What should have been Segway's business strategy?
Updated: Apr 12, 2020
In December 2001, an American inventor Dean Kamen launched Segway PT- Personal Transporter, world’s first self-balancing battery operated electric human transporter. Segway was expected to revolutionize transportation. Its speed was 6–10 mi on a fully charged nickel-metal hydride (NiMH) battery with a recharge time of 4–6 hours & was priced at $4950. Despite this hefty price tag, there were bold predictions that Segway would be the fastest-growing company into a billion dollars ever.
Segway’s journey from US to China:
Immediately after buying Segway in April 2015, Ninebot began to sell a series of Segway branded scooters and other products priced at $1,000 or less taking advantage of economies of scale. They managed to sell far faster than the Segway PT ever did.
Fifteen years after Kamen introduced the world to an electric vehicle, the world was finally ready for them with the ever-growing number of bike lanes in urban centers.
Now let’s try to deep dive why Segway’s vision to change the transportation failed. The company had a brilliant idea, patented invention & a great introductory publicity but still, the product failed?
Few questions that I asked in the quest of finding the answer to the above question.
1. Did the company have a complete product market awareness? The product was targeted for which geographic regions & customer segments and what was the purpose?
2. Why were the models recalled in 2003 & 2006? Due to the fear of competition was enough product testing conducted for different scenarios before the launch of any new versions? A survey in Florida highlighted that Segway developed and tested the PT under greatest secrecy. The company worried a competitor might beat it to the market.
3. Did the target market have the required infrastructure to support the product? Why was Segway banned from sidewalks and roads in a few countries? Was it considered to be unsafe?
4. If the product was a mass product to revolutionize transportation was the product rightly priced? Wasn’t it expensive for most of the population in 2001?
5. How did Segway improve the product after many accidental reports? How did they collect & incorporate customer feedback for enhancing the product and customer experience?
6. Were there enough training & customer support centers in the market since the unit required some training after the purchase? What measures for taken for customers' safety?
Now let’s see what are the business level strategies which could have helped Segway to change the above story into success:
External Analysis is part of the SWOT analysis that is critical in strategy formulation. Thorough market research & external analysis of industry could have made Segway aware of the threats in this industry like advantages & disadvantages over substitutes like bicycles, safety regulations in different countries, infrastructure availability to support Segway like allotted parking areas, separate pathways for riders, charging points, etc. PESTAL Analysis is one of the useful frameworks for external analysis of the industry.
Market Segmentation & Targeting
Knowing customer needs & understanding exactly what the customer wants is very critical for a product to be successful. When defining your product market, there are four important aspects:
What – Product type
To Meet – Customer Needs
Who – Customer Segments
Where – Geographic region
Segway missed the focus on the last two aspects ( Who & Where ). In November 2002, it was available for purchase on the internet for the public. Considering the sales and recall of machines in 2003, Segway should have focused on the Single Target Market approach whereby the firm selects one particular market segment and makes every effort to lead that market. Initially they could have targeted only B2B market like hotels, departmental stores, amusement parks, huge corporate campuses where employees could use Segway for internal transport. After wider user acceptance of the product they could have considered expanding & making it available for more customer segments.
Intense Product Testing
It is critical for improving product acceptance. After few accidental reports in 2002 & 2003, Segway should have invested more in the testing of different scenarios with a different set of target audiences, analyzing important & safety features, ease of use, appeal, function, as well as test whether each customer would likely buy what it is offering.
A company should select a pricing strategy that’s appropriate for its target market such that it maximizes profits while considering consumer and market demand. Product should be affordable for the target market & customers should be convinced by the product value in exchange of the price that they pay for the product.
Segway was made available to the general public over the internet and it was perceived by the majority as expensive. Manufacturing cost & nickel-metal hydride battery made the price of Segway too high and company couldn’t afford to lower the price initially. To overcome this challenge, company should have targeted the right market segment i.e. B2B market initially. Segway could have managed to sell more units than they managed to sell initially. Pricing Strategy should match the target group.
Invest in innovation
Records history shows that most successful innovations involve some degree of iteration, experimentation, openness and collaboration. An invention needs to gain market acceptance which is possible by incorporating user feedback in product enhancements. Learning from mistakes & soliciting customer feedback is critical in product innovation and enhancements. Kamen, the inventor of Segway had received feedback from multiple business leaders for the product design. Segway was considered to be too heavy and having traditional looks. The feedback were neglected and not considered by Kamen.
Customer Training & Support centers:
Segway required some training after the purchase, & thus it needed to have reliable customer interaction points where customers could test drive, learn and take lessons. Instead it was available for purchase on the internet for the public which made the buying process tedious for the buyer to go regional training center for lessons. If a retailer similar to Home Depot could have been the customer contact points, the product could have been successfully sold to a wide market place.
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