Pricing Strategies
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Pricing methods and strategies, and review the pricing of the Segway as an intrinsic component of the marketing strategy for that product. Would your pricing and marketing strategies have been any different, and if so, in what way and why?
The Situation
Kanellos, M. (2001, Nov 29) More Ginger details may be coming at News.com. Viewed February 22, 2008.
Reuters, (2001, Dec 3) Mystery of Ginger ends at news.com. Viewed February 22, 2008.
Harmon, A. (2001, Dec 3). An Inventor Unveils His Mysterious Personal Transportation Device at newyorktimes.com. Viewed, February 22, 2008.
BBC (2002 Feb 19). Hyped scooter goes on sale at news.bbs.co.uk. Viewed February 22, 2008.
Ojeda-Zapata, J. (2008, Jan 5) Going somewhere? McClatchy-Tribune Business News. Retrieved from Proquest database, February 22, 2008.
Jackson, G. (2007, Dec 19). Segway's new way. McClatchy - Tribune Business News. Retrieved from Proquest database, February 22, 2008.
Jay Jochnowitz, J (2007, Aug 16). Push for Segway use ends at governor's desk. Knight Ridder Tribune Business News. Retrieved from Proquest database, February 22, 2008.
Kawamoto, D. (2003, Sep 29). Segway sales haven't transported maker at News.com. Viewed February 22, 2008.
techsoc.org (2008). Today in Technology History at techsoc.org. Viewed February 22, 2008.
Gizmodo.com, (2008). Segway at gizmodo.com. Viewed February 22, 2008.
BACKGROUND: In 1985, UK entrepreneur, computer manufacturer and inventor Sir Clive Sinclair launched his latest new product, one that would revolutionize the world of personal transportation. The C5 was positioned as the world's first commercially produced electric car and priced at equivalent to $520 (at 1985 exchange rates). It was an unmitigated commercial disaster. Before the end of the year the price had dropped to the equivalent of $190 to clear unsold stock. In total 12,000 were produced and the C5 entered the record books as one of the worst marketing blunders of all time.
Fast forward to the Twenty First century, where we know better, right? In 2001, U.S. entrepreneur and inventor, Dean Kamen launched his latest new product, one that "would be bigger than the internet", (BBC, 2002) and revolutionize the world of personal transportation, a claim supported by fellow inventor and hi-tech guru, Steve Jobs, co-founder of Apple Inc. According to techsoc.org, a company Press Release of the time described the Segway as: "the first self-balancing, electric-powered transportation machine. With dimensions no larger than the average adult body and the ability to emulate human balance, the Segway HT uses the same space as a pedestrian, and can go wherever a person can walk. The Segway HT will allow people to go farther, move more quickly, and increase the amount they can carry anywhere they currently walk." (techsoc.org, 2008)
Amy Harmon writing in the New York Times indicated that Mr. Kamen saw the product as "a transportation choice that fills the niche between walking and driving", and that: "the Segway could cause cities to be redesigned, help wean the world from oil dependence, compress time and space for pedestrians and raise productivity for corporations and government agencies" (Harmon, 2001).
The elimination of poverty and the achievement of world peace were surely just around the corner. Prices were expected to be around $3,000, which was regarded as $2,000 too high by one commentator (Harmon, 2001). In 2003, sales were reported to have reached six thousand, far short of the expected sales figures of 50-100,000, when all sold Segways were recalled, (Kawamoto, 2003).
In 2008, a university professor browsing e-bay found a brand new Segway was priced at $4,998.95.
In answering the question make reasonable assumptions, (clearly you won't have the same information available to you as the actual manager, e.g. about costs, but make some assumptions and follow through in your analysis).
You should also bear in mind that a fundamental goal, as with all the cases you build in MKT501, is to stimulate your learning. Your answers should therefore aim to demonstrate that learning. In preparing your CASE5, ensure that you demonstrate your learning of the marketing concepts and frameworks for analysis outlined in the modular learning objectives. In particular, in answering the question, ensure that you demonstrate your understanding of promotion and factors affecting promotion success, as well as your learning from previous modules.
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The pricing methods used for Segway is such that MR = MC or the marginal costs equals price. The point at which the marginal cost cuts the marginal revenue point should be above the average total cost curve. In such a situation the price would cover the average fixed cost and the average variable cost and contribute some amount to the profits. We assume that the average fixed cost for the production of Segway is $1,500 and the average variable costs equal $1,000, then the price of Segway at $3,000 gives a positive contribution of $500 per vehicles. However, in 2003 the break even point would have been reached if at least 30,000 Segway vehicles were sold. However, in the year 2003 instead of selling at least 50,000 vehicles as forecasted, only 6,000 Segways were sold leading to large losses for the company.
My marketing and pricing strategies would have been different had I been the marketing manager in charge of Segway. First, the product should have been more stable so that wrist and head injuries would have been avoided. I would have conducted several tests for safety before launching ...
Education
- BSc , University of Calcutta
- MBA, Eastern Institute for Integrated Learning in Management
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