Why Did Segway Fail to Meet Expectations?
Even Steve Jobs was wrong about this two-wheeled mistake. Here’s what made it a loser.
The premise that there is one key to success is an illusion. There are nearly always 5 to 10 and the absence of any one can kill an offering. Take Segway. Segway is the upright, self-balancing, two-wheeled, people mover that was introduced in 2001 and was a market failure in the eyes of most observers because it fell far short of its expected sales.
Steve Jobs predicted that it would have as great an impact as the personal computer and the production was geared to turn out 500,000 units a year, but the actual sales for the first seven years were under 30,000 units. Segway did so many things well.
- The technology was brilliant and was protected from competitors by patents.
- As an energy saving device, it delivered self-expressive benefits.
- It was a lifestyle product that attracted a loyal following reminiscent of Harley. There were Segway Fest event to celebrate the Segway lifestyle.
- The product was produced nearly flawlessly. Even the early ones did not have glitches. It did exactly what it was supposed to.
- The introductory publicity was incredible, maybe the most visible product of its time.
It was featured on network shows and in major magazines. It was everywhere. A New Yorker cover, for example, showed Osama bin Laden traversing the Afghan countryside with an all-terrain version of the Segway. So why did the Segway fail to meet expectations? The fatal mistake was its distribution. Because the unit required some training, it needed to have a reliable customer interaction point. If a retailer like Sears, Costco, Home Depot, or Target could have been the key points of customer contact, the product could have been successfully sold to a wide marketplace. Instead, Amazon was the vehicle for the general public.
A related mistake was a focus on those in the postal and security fields which could be reached by direct marketing. The problem was that postal workers needed both hands while walking and security workers preferred a bike that did not have a limited range. Both these mistakes were caused in part by a weakness in the marketing team.
The talent was in technology and production. Two learnings. First, excessive expectations are in general a good thing. It is usually impossible to overhype the benefits. You want buzz and as many to jump on the bandwagon as possible. However, in this case, had expectations been lower, the product would have not got the loser image.
As we learn from the stock market, an image (or illusion) of success comes from beating the earnings expectations. Segway, in fact, is very much alive, enjoys a niche and meaningful following, and continues to innovate. There is now a golf transport, a second generation product that allows steering by leaning, a set of robotic products, and a possible future two-passenger vehicle.
“An image (or illusion) of success comes from beating the earnings expectations.”
There is also a social networking site and a set of dedicated dealers that blanket the US and beyond. But it has been a difficult uphill road, and the hype did not help. Second, a new offering will have multiple keys to success and the absence of any one of them can be fatal. A strategy is only as good as its weakest link.
When I wrote my second brand book, Building Strong Brands, I studied the success of Saturn. I then concluded that Saturn’s success was based on their car design (from scratch—not a version of an existing design), the new dealer area network that supported the no price haggling policy, the company culture (customer is a friend), the focus of the advertising on the company and not the product (a classic new subcategory strategy), a gifted CEO (soft-spoken charisma), a new plant in Spring Hill Tennessee (which give a US message), a different union relationship (the contact was a few pages instead of a telephone book), the passionate users drawn to self-expressive benefits (of owning a quality US car).
If any of those elements had not been there, the success would not have happened. All were necessary.
Segway did a lot right but the weak links of distribution and a mistaken target market were problematic. But the firm had staying power because of adequate financing, great technology, solid production, fanatical customers and a strategic commitment. And lower expectations may have just helped.