AA4 – Segmentation Analysis Assignment Instructions
Tasks:
A. Read the case background. (AA4 Smartwatch Segmentation Case Background.pdf)
B. Analyze the accompanying data set. (Segmentation.xlsx)
C. Respond to the following writing tasks: (#1-6)
• REFER TO THE CASE FOR VARIABLE DESCRIPTIONS AND CODING.
• USE ANNOTATED SCREENSHOTS TO DISPLAY THE INFORMATION YOU USED TO MAKE DECISIONS.
• AMERICAN ENGLISH SPELLING, OPEN-FORMAT & ROUGHLY ONE-PAGE.
• DUE END OF DAY: SUNDAY OCTOBER 30TH, 2022 (PDT)
ADDRESS THE FOLLOWING (C - QUESTIONS #1-6):
1. To begin the analysis, determine the number of distinct segments present in this market, as
epresented in the cu
ent sample of respondents.
• Compare the output of a three, four, and five segment (clusters) description. Re-run the
analysis for each in new tabs to make comparison easier.
• Specifically identify the segments are split into new groups going from 3 to 4, and 4 to 5
segments. Consider both the “distances” separating the segments (e.g. Dendogram, Scree
Plot, Segment Space) and the different characteristics of the separate segments (e.g.
Segment descriptors).
• Based on your prior understanding of the personal technology industry, decide if the
differences across 3, 4, and 5 segments are important enough to justify the added
complexity of “adding” additional segments. Are the additional segment(s) “useful” from a
marketing perspective?
2. After finalizing your decision for the three, four, or five segment solution, carefully study each
unique segment.
• Based on the characteristics of each segment’s descriptors, create a name for each segment
that capture the essence of what makes it unique (“Soccer Moms,” for example). In one
sentence, explain why the name you chose is descriptive and appropriate.
• Then, rate the attractiveness of each segment on a scale of 1-7 (worst-best) for the smart
watch industry in general. Explain what factors played into your rating.
3. For each of the variables used for the segmentation, rate the strength of competing Apple Watch,
Fitbit, and Samsung offerings available on the market. Use an internet search and YOUR personal
assessment of these competitor products (e.g. Task Management, Photos, etc.).
• Identify which of your segments that each of these competitor watch
ands is best
positioned. A chart may be useful to present this information.
• Rate Intel’s pervious watch (the Basis Peak, see class slides for details) and identify the
segment that you believe is the best target for Intel to go after and explain why.
4. Consider the information in the “discriminant” section
• Come up with a “go-to-market” plan and basic information on your potential marketing mix
(“4 P’s”).
• Which
and would you include as a partner (choose from the
ands listed as potential
partners in the case background, Google, Aetna, or Amazon).
• What would you offer the partner to
ing them on board? Provide some specific
information about the product features of the watch, the price point, the distribution plan,
the advertising/promotional plan including the main launch message/slogan to emphasize
and what advertising channels to use. Finish with a few sentences that explain why these
decisions make sense for the segment you chose to target.
5. What concerns do you have with the approach Intel has taken, specifically regarding the survey
construction and the sample of respondents used in the survey data collection? Anything else you
might want to know?
6. If this data were real, do you think Intel should follow your suggestions and launch this watch?
Briefly explain why or why not?
Marketing Strategy: Based on First Principles and Data Analytics
1
Marketing Strategy:
Based on First Principles and Data Analytics
AA4: Market Segmentation
Marketing Strategy: Based on First Principles and Data Analytics
2
Segmenting the Smartwatch Market1
Conor Henderson, Shrihari Sridhar and Alejandro Lerza Durant
Background
Intel has dominated the computer chip industry.
Beginning with the iconic advertising campaign “Intel Inside,” the company has created a large
market for powerful processors. This has allowed Intel to charge high prices to computer
manufacturers (e.g., Dell, HP) who needed the best processor chips for personal computers and
industrial mainframe servers to meet buyers’ expectations.
Along with Microsoft, Intel has also captured a large percentage of profits in the modern
computer revolution. But Intel, enjoying its success in PCs and mainframes, missed the rise of
smartphones, where companies like Qualcomm and Samsung placed their mobile
communication chips.
The latest astronomical rise in computer chips has come from graphic processing units (GPUs),
which were originally designed by companies such as Nvidia for high powered visual
equirements in applications like video games. Now GPUs are being put to use for deep-learning,
artificial intelligence and computer vision, machine learning, and self-driving cars. In 2016, with
AI and Tesla placing multiple GPUs in every car manufactured, Nvidia’s stock price has more
than tripled. During the same period, Intel’s stock price has increased by only 8%.
