Summary:
Internet Tool Company, Inc. (ITC) has been formed to create Internet development tools. The market for Internet tools is growing very rapidly. ITC’s first development tool, “The Tool,” provides a major technical breakthrough by virtue of its “intelligent agent” feature. The intelligent agent makes it very easy to create documents and at the same time offers great flexibility in changing documents and other graphic material.
“The Tool” will be positioned as the premier Internet development tool for heavy computer users. ITC will target its marketing efforts narrowly at the core heavy user market. Because the product’s ease of use is of less importance to highly experienced computer users, ITC will give more marketing emphasis to the product’s other key benefit: flexibility.
ITC will completely avoid the retail store marketplace, where its lack of ability to fund expensive national and co-op advertising campaigns and its lack of presence in this marketplace would make it very difficult to compete or even gain entrance. Wholesalers and retailers are often more interested in the marketing support and name recognition that products enjoy than the product’s functionality and features. Instead, the product will be sold direct and via catalogs in a carefully targeted marketing campaign.
“The Tool” will be placed at the very high end of the consumer segment at $100 to further emphasize the product’s superiority and take advantage of the fact that consumers buying direct are less price sensitive than retail buyers.
1) The Market
Over 30 million people are currently using the Internet. Internet users are expected to grow in number by at least 25 percent each year for the next five years. The potential number of consumers for our Internet development tools is at least 20 million now with the potential for 30 million in two or three years. Recent trends indicate that, while Fortune 500 businesses will continue to seek out the Internet, faster growth will be seen in the home and small business market.
2) Market Segmentation
The market is divided into three relatively distinct segments: the corporate/professional segment, the small business segment, and the consumer segment.
3) Corporate/Professional Segment:
This market includes large corporations, institutions, government agencies, and professional developers. Internet development tools aimed at this market are expensive, costing upwards of $500; may take some time to master, even for seasoned technical developers; but provide the maximum number of options and flexibility in site design. Small Business Segment:
Internet development tools aimed at this market are mid-priced, typically costing from $100 to $500. They are designed to be used by people without development experience, although ease of use is a secondary feature to the ability to create the broad range of functionality likely to be required by a small business. Consumer Segment:
This segment is driven by low price (under $100) and ease of use, with breadth of functionality typically being sacrificed.
The consumer segment is the segment that ITC is positioning its product for.
4) Consumer Analysis
The target group of consumers for this product are heavy recreational computer users. They typically have used computers for three or more years. They have already used a commercial on-line service and have used at least several software packages extensively. They also tend to buy new software from time to time, if not regularly.
While the target group is increasingly buying software at retail outlets, many (especially those that tend to use their computers the most) buy their software through mail-order catalogs and quite a few order at least some software directly from the publisher. Even when buying software in retail outlets this group tends less to buy on impulse and are more apt to be looking for a specific item on which they are pre-sold. This group is most likely to be pre-sold by editorial coverage in computer publications such as reviews and product announcements and by word of mouth. Because this audience is exposed to so much information about so many competing products, it is most likely to decide on a particular item as a result of multiple exposure to information about a product—often from different types of sources.
Members of the target group tend to live in suburban or urban areas. They are typically male; aged thirty to forty-five; college educated; have a household income range between $40,000–$100,000; are homeowners; and hold professional jobs. Many belong to computer clubs.
They read two or more computer publications, a major metro newspaper, and one or more consumer magazines. While they watch television several hours per week their viewing tends to be less than average. They tend to listen to radio stations while they commute in their cars—tuning into a broad variety of formats.
5) Product Features and Benefits
Several products are already in the marketplace in the under $100 price range that offer similar functionality. These products offer powerful editing capability for text-only documents as well as for graphics. They give users the capability of moving large amounts of text or graphics into a form translatable into a language understood by the Internet.
ITC’s main distinctive feature is its intelligent agent. The benefit to consumers is that the product is easier to use and more flexible than competing products. The intelligent agent “walks” users step by step through the process of creating a document. The most similar competing product offers more passive help by using “placeholders” where the user places objects on a layout page. While the placeholder approach also gives users the ability to quickly assemble creative material, it does not give the user the flexibility of moving objects about.
Strengths
Engineering: As shown by the features of its first product, ITC has a strong competitive edge in its engineering capabilities. The intelligent agent is a leap ahead of its competitors. This strength should help ITC keep ahead of its competition in the future as well.
Fast Development Cycle: Even with a product offering superior capabilities, ITC was able to create its first product from scratch in a very short period of time. This ability coupled with superior engineering skills, should give ITC the ability to stay on the leading edge of product design over a sustained period of time.
Closeness to Market: Almost all key employees have a long experience of personal Internet use and keep in close touch with many in the industry and at different computer clubs who are also heavy Internet users. This gives ITC the ability to keep abreast of the marketplace and strong insight into the changing demands of its core customers.
Weaknesses
Financial: Even after raising the additional planned funding, the company will be substantially less well capitalized than some of its competitors. This would make it particularly difficult to finance the national advertising and promotion campaign that would be important if the company were to try to obtain shelf space at computer retailers nationwide.
No Market Presence: The company currently has no other products in the market or coming to the market soon. It has no relationship with any resellers. This contrasts with several competitors, who are already selling product through many outlets, including retailers, and competitors who have other offerings in their product line.
Weak Marketing and Sales Staff: The company has one marketing manager and no sales staff. The marketing manager has several years of experience in selling hardware add-ons direct to major corporate customers but no experience selling software or selling products to consumers.
5) Sales
ITC will sell the product via established direct-mail catalogs and through promotional efforts with computer clubs.
Direct-mail catalogs will be chosen on the basis of how closely the demographics of the catalogs match the demographics of ITC’s target market.
To prompt consumers to order direct, ITC will accept orders on the Internet and via a toll-free 800 line.
6) Advertising and Promotions
Because ITC’s budget is very limited, it will keep its message simple, emphasizing its product’s flexibility and ease of use.
With the company’s very limited budget, initial ads in direct mail catalogs will be small—typically no larger than 1/8 page. Ad copy will contrast with competitive products that are shrink-wrapped and sold at lower prices to less experienced computer users.
Press releases will first emphasize the company’s two key benefits. But they will also offer a lot of technical detail that will appeal to the editors and publications most important to effectively reaching the core target market.
The company’s top technical people will give talks at computer clubs, again to help position ITC on the leading edge.
Packaging will be subdued and professional-looking to further contrast ITC’s product with the competitor’s offerings.
7) Competitive Reaction
By positioning ITC’s product as the premier product at the top end of the price range, any price cutting by competitors will only help reinforce ITC’s premium positioning. While deep pocketed competitors may trumpet their products with expensive, colorful magazine ads, these ads will be unlikely to have much impact on ITC’s core audience of highly experienced computer users.
8) The Future
Because ITC has relatively weak marketing and financial strengths, it must rely upon continued product innovation to remain viable. Sooner or later competitors will mimic ITC’s features. However, ITC’s engineering and fast- to-market capabilities should allow it to stay one step ahead of competitors. And each new product feature will help ITC gain more publicity for its product.
