Market Segmentation: Tom Hoffman of SymplicIT

June 2002 Marketing

We all understand that new ventures proposing to enter mature markets with a me-too strategy are doomed to struggle. In dominant texts on high-tech marketing, authors deride new ventures that attempt to enter mature markets. They note that the growth rates are declining, new customers are harder to serve, and that industry consolidation becomes the norm.

Yet mature markets are also characterized by product proliferation and the creation of distinct products to meet distinct needs of the market. In a historic example, the initial market for cars was largely defined by Ford with a single model for the entire market. GM however understood that the market could be stratified with various models and price points. As a result, GM provided a pyramid of product, each fitting a different segment. The resultant strategy eventually enabled GM to overtake Ford in the early years of the automotive industry.

New ventures in the current tech market can learn a similar lesson. Despite the numerous reasons to avoid a mature market, there are strategies that enable firms to enter these markets and win. Some keys are segmentation and ifferentiation.

According to Tom Hoffman, VP of Business Development, SymplicIT is attempting to do just that with their product Octane8. SymplicIT produces a web application development tool designed for the mid-tier corporate market. They have created a product that combines many of the WYSIWYG features of lower-end web development tools with the business application development tools of the higher-end while differentiation their tool by providing web application architecture management. The success of their venture is deeply dependent upon market segmentation and targeting.

The web design market is crowded with development tools. At the low end, FrontPage by Microsoft and DreamWeaver by Macromedia have become the platform of choice by many web designers. Both are WYSIWIG tools running below $400. Many reviewers cite the ease-of-use of FrontPage as its winning feature while noting the clean-code, extensibility, and open-code as DreamWeaver’s winning edge. At the high end, Interwoven, Documentum, FileNET, and Vignette provides a web content management tool used by many large corporations and priced in the hundred thousand dollar range. In between however, there is plenty of room to segment the market.

SymplicIT is designed and marketed to fill this market gap. It works with other HTML code editors, yet provides many of the advanced content management functions that businesses seek without going to the high-end of the market. Furthermore, it is differentiated from its competition in managing the web architecture and backend functionality. It is not designed to displace neither DreamWeaver nor Interwoven, but rather fill the niche between the two.

A supporting factor of SymplicIT’s technology strategy is their use of the plug-ins concept. In a plug-ins strategy, a base product is delivered that has all the features required to perform basic functions in the product category. To perform unique functions required only by a subset of the market, plug-ins are developed and distributed to broaden the tool’s capability. While providing a more robust product, this plug-ins strategy also allows the firm to produce a tool that is both stable at its core yet able to evolve rapidly to meet new demands.

Other technology firms have taken a similar market segmentation strategy and succeeded. Interact produces ACT for the low end and SalesLogix at the middle while Siebel, Onyx and Vantive vie for the large corporation CRM market.

Mature markets may cause new ventures to pause before entry. However market maturity alone is not a sufficient reason to avoid entry with a new take on an old idea, it just requires better marketing, segmentation, and targeting.

The May Report, TECH BUSINESS BRIEFS, June 6, 2002

About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

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