To look for growth, Intel has set its sights on the forthcoming “internet of things” market in
which previously ordinary items (e.g., refrigerators, factory machinery) will be full of sensors
and connected to the internet. One such category is the smartwatch, an advancement that replaces
the traditional wristwatch with capabilities far beyond functional timekeeping. While the origin
of computer interfacing wristwatches can be traced to the Pulsar
and in the 1970s, retail
markets have been negligible due to data, storage, battery, and connectivity limitations. It was
not until 2013 that the TrueSmart watch by startup Omate reached the full operational capability
of the present day smartwatch.
Smartwatch sales are rapidly increasing. More than 30 million were sold in 2015, and 2017 sales
projections surpass 66 million units worldwide. Samsung and Apple entered the market in 2014
and 2015 respectively, largely targeting their smartphone customers. In addition, Google,
1 Conor Henderson is an Assistant Professor of Marketing at the University of Oregon, Shrihari Sridhar is Center for
Executive Development Professor at Texas A&M University, and Alejandro Lerza Durant is an M.S. Analytics
Student at Texas A&M University.
Marketing Strategy: Based on First Principles and Data Analytics
3
Microsoft, Sony, and Toshiba have joined at least 30 other companies cu
ently offering
smartwatches.
Opportunities for the modern smartwatch include products that act as companions or standalone
alternatives to smartphones, fitness tracking and enhancement monitors, and diagnostic and
medical health reporting devices.
In 2014, as part of an early exploration of connected devices loaded with sensors, Intel acquired
Basis Science, a smartwatch manufacturer employing high quality heart rate sensors and
algorithms to track activity and monitor sleep patterns. The Basis Peak was released in 2015, but
the waterproof watch that emphasized quality sensors and algorithms failed to catch on with the
wider public. In 2016, reports that the Basis Peak battery caused burns from overheating
prompted Intel to recall the watch and issue customer refunds.
Imagine Intel has fixed the battery issue with the Basis Peak and is now considering another run
at the smartwatch space. This time, they plan to partner with another company to launch a new
product. Potential partners include Aetna, Amazon, and Google.
Google would offer integration with Android Wear for full-function smartphone communication
synthesis and access to apps. Health insurer Aetna could be a valuable partner by promoting the
watches to businesses concerned with employee well-being. Periodic reminders (e.g.,
eathe,
stand up, walk) would encourage healthier living and save money on company sponsored
healthcare premiums. Amazon is an alternative to Google, with access to the “Alexa” artificial
intelligence voice interface. A partnership with Amazon could provide a voice-based interface
that might pair well with Bluetooth ea
uds. The firm also has an obvious advantage in
promotion and distribution, as it can utilize its own retail platform.
As Intel executives ponder their next move, it becomes clear they need a systematic approach to
evisit the cu
ent state of the smartwatch industry, their customers, and their competitors, given
the changes in the last five years.
Problem Statement
Intel’s problem appears to fit the first fundamental marketing problem all firms face while
formulating marketing strategy, i.e. multiple factors are working together in multifaceted ways to
make all smartwatches differ in the market.
In order to decide who to partner with, Intel must carefully select the best customer segment to
target and decide what features to include and omit to optimize the watch for the segment. The
partner they choose should depend on what segment of smartwatch customers they decide to
target and what unique benefits they aim to provide. Thus, Intel needs to answer the following
questions:
Marketing Strategy: Based on First Principles and Data Analytics
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How can the company effectively segment the market for smartwatches based on
differing consumer needs?
From what segment(s) of the market should Intel draw customers? How can Intel position
itself or work with partners more strongly in these segments?
To help inform the decision, Intel decides to develop a customer survey to perform a
segmentation analysis.
Data
Assume a data collection takes place in collaboration with the PSU’s School of Business. A
survey is built on Qualtrics and subsequently sent to college alumni who graduated after 1996.
As an incentive for participation, Intel promises to donate $2 to the scholarship fund for every
completed survey.
A total of about 1,000 alumni complete the survey, a response rate of 2%. The survey key is
provided in Table 1. The data are provided in the data file “AA4_Data_Form.xlsx.”
Marketing Strategy: Based on First Principles and Data Analytics
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Table 1. Survey
1) Do you own a smartphone? (1=Yes, 0=No. Fifteen respondents answered “No” and were
dropped from the remainder of the survey.)
2) Rate the importance of the following attributes and characteristics. Indicate how important
each characteristic is to you (or would be to you) in a product on a 1-7 scale from “very
unimportant” to “very important”:
a. Innovation: The ability to benefit from the latest and greatest.
. Constant communication: The ability to