needed
A General Model of Consumer
Behavior
Is Market-Opportunity Different in
eCommerce?
 Competition
occurs
across industry boundaries
 at an unprecedented speed
 between alliances of companies

 Customer
behavior easy to influence and change
because eCommerce is so new
 Value chains rapidly being reconfigured
Factors that Predict On-line
Buying Behavior
Two Generic “Value types”
 Trapped
Value
 New-To-The-World
Value
Heidi Roizen
Guiding Questions for Finding
Trapped Value
 High
degree of asymmetric information between buyers
and sellers that traps value?
 Significant time and resources consumed in making the
transaction?
 Activities becoming more collapsed?
 Able to collaborate effectively and efficiently?
 Advice and information to maximize their effectiveness
or benefits?
 Forgoing opportunities because of privacy issues?
Identify Unmet and/or
Underserved Needs
 Examine
 Steps
customer decision process
the customer goes through?
 Who is involved and in what role?
 Different paths customers go through?
 Where does the process take place?
 Time the overall process will take?
 Categories and competitors are considered?
 Choices not considered? Aware of?
 Which customers are not participating?
Revealing Unmet or
Underserved Needs
 Series
of activities or steps of the Customer
Decision Process ?
 The nature of the ideal experience (functionally
& emotionally)
 How close is the actual customer experience
to the ideal?
 What are the key frustration points?
 Compensating
behaviors?
 Customer success?
 Underserved needs? (customer awareness)
Avie Tevanian
Revealing Unmet or
Underserved Needs...
 Experience
vary according to their
environment?
 Customer beliefs and associations?
 How
do they view relative competence
and role?
 View (+ or -)Current set of company
offerings?
 Opportunities
enhance or transform
the customers’ experience?
 Will customers define or pay for
added value?
Market Segmentation
Demographics
(or Firmographics)
Geographics
Behavioral
Occasion
(or Situational)
Pyschographics (lifestyles, personality)
Benefits (convenience, quality, ease of use
Beliefs and attitudes
Requirements of an Effective Segmentation
In order for a customer segmentation to be effective, it must be meaningful, actionable,
measurable and substantial

Customers must demonstrate needs, aspirations or behavioral patterns that are similar within
a segment and different across segments
– A distinction between a price sensitive and a quality seeking segment is meaningful,
since the two segments demonstrate distinguishable sets of needs

A company must be able to reach customers within each segment through effective and
targeted marketing programs
– A customer segment consisting of customers with blue eyes is not actionable, since it is
very hard to identify and reach only customers with blue eyes

Segments must be large and profitable enough to make the investment in serving them
worthwhile
– myCFO.com is targeted towards high net worth individuals, helping them manage their
portfolios. Even though the number of those individuals is small, the $ amount managed
is sizeable, thus constituting a substantial segment

Key characteristics of the segments (e.g. size and spending patterns) must be easy to
measure
Meaningful
Actionable
Substantial
Measurable
Source: Philip Kotler, Marketing Management, 1997 (Chapter 9, page 269)
Segmentation Approaches
Segmentation Type
Description
Examples - Variables
Geographic

Divides the market into different
geographical units

Country / Region / City, City Size, Density
(Urban, Suburban, Rural), ISP Domain
Demographic

Divides the market on the basis of
demographic variables

Age, Gender, Income, Occupation,
Education, Nationality, Family Status,
Internet Connectivity
Firmographic

Divides the market on the basis of
company-specific variables

On-line / Off-line Business, Number of
Employees, Company Size, Job Function,
Purchasing Process
Behavioral

Divides market based on how customers
actually buy and use the product

On-line / Off-line Shopping Behavior, Webpage or Site Customer Arrived From,
Website Loyalty, Prior Purchases
Occasion (Situational)

Divides market based on the situation that
leads to a product need, purchase or use

Routine Occasion, Special Occasion, Time
(Time of Day, Day of Week, Holidays),
Location (from Home, on the Road), Event
(when writing a business plan, when
shopping), Trigger (out of supply)
Psychographic

Divides market based on lifestyle and / or
personality

Personality (laid back, type A), Lifestyle
(thrill seekers, fun lovers, recluse), Affinity
(community builders, belongers, outcasts)
Benefits

Divides market based on benefits or
qualities sought from the product

Convenience, Economy, Quality, Ease of
Use, Speed, Information, Selection
Geographic Segmentation — Description
Description

Geographic segmentation divides the market into distinct geographical units, such as
nations, states or regions

In the Internet space, geographic barriers are to a large extent lifted

However, there still are many industries where local relationships and distribution channels
play a key role, maintaining the need for a local focus
– Webvan was operating only in San Francisco and New York. Entry into new
geographical markets will require the building of the necessary home delivery
infrastructure
– Many construction sites have a local or regional focus, since relationships with local or
regional contractors and suppliers are of critical importance
Segmentation
Examples

