Market Segmentation Analysis of Glucose Monitoring Watch

Diabetes is considered as a group of diseases that are characterized by high sugar level in the blood (American Diabetes Association, 2017). A diabetic patient may present either type one where the body does not make the required level of insulin or type II form of the disease which is a result of improper use of insulin. Both conditions cause blood sugar level to increase or pile up. High blood sugar when combined with high lipids and blood pressure can lead to diseases as stroke, kidney failures, and heart diseases. In the U.S, diabetes is ranked seventh among leading killer diseases with over 1 million new cases reported annually.  About 9% of U.S population is affected by over 7% not being aware of their condition (American Diabetes Association, 2017). With the introduction of blood sugar or glucose monitoring watch, diabetes patients will have an opportunity to monitor their blood sugar level every time without getting injections. The glucose monitoring watches will be worn on the patient wrist and will aid in measuring patients glucose painlessly, effortlessly within seconds. The watch allows for self-monitor of glucose levels without cumbersomeness experience in other methods such as tests based on blood patients’ blood sample. Through pressing the detection button, patients wearing the watch will be able to view displayed test results on the watch screen. The watch will have only a single button near the screen for ease of use by any age group. After every hour, the patients’ blood glucose level will be displayed through a smartphone application.

Target Market Segment (Demographics and Psychographics)

Based on the number of individuals affected by diabetes, the concentrated strategy will be deployed in targeting the market segment.  The strategy is suited for the firm in that it aids in focusing on a single product and allows the firm to add more input in production and marketing. The only risk feared is making loses in case of a decrease in demand although countermeasures have been put in place to avert such cases. The strategies take into consideration of the four Ps presented in the market mix (Product, price, promotion and distribution or place) (Perreault et al., 2017).  The Ps aid in distinguishing market segment selected based on costs, sales and profits potential. The demographic variables that are taken into consideration during market segmentation and manufacturing or designing of the watches include age, income, education, social class, and gender.  The psychographic variables that are to be considered include personal attributes, lifestyle, and motive of patients. The geographic segmentation will lead to the division of the market into urban, rural base and international market thus determines the rate of product distribution (Perreault et al., 2017). Such method of segmentation is valuable since it will assist in determining the number of sales, distribution, and level of advertisement required per region.  The type of segmentation will also aid in enhancing competition among the regional sales team thus leading to more profits to the firm. The psychographic variables which dwell on patient personality, on the other hand, will aid in understanding some of the key reasons for purchase, clients opinion on glucose monitoring watches and other broad issues. Some of the driving forces under psychographic segmentation may include family members, time-saving, quality of product and health which is the key attribute.

Presumed Cost to Make/Buy/Provide the Product/Service

A single unit is approximated to cost $200 dollars during the production process. The value is inclusive of labor cost at $50, raw material $100 and shipment of raw material costing $10. The expected market price for a single unit will be $300 slightly below current existing application based watches from competing firms such as Apple.  The distribution cost is estimated to cost $5 dollars per unit as well as a marketing cost. The firm’s targets a profit of $90 per unit sale. Out of the $90 profit, $10 from each unit sale will be used in funding charity programs and aid in branding as well as boost the marketing department.

Market Size (In Units or Service Elements)

Three key factors will be considered in determining the market size for the watches. The focus will be laid on the current TAM (Total Available Market) which is a combined unit volume of diabetes-related products and SOM (share of market). The firm will also determine the size of SAM (Served Available Market).  The three factors will aid in narrowing down the market to U.S, Europe, and North America among others.  Since the product and services to be in TAM is known, the firm will narrow down to the mentioned geographical regions. Hospitals and other health facilities will be vital in shaping up the market size of the firm based on the data obtained. Yearly market size is estimated to be over 1 million within U.S.  Globally, a higher market size for the diabetes monitoring watch is expected even though stiff completion over the SOM will emerge from other companies such as Apple (Perreault et al., 2017).  An estimated daily sale of 100 watches is expected from the international market.

Profit/Loss for Product/Service Including Estimated Administrative Costs

The firm expects to produce 4000 watches per day and develop an app that will link the watch with the smartphone. Each watch with the installed application will cost $160 plus an administration cost of $40. The total cost of producing a single unit will, therefore, be $200. The shipment cost as indicated earlier per unit will be $5 and cash dedicated to charity $10. The cost of a single unit in the market will be $300 thus implying that the firm will make a pre-tax profit of $90. The estimated profit per day is $360000 while estimated administrative cost per day is $160000. 

Distribution/Transportation Issues

With readily established departments of logistics and distribution, the firm top management does not expect the department to face an uphill task in displaying its role. The allocated value per unit produced ($5) is expected to cover up for fuel and other logistics. Market segmentation will aid in the quick distribution of watches based on the demand presented by each of the identified regions. To avoid incurring huge costs in transportation or shipment of the watches, the firm has opted for bulk distribution as opposed to single unit distribution. This implies that patients will be grouped per region and the firm establish single collection points where the products will be collected by clients.

Pro Forma Profit/Loss for the First Year

 Pro Forma Income Statement For Blood sugar or glucose monitoring watch

 Diabetes Watch Corporation

Three Year Pro Forma Income Statement

2018

Sales

2,200,000

Cost of Goods Sold

Fixed

9,000,000

Variable

9,600,000

Operating Income

1,008,000

Other Expenses

Administrative

1,920,000

Marketing

48,000

Total Expenses

1,008,000

Earnings Before Interest and Taxes

432,000

References

Perreault, W. D., Cannon, J. P., & McCarthy, E. J. (2017). Essentials of marketing: A marketing strategy planning approach. New York, NY: McGraw-Hill Education.

American Diabetes Association. (2017). Statistics about diabetes. 2017.