How to Segment a Market and Determine Price Points by Robin Purohit at SVPMA Monthly Event October 2002

1. Market Segmentation
Robin Purohit
VP of Product Management
VERITAS Software

2. Who am I
• 13 years experience as developer, architect,
strategic planner, PM
• Telecommunication, Enterprise Computing,
Networking, Storage HW and SW
• 4 years @ VERITAS as PM
• Currently manage 75 person PM org
– Planning
– Cross-functional Program Management
– Technical Marketing

3. Product Management at VERITAS
• 4 year transition from
– Evangelism to business leaders
– No process to formal Product Life Cycle
– Technology focus to market focus
– Reporting to engineering to company function
• Yes, we’re hiring

4. Market Segmentation &
Business Planning
• Brings focus to complex, data-rich problem
– Ensures a customer-centric view of business opportunity and
strategy
• Clearly maps our targets by
– Common customer characteristics
– Channels
– Competitive Landscape
• Invaluable throughout the product lifecycle
– Prioritize development
– Choosing Partners
– Marketing Messages
– Pricing
– Sales Training

5. Market Segmentation
Common Pitfalls
• Inwards Looking:
Segmenting by Product Offering
• Relying on 3rd Parties:
Using Industry Analyst Segmentation
• Treating Segmentation as Static:
Being unaware of changing market
conditions
• Public Communication:
Telling the press, partners how clever you are

6. Market Segmentation
Best Practices – Robin’s View
• Assess the Market Stage
• Develop a strawman with secondary research
• Dispassionate primary research
• Let a customer centric segmentation reveal
itself
• Determine most attractive attack points by
knowing who you are
• Validate with analysts,x-functional team
….Ideally before significant R&D investment

7. Assesssing the Market Stage
Using a Market Life Cycle Model
Market Creation Mkt Development Mkt Exploitation Market Sustaining Market Exit
Early Adopter Early Mainstream Mainstream Mature Decline
(Market Intro) (Growth) (Sustaining) (EOL)
? Where is the general market
? Where is the general market
? What market dynamics create new
? What market dynamics create new
opportunities
opportunities

8. Assesssing the Market Stage
Fibre Channel Storage & 3COM circa 1997
Market Creation Mkt Development Mkt Exploitation Market Sustaining Market Exit
Early Adopter Early Mainstream Mainstream Mature Decline
(Market Intro) (Growth) (Sustaining) (EOL)
Internal SCSI
• Storage Densities Storage
• Media Rich Applications
• Data Explosion
External Storage
Serial Internal
Networked Storage Extended SCSI Storage
Storage

9. Strawman Segmentation
FC Propositions
• Sources to develop strawman
– Industry groups
– Peer discussions
– Technical press
– Early Adopters within Video Production/Broadcast
• Strawman Market Segments within
Enterprise Universe of Customers
– “Data Sharing”
– “Shared Consolidation’
– “LAN-Free Backup”

10. What the Research Revealed
• Process:
– Mediated blind focus groups to develop impartial view
– Not extensive : 8 cities provided enough to develop
an intuitive view of the market
• Results
– Mainstream Market in infancy of education
– LAN-Free Backup was only compelling reason to buy
– Skepticism buying solution from a network vendor
– Competitors highly fragmented and lacking credibility

11. Self-Assessment
New Market, No Credibility
• Internal soul-searching and executive interviews
– Where is the company’s strengths?
– Where is the company going?
– What is the sense of urgency to develop a new market?
– Is this a sufficient new economy to be worthwhile
• Conclusions
– Solutions delivery to create value
• Develop new storage industry partnerships
• Evangelize & educate to software vendors
– Pre-mature for primary high volume channel
• OEM best fit
• Recruit a small highly set of new storage savvy VARS/OEMs
– Aggressive M&A exploration to acquire credibility
– Multi-100M$ product opportunity with first strike potential
– Strong brand could accelerate customer interest

12. Refined Segmentation
OEM Channel
• Through direct discussions with OEM prospects
– PC Server
– UNIX Server
– Enterprise Storage
– Disk Drive
• Challenge
– Existing OEM channel served PC Servers, but
UNIX and Enterprise storage were critical
• Primary focus on PC Server
• Identify VAR based solutions providers with UNIX/Storage

13. Market Attack
Pricing Dynamic & Strategy Refinement
Market Creation Mkt Development Mkt Exploitation Market Sustaining Market Exit
Early Adopter Early Mainstream Mainstream Mature Decline
(Market Intro) (Growth) (Sustaining) (EOL)
License technology ASAP to build market
Networked Recruit
Storage Solution Partners for
LAN Free Backup
Price Insensitive
Serial OEM Pursue significant M&A to acquire
Storage best technology vendors
Price
Sensitive

14. How did the market play out?
3COM imploded, but….
Market Creation Mkt Development Mkt Exploitation Market Sustaining Market Exit
Early Adopter Early Mainstream Mainstream Mature Decline
(Market Intro) (Growth) (Sustaining) (EOL)
Storage Network Infrastructure
Enterprise RAID/UNIX
Packaged solutions
LAN Free Backup
New Threats in 2002
Internal Disk
• IP-Storage
• Hybrid devices

15. How to use Segmentation across
Market Life Cycle Model
Market Creation Mkt Development Mkt Exploitation Market Sustaining Market Exit
Early Adopter Early Mainstream Mainstream Mature Decline
(Market Intro) (Growth) (Sustaining) (EOL)
Re-segment to :
- exploit niches if you lost (compete on price)
- identify untapped value and customers
(premium price)
“Tornado Phase”
Identify compelling
reason to buy
one vertical at a time
(price as part of
Identify value solution costs) Throw out the segmentation
one customer and chase the money
at a time (price to win)
(price high to cover costs)