Segment Zero

Leo and I had a change to do a presentation on this topic during the last class, but I wanted to discuss it a bit more. I'm particularly interested economics, so I was interested in a topic that combines innovation and markets.

Typically, advances in technology outpace their demand. Meaning, companies develop a technology and market it before customers realize that they need it. How does this impact segment zero? Well, this is actually what creates it... As we said in our presentation, Segment Zero is a portion of the market that is frequently neglected by most players in the market. The reason this segment is neglected is that individuals do not want to pay or need the newest technology that is continuously being updated. Intel considered their 'segment zero' to be anyone not willing to spend at least $1,000 for their products (computers, we'll disregard their other products, as the case relates specifically to Microsoft).

With major players in the market keeping their focus on high-profit customers, a segment of the market was neglected. I consider myself to be a member of this segment. I'm not willing to spend at least $1,000 on a computer that has technology installed that I neither want nor need. A functional laptop costing less than $700 was fine for me. Because competition neglected this portion of the market, more competition has been created. Companies who saw a neglected customer-base entered the market specifically to service those customers' needs. This is where I draw the comparison between major competitors--Apple and Google.

Apple has been around since the beginning, and it has a reputation for making solid computers. What other reputation exists with Apples products? For me, the first thing I think of is price. After tax, you'd be hard pressed to purchase an Apple laptop for less than $1,000. Sure, you can probably do it, but are you sacrificing size and functionality just to buy the name? The second thing I think of is the typical Apple customer. While not trying to stereotype any given user of a computer, I think of Apple user's as individuals who are involved in arts--music, graphic design, etc. These people have heavy demands on processing power and memory. They also need constant up time. I don't think of a person who just wants a computer to check email and read the news. I certainly have nothing against Apple's computers, they just aren't for me; I can't make use of everything that they offer.

Google on the other hand just turned 15 years old. Google didn't start out building computers, but rather it has focused on the internet. A few years ago, with the advent of the smartphone, Google entered the operating system market. Android is Google's operating system. This was Google's "in" into the market. By creating an operating system, Google realized that this could easily translate the operating system to tablets, and eventually computers. Enter the Chromebook.

The Chromebook is a low cost alternative to laptops. Most will cost somewhere between $200-$500. By entering the low priced laptop market, Google has provided cost-conscious customers with an alternative to expensive computers. As major competition (HP, Apple, Dell) focused on higher priced, higher margin PCs, Google focused on providing a functional, inexpensive alternative to customers who did not need to have computers with faster processors and more memory. I admit that the Chromebook has a few drawbacks, but it works for those people who don't demand much of their PCs.

So, I know I briefly talked about this during the presentation, but wanted to give an extended explanation of how we all see Segment Zero in action.