Product a) The product is a food replicator. This product can rearrange the particles in the air and turn them into comestibles. The user will simply enter the food that he or she wants to eat, and the replicator will create it. There will be models that are focused on different ethnic cuisines, so if somebody in the U.S. asks for chicken and waffles, they can get that, and if someone in Singapore wants chicken rice, that can be arranged.

b) The market is going to consist of high net worth individuals. This is because the replicator is expensive to produce. Also as a unique product it has a lot of inherent value to people, especially given the popularity of fine dining these days. So net worth is the primary segmentation variable. Income is a proxy for this.

c) I chose this method of customer segmentation because the product costs a lot to produce. I have to sell it at a high price in order to offset these variable costs. Moreover there were high costs of inventing the replicator. Further, I have a patent which means I have monopoly power. So I am targeting the wealthy.

d) The buyer of the replicator is wealthy, works hard, plays hard. This is someone accustomed to fine dining, and how has traveled the world. This person probably has a very large house, if not multiple homes. This person may be new money or old money but will have liquid assets in excess of $10 million. Many such individuals...

They tend to cluster in communities with other people of equivalent wealth, though these communities are seldom large. They are essentially a global class, and no matter what country they are from they have a taste for the finer things like luxury vehicles and homes, high end travel (private aircraft are common) and fine dining. Many will have a chef on staff already, and the replicator will make the chef redundant, so there is a cost saving component.
e) The product will allow my target market two main benefits. First is the functional benefit, which is that it makes any kind of food instantly. This has a tremendous appeal in terms of both quality and convenience. The second main benefit is prestige. The replicator is expected to be the must-have gadget in this demographic, but supply will be limited. Thus, there will be tremendous personal prestige attached to owning a replicator, enhancing the reputation of the buyer.

f) The price is going to be $4 million. There are several reasons for this. First, it costs $1 million to produce. Second, the patent gives the company monopoly protection. Third, the buyers are not price sensitive. We believe that the market will bear this price.

g) The pricing strategy here is called skimming. We are going after the high end of the market, using premium pricing to skim off the cream…