Market Analysis Summary
Safe Current has identified three distinct market segments that they will target. The first segment is family home owners, typically with children, and the second is single home owners.
These two segments have been chosen because families with children typically have a large number of electronic devices and the upper income single home owners often adopt technology using lots of gadgets in their home.
The third segment is commercial businesses that have equipment they want protected. Competition is very limited for surge arrestors as they require electric utility installation. There is some competition with the surge protectors, however the competitive products are of a consumer level of quality and protection, different from Safe Current's products which offer industrial levels of protection.
3.1 Market Segmentation
Safe Current has segmented the market into three distinct groups.
Family home owners
This segment generally has electronic equipment and lives in middle- to high-end homes.
- 69% have at least one child.
- The median household income is $77,000.
- Eat out 2.3 times a week.
- 58% of the families have two incomes.
- 63% have cable TV.
- 49% have a broadband Internet connection.
Single home owners
This segment is a single person who owns their own home. They are generally professionals who often use a lot of electronic technology.
- Ages 25-40.
- 71% are professionals.
- The median household income is $62,000.
- Eat out 2.7 times a week.
- 72% have cable TV.
- 71% have a broadband Internet connection.
This segment is small to mid-size businesses that have expensive electronic equipment that they need protected. Commercial sales are not industry specific. All businesses, regardless of type, have pieces of equipment that can be protected.
3.2 Target Market Segment Strategy
Safe Current is targeting these groups since all tend to have many pieces of electronic equipment all of which are vulnerable to power surges.
While most home owners insurance offers some level of compensation for damage, deductibles are typically high enough that most people do not make claims. Both segments are already customers and aware of TCIC's reputation for safety, reliability and operational excellence, making it easy to solicit their business.
3.3 Industry Analysis
Safe Current operates selling two similar service devices, surge arrestors and surge protectors. While these products are similar, they have serve different purposes.
The surge arrestors are a product that can only be offered by a utility so it is typically only sold and installed as a package by the utility.
The surge protectors operate within the more general consumer product segment as evidenced by the fact that surge protectors can be found by a wide range of retailers such as hardware stores, do-it-yourself type stores, and computer and electronic retailers.
It should be noted that Safe Current's parent company, The Cleveland Illuminating Company is an electric utility and is therefore operating within a regulated industry. Current regulation by the public utility commission (PUC) dictates that the rate of return is capped at 10.5% for utility activities.
Safe Current however provides a product that operates within the unregulated area of the utility and therefore does not have rate of return caps. This is quite advantageous to Safe Current because it allows them to leverage the assets of the utility without being held to the same restrictions as the rest of the utility.
3.3.1 Competition and Buying Patterns
Safe Current does not face any real competition for the arrestors due to the installation requirement of the electric utility.
While there are four current vendors that sell the actual arrestor equipment, it is far more expensive to buy the equipment and then pay the utility for installation than buying the package (product and installation) directly from the utility.
Safe Current faces general competition from several sources. This is qualified as general competition since the products typically sold (90% of the time) are of consumer quality versus the industrial quality that Safe Current offers.
Due to TCIC's direct contacts with electrical component manufacturers and their sheer buying scale/power, Safe Current is able to offer high-quality industrial grade products for prices that are similar to the consumer units. Competitors in this segment include:
- Hardware stores
- Mass merchants
- Do-it-yourself stores
- Computer retailers
- Electronic retailers
Safe Current will offer a family of surge arrestors and surge protectors for consumers. A surge protector protects appliances plugged into it against spikes in voltage.
A surge arrestor or "whole house surge protector" protects all circuits of a house from a surge in current emanating from outside the building. These products will protect consumers and their sensitive electric and electronic appliances from power surges or transient voltage.
A power surge is an increase in voltage significantly above the designated level of flow of electricity. If a surge or spike is high enough it will inflict serious damage, just like applying to much water pressure through a hose. Too much will case the hose to burst. The same thing happens when there is too much electrical pressure through a wire, the wire "bursts."
Surge protectors work by diverting the extra electricity into the outlet's grounding wire. A surge arrestor offers the same protection, however, the protection occurs before the current comes into the home. There are several sources of surges.
The most familiar source is lightning. When lightning strikes near a power line, the electrical energy creates a boost of electrical pressure. A surge arrestor is the best form of protection against lightning as a lightning surge will overpower most surge protectors.
A more common source is the operation of high power electrical devices such as refrigerators and air conditioning units. These appliances cause spikes when their compressors or motors are turned on and off, creating sudden, brief demands for power and upsetting the flow of the electrical voltage.
These types of surges can be protected only by surge protectors because the spike occurs within the home and not from the electrical grid.
The last main source of surges come from the utility company's equipment. The complex system of equipment that brings electrical power from the grid into the home may have points of failure that can cause uneven power transmissions.
A combination of a surge arrestor and surge protectors on major or expensive electric/electronic components can significantly decrease the possibility of surge/spike damage.
Safe Current will offer two main products, surge arrestors and surge protectors. These products are made by a contract manufacturer and sold under the Safe Current brand name:
- Surge Arrestors (whole house surge arrestors): This is a piece of equipment that is mounted on the outside of a house or business near the meter that offers protection from surges eminating from outside of the house. This product costs $235 including installation.
Only the electrical utility can install a surge arrestor because the unit is connected directly to the outside meter and the electrical grid. A surge arrestor is the ONLY protection against spikes that come in through the outside electrical lines.
- Surge Protectors: This is a piece of equipment that protects individual or groups of appliances against internal sources of spikes. A protector offers a bit of protection against outside surges, however, most outside sources of spikes are of high enough voltage to overpower most protectors.
While most hardware stores, electronic stores, and mass merchants sell some sort of surge protector, the products offered by Safe Current are differentiated by their industrial grade offer and, a far higher level of protection than most other surge protectors. These units are $50 each and offer the best protection when used in conjunction with a surge arrestor. Any type of electric or electronic appliance of value should be protected such as furnaces, refrigerators, stoves, TVs, stereos, computers, modems, phones, etc.
Safe Current has chosen to outsource production because 1) it has numerous relationships with contract manufacturers that can make the products for far less than they can, 2) production would create significant capital costs which are truly unnecessary. The beauty of this business model is the usage of contract manufacturers and the leveraging of TCIC resources.