On March 28, 2002, the first three Segways designed for the consumer market were auctioned off on Amazon.com for a total of over $350,000, drawing more than 500 bids. In line with creator Dean Kamen’s desire to improve the world by inspiring an appreciation of science and technology in young people, the proceeds went to his charitable organization FIRST (For Inspiration and Recognition of Science and Technology) rather than to the company’s coffers.35 The Segway—whose name stems from the word “segue,” meaning to move seamlessly from one mode to another—was designed as the first self-balancing, electric-powered machine for human transport. Approximately 4 feet tall and weighing between 65 and 85 pounds, the upright, two-wheeled machine seems to predict the movements of the rider.
When first introduced in 2001, the Segway generated a lot of fanfare, was marketed as “a set of magic sneakers,”36 and was positioned as a short-distance travel machine for urban areas. Kamen envisioned a world where cars would be banished from metropolitan centers populated instead by his revolutionary product.37 To meet the anticipated onslaught of demand, a 77,000 square foot factory capable of producing 40,000 Segways a month was built near Manchester, New Hampshire. Kamen acknowledged some potential hurdles:
ensuring product safety, setting a high selling price particularly during a recession, and launching a new product when the country was at war. But Kamen insisted these potential problems would fade into the background as consumers scrambled to buy the Segway once it was available.38 To avoid the perception of the Segway as a high-end toy rather than a practical, useful product, Kamen introduced it first in the commercial market after presenting it to the Postmaster General and the head of the National Parks. In April 2002, the first units were sold in the commercial market, but the $8,000 price tag minimized business purchases.
The company has been criticized for failing to recognize immediately that its innovative product would require governmental approval. Instead, it delayed public sales while it lobbied across the country for new laws that would allow the product on the sidewalks. Eventually, the company was able to persuade the Consumer Product Safety Commission (CPSC) that the Segway should be classified as a “consumer product”
rather than a “motor vehicle,” which led 46 states and the District of Columbia to allow Segways on sidewalks.39 In August 2002, a community of Segway enthusiasts and prospective owners launched www.segwaychat.com to share information and stories. In November of that year, Segway models went public, and in February 2003, they were shipped at selling prices of $3,995 to $4,495, depending on the model. Although the consumer version is now available from Amazon.
com, Brookstone, and Segway-certified representatives, it experienced some resistance.
Only 6,000 units had been sold by October 2003, when the entire inventory was recalled to repair a problem that caused people to fall off when the batteries ran low. Granted, the recall required only a 15-minute fix and the company was able to locate its customers relatively quickly, but the entire affair created some bad press.
After introduction, the company’s strategy for long-term business success followed a three-step plan:40 1. Demonstrate the commercial productivity Segway can deliver to large enterprises and government workers such as police, emergency medical technicians, and letter carriers.
2. Demonstrate the Segway HT’s pedestrian-friendly operation and earn regulatory approval and social acceptance on sidewalks.
3. Launch consumer sales, beginning with pilot tests in selected cities.
Prior to the launch, the company garnered tremendous media attention, including features on major networks, CNN, MSNBC, 60 Minutes, and Good Morning America. Production capacity did not pan out as initially anticipated, and Segway has been forced to evaluate its spotty performance and take corrective action by looking for new markets. For instance, in December 2003, Segway sold 15 scooters to university researchers working on a project to develop robots that could be used on the battlefield. Segways are now used in the “Around the World at Epcot” tour in addition to a one-hour Simply Segway ride offered there since May 2005. Segway enthusiasts founded the National Segway Enthusiasts Group that organizes local glides and Segway polo matches. Members can log in to segamerica.org for benefits and upcoming event listings such as Segway Fests held several times a year around the United States. Electric Tour Company (www.electrictourcompany.com) offers tours of San Francisco and Sausalito California. But will Kamen ever achieve his lofty goals—which have little to do with profit—of revolutionizing how the world travels?41 Questions
1. Assess how the company progressed through the three phases of the strategic marketing planning process. Did it function well or poorly?
2. What do you think the company’s mission is? Comment on the appropriateness of its mission.
3. Conduct a situation analysis for Segway using SWOT. To what extent are the company’s segmentation, targeting, and positioning approaches appropriate for long-term success?
4. What do you perceive as Segway’s competitive advantage? To what extent is this competitive advantage sustainable over time?