This is a modified excerpt from a Steve Jobs company speech in 1991 on market research that was carried out in order to determine the marketing strategy of the computer workstation NeXT. Image by James Mitchell.
The goal of the market research was to find out “who is our target customer and why are they selecting our products over our competitions?”
Steve Jobs: “I’ve had the good fortune to be out in the field, meeting customers, getting first-hand information as to what they’re doing with our products. Equally, our account managers have fed a lot of information to the management of this company. We’ve done a lot of thinking and looked at the data and some very important things have come to light:
Step 1: Get an overview of your competitors
We’ve had historically a very hard time figuring out exactly who our customer was, and I’d like to show you why. When we first looked at the workstation marketplace, the biggest player in the workstation marketplace is Sun. Second biggest player is HP Apollo. Third biggest player is DEC. And IBM with the RS/6000 is now in the game as well. And then, outside the workstation marketplace, a very large market for PCs and Macintoshes, the traditional personal computer market.
Step 2: Find out how you are different from your competitors
Now, we looked at the workstation marketplace and we said, wow, we have multitasking, we have great networking just like the workstations, we use Unix, we have a pretty good development environment. So we’re a lot like these folks. But then again, these folks don’t really care about user interface or at least they haven’t been able to execute on it if they do. They don’t really have great third-party application software. So we’re not like them at all.
And then we’d look at the PCs and we do strive to get a suite of application software that allows us to be just like these folks. We do strive to attain, ease of use, and actually are easier to use than even a Macintosh today. So we’re a lot like these folks. But then again, we have multitasking and networking that is an order of magnitude beyond what you can do with a PC today.
So over the last year, we’ve oscillated back and forth between thinking that the PCs and the Macs were our competitors, and this is where we want it to be, or the workstations were our competitors, and this is where we wanted to be. In essence, are we an easier to use workstation or are we a more powerful PC? And had it not been for a revelation if you will, five or six months ago, we probably would still be oscillating today.
Step 3: Segment the market (cut a pie in different pieces)
And what that revelation was, was that somebody turned up the power of our microscope a little bit, and we saw something very important. And what we saw was that the workstation marketplace is really not just one workstation marketplace, but two. There’s the traditional half, which is what we’ve come to know and love, science and engineering. Which does indeed look just like this. But there’s a new half emerging, which we’re calling the professional half. That is professionals that are not scientists and engineers who want the power of workstations. And inside this marketplace, there are several sub-markets. Publishing, Medical, Higher education, Legal markets, et cetera.
And what’s very interesting is Sun is the only company that seems to have eked out a beach head over here. And our data says that in 1990, Sun sold around 40,000 computers into this market and had about an 80% market share. So the entire professional workstation market in 1990 was about 50,000 units. And Sun had the majority share.
Step 4: Choose your target market (pick a piece of the pie)
That’s why we didn’t see it before. It was such a small blip compared to the workstation marketplace, or of course the PC marketplace, that it did not show up on our radar screen. But we’ve seen it now. And it’s good that we have, because this is a marketplace that we can dominate and it’s a marketplace that’s going to be very large.
The market research data that we have, and also our gut feelings from many, many years in the industry, say that this marketplace in ’91 is going to grow to about a hundred thousand units in size. It’s going to double this year. And next year in ’92, it’s going to triple to about 300,000 units. That is a substantial marketplace.
What is also exciting about this marketplace is that a hundred percent of our volume goes in here. In other words, if we could ship 50,000 computers into all these markets this year, we would have a 50% market share of one of the fastest growing segments of the entire computer industry.
Step 5: Uncover target market buying motivations.
Why do customers move into the market and why would they choose our product and not the one by the competitor?
The good news is that we’ve had a chance to suit up against Sun with our new products, about 15 times in the last 90 days. And we’ve won 15 out of 15. Now, we want to address what is compelling these people to move into this new category of professional workstations. And secondly, once they’ve decided to make the move into the category, why are we going to beat our competitors (the most important one being Sun)? Let’s take a look.
There’s three primary reasons why they are moving into this new category of professional workstations.
The first one is that every single customer we’ve talked to here has the need to write one custom application. They’ve got one mission critical app that they’ve got to write. And so the development environment becomes critical.
In addition to that, these applications are very network intensive, so they need very sophisticated networking capabilities, which they cannot find in PCs and Macs.
And third, these applications primarily are database driven, which means that they want to write the application on the desktop machine, but this application on the desktop machine through the sophisticated networking is going to communicate with SQL databases running in either an IBM mainframe, or running Oracle or Sybase on a Sequent machine, something like that.
So they need the sophistication of the networking and the ability to seamlessly talk to databases running on large servers. And the development environment and the networking and the database sophistication together, are things they cannot begin to get from this class of products. It turns out that these are exactly the three things that are driving people into the category in the first place.
We couldn’t ask for a much better situation as we have the upperhand compared to our competitors, in these three areas:
Custom applications: It turns out that our development environment is vastly superior to Sun’s. And this is being decided not by us, but by our customers’ best technical people when they return from our software camp. Our best competitive weapon to illustrate this point is to get our customers’ best two or three developers to spend a week and to come to Redwood City or Pittsburgh and go through our developer camp. They will go back raving about NeXTSTEP and telling their own management that NeXTSTEP will allow them to build their custom app three times faster than Sun.
Productivity apps: Secondly, once they’re in this category, comparing us with Sun, the comparison of productivity apps really tilts in our favor. The productivity app suite that we now have, and are in the process of getting, dwarfs that of Sun. Not only do we have more apps that are easier to use for this customer, but we have the breakthrough ones. We have the Lotus Improv, we have the Wiziwig WordPerfect, et cetera, et cetera. So once they’re in this category, the productivity app comparison is no longer against these guys. It’s against Sun and we’re winning hands down.
Interpersonal computing: A demo will communicate very rapidly how superior NeXT is in interpersonal computing. And we will be supplying you a videotape of a demo that we’ve been using a lot. I would suggest you use it to show your customers. And I would suggest that you get the software that’s on this videotape and learn how to demo it yourself. Very rapidly, we have been able to convince customers that because of our multimedia features and our ease of use features, these people can use interpersonal computing on our system to achieve a far superior result than they can with Sun’s.
So these are the three competitive weapons that we have against Sun. And as we use them to move people into the category, they are already very well positioned to see us in a favorable light once they’re inside the category.
So I hope this gives you a feel for what we’ve learned in the last 90 to 120 days. I have no doubt that we will continue to learn more and more together at an ever accelerating rate. As we get more and more customers. We’ve been listening a lot to them and we intend to listen even more to them, to continue refining this professional workstation market definition, and what is important to these customers and our competitive position against our number one competitor, Sun.”