Analysis Segway Human Transporter Marketing
It is a fact that customers are always conscious about the prices of the goods and products they buy. It is because of this reason that pricing is not just a science but also an art. A product may be the best there is in the market but if it is not marketed or priced right, then nobody will be interested in purchasing it. Choosing a pricing strategy however is very difficult but it is very rewarding. An anecdote of how financially rewarding pricing strategy can be is the story of a retail shop in a beach who sells sunblock or sunscreen lotion at two or three times its actual value.
People may be surprised at how expensive sunblock lotions are near the beach but people buy these products just the same. Despite its expensive price, the retail shop is able to sell their lotion and get so much profit. The reason – customers are willing to buy more expensive products because of its value.
Value Pricing can be an effective and rewarding strategy. Value pricing, however, presupposes that the product has a value for the consumers. It must have something that the consumers want and capable of satisfying or meeting customer expectations. This essay seeks to prove that the pricing strategy behind the product called the Segway Human Transporter is flawed. The story behind the Segway Human Transporter, its relative advantages and disadvantages will also be discussed for the purpose of determining which pricing strategy fits this product better.
Segway Human Transporter
In 2001, US entrepreneur and inventor, Dean Kramen, launched a product considered as “bigger than the Internet and almost as big as cold fusion would have been.” (Ian Shoales, 2002, p.1) The product, which was code-named “Ginger” or “IT” or “Segway”, was actually a self-balancing, motorized scooter (“Mystery of Ginger Ends”, 2001, p.1). It was marketed as the Segway Human Transporter (Segway HT). The name came from the word ‘segue’ meaning ‘to transition smoothly from one state to another.’ The inventor’s goal is to revolutionize the way transportation is done. They thought that the human transporter will someday take the place of private cars, motorbikes and other means of transportation.
When the Segway HT was launched in 2001, the company focused on the commercial establishments. Marketing campaigns were launched for manufacturing plants, warehouse, airports, colleges and universities. They even announced that the police departments may find use in the Segway HT as they patrol the streets (“Hyped Scooter Goes on Sale” 2001, p.3). Segway HT was also sold at $3,000 (Will Knight, 2001, p.1). When it was launched, the company projected that it will be able to sell 50,000 to 100,000 units in its first year. However three years of operation, the company has not even reached sales of 10,000 units.
It is believed that the reason for the product’s poor performance in the market is its poor strategy. Firstly, it was not marketed right. When it was launched, the company’s marketing effort was exclusively focused on a limited and narrow market. The company tried to sell the product to business establishments, manufacturing plants, warehouses, and factories. Segway’s inventor himself has stated that the human transporter is a revolutionary product. As a new product public acceptance and patronage will not come easily. The public must first appreciate its value before it can be sold. The only way for the human transporter’s value to be known is to let as much people as possible get to know the product and use it. An elitist attitude in selling a new product is a recipe for disaster.
Secondly, when the Segway Human Transporter was launched, it was sold at around $3,000. The question is should owners of manufacturing plants and warehouses spend an additional $3,000/unit over a vehicle that has absolutely no relevance to increasing their own profitability. Considering the mounting labor cost and product cost is additional $3,000 worth it? The high cost of Segway HT discouraged even the potential customers who may be interested in acquiring several units of the human transporter. As a result, until how, the Segway HT’s reputation is that it is a “novelty toy for the rich and the geek” (Sara Ivry, 2006, p.2).
The Segway HT however is not a bad product. It has several advantages not found in other means of transportation which are: 1) Convenience as it is a good alternative to get around congested urban areas; 2) Easier to maintain as it is powered by standard nickel and metal hydride electric batteries; 3) Hassle-free as it is from the hassles of pubic transportation; 4) Mobility as commuters need not transfer from one means of public transportation to another and they can go directly to their place of work; 5) Easier to control as it does not require an ability to balance like scooters; 6) Safer since it is supposed to be ridden on sidewalks; 7) Effective for crime prevention as it helps make police officers more recognizable while patrolling the streets; and 8) cheaper because does not rely on gas (C. Grant Jackson, 2007, p.1).
Taking this into account, it would have been better if the company initially marketed this product to the general segment of the population. If the company intended Segway Human Transporter as the future of transportation then it should have made the product available to a wider client-base. Indeed the students, young professionals and middle-aged men and women may find good use to the human transporter.
However, in offering this product to the general public, the company needs to lower the price of the product. This can be done by outsourcing some of the functions used in making the human transporter. It should have realized that the Segway HT belongs to the transportation industry in which it is in direct competition with bicycles, scooters, cars and buses.
Bicycles ad scooters are already accepted mean of public transportation. While bicycles and scooters may have their weaknesses they have decades of reputation and customer value which Segway HT does not have yet. Cars are also much faster and safer means of transportation than Segway HT. While it may also have weaknesses, the public has come to accept it as a convenient means of transportation. The point is that acceptance of the real value of a new product takes time.
Value Pricing can be an effective pricing strategy. It however presupposes that the product has value. While consumers may have different valuations for a product, the Segway Human Transporter offers distinct advantages not found in other means of transportation. Since the Segway Human Transporter is an innovation it requires time for its value to be appreciated by its consumers. Thus, the effective strategy would have been to lower the product’s price and to market and offer it to a large segment of the population