Country

Region

Urban vs Rural

Density

Climate
Source: Philip Kotler, Marketing Management, 1997 (Chapter 9, page 257)
Geographic Segmentation — Citysearch.com
Citysearch.com
“Where to go, what to do, how to get
things done…in your city”

Citysearch.com is a leading local
portal and transactions company,
providing content and services in
select popular cities in the US, and
slowly expanding to international
cities

Citysearch provides complete city
guides for 40 cities and arts and
entertainment guides for 33 cities

Citysearch’s offering includes:
– Movie listings
– Job listings
– Restaurant reservations
– Ticket purchases
– City exploration
Demographic Segmentation — Description
Description
B2C:
Demographic
B2B:
Firmographic


Market division into groups based on customer
demographic variables
Most popular method for distinguishing
customer groups, highly actionable

Market division into groups based on business
demographic variables

Highly actionable, since business demographic
data readily available
Source: Philip Kotler, Marketing Management, 1997 (Chapter 9, page 258)
Segmentation
Examples

Age

Income

Occupation

Nationality

Industry

Company size

Location
Needs-Based Segmentation
 With
actionable and meaningful dimensions
identified……..
 Management
can begin identifying how to
satisfying customer needs
 Needs
based segmentation seeks to understand
 why
a purchase is made (i.e., what needs are being
satisfied)
 divide
the market up into groups of buyers
 Segment’s
 Particularly
size, growth rate, financial attractiveness
compelling for technology companies
Priceline.com Segmentation
Occasion
Trip Purpose
Flexibility
Who
Students
Demographics and Behavior
Retirees
Low –
Middle
Income / Not
Frequent
Fliers
Middle –
Upper
Income /
Frequent
Fliers
Families with
Children
All Other Families
Families with
Children
Personal
Schedulable in
Advance (e.g.,
Family Vacation)
Students on
Vacation
Flexible Event
(e.g., Going
Home)
Business
Last Minute
(e.g., Surprise
Birthday Party)
All Other
Students Going
Home
Retirees
Low / Mid
Income Families
on Vacation
Other Low / Mid
Income on
Vacation
Low / Mid
Income on
Getaways
Last Minute
All Other Trips
High Income
Families on
Vacation
All Other Families
High Income Non-Family Trips
Groups
Group Trips
“Name your Price” needs willing buyers and sellers
Business Trips
Priceline.com Number of Airline Trips
Occasion
Trip Purpose
Flexibility
Who
Personal
Schedulable in
Advance (e.g.,
Family Vacation)
Flexible Event
(e.g., Going
Home)
Students on
Vacation
Students Going
Home
Students
Demographics and Behavior
Retirees
Low / Mid
Income Families
on Vacation
All Other
Other Low / Mid
Income on
Vacation
Families with
Children
Middle –
Upper
Income /
Frequent
Fliers
All Other
Last Minute
All Other Trips
Retirees
Families with
Children
Low –
Middle
Income / Not
Frequent
Fliers
Low / Mid
Income on
Getaways
High Income
Families on
Vacation
All Other
High Income Non-Family Trips
Group Trips
Groups
= 5%±2%
Business
Last Minute
(e.g., Surprise
Birthday Party)
= 10%±2%
= 40%±5%
Shows location of money and relative opportunity
Business Trips
Priceline.com Segment Prioritization
Occasion
Trip Purpose
Flexibility
Who
Students
Demographics and Behavior
Retirees
Low –
Middle
Income / Not
Frequent
Fliers
Middle –
Upper
Income /
Frequent
Fliers
Families with
Children
All Other
Families with
Children
Personal
Schedulable in
Advance (e.g.,
Family Vacation)
Flexible Event
(e.g., Going
Home)
Students on
Vacation
Students Going
Home
Business
Last Minute
(e.g., Surprise
Birthday Party)
All Other
Last Minute
All Other Trips
Retirees
Low / Mid
Income Families
on Vacation
Other Low / Mid
Income on
Vacation
Low / Mid
Income on
Getaways
Business Trips
High Income
Families on
Vacation
All Other
High Income Non-Family Trips
Groups
= Primary Focus
Group Trips
= Approximately 45%–55% of the Total Market
Total Number of Trips = 45%–
55% of the Market
Amazon.com Homepage for Two Different Customers
Targeting
Individual
Customers
Lise Buyer
Journal Grading
 Observe,
critically analyze, question, point out
contradiction, discuss something you found
fascinating, propose new areas of inquiry
 Consideration also given to responses
 Pluses
 Additional
Research
 Case site interaction
 Consideration of proposed questions
 Minuses
 Too
Short (500 words)
 Reiterating the case pass out
 Grammar/Spelling (only if its blatant)