NextGenTech has developed a wearable device, Theo, designed to operate with built-in wifi and cellular connectivity, aiming for $1 billion in annual revenue in the U.S. Within the context of distribution, NextGenTech faces a strategic decision to either partner exclusively with AT&T and Verizon or pursue other carriers, considering customer preferences and potential market penetration. The recommendation favors partnering with AT&T and Verizon for their larger retail footprint and customer base alignment with Theo's target market.

1. Case Study:
New
Wearable
Tech

2. The Client, Product & Objective
● The Client:
○ NextGenTech
● The Product:
○ THEO is a new wearable computer device (new technology)
○ Worn like a bracelet with a built-in WiFI/cellular connection, tracks your activity, counts
your steps, accepts text messages and has customized information displays
● The Objective:
○ NextGenTech has a goal of making THEO a $1B annual revenue business within the U.S.
in the next two years

3. The Problem & Challenge
● The Problem:
○ THEO’s built-in connectivity only works when it has access to WiFI, but they want the
device to work even when WiFI is not available
○ NextGenTech is interested in selling annual cellular contracts/partnering with wireless
carriers to provide connectivity to their customers
○ AT&T and Verizon have stated that they will only sign on if they are the only two carriers
that carry THEO
○ Distribution channels are via carrier retail stores
● The Challenge:
○ Should NextGenTech:
■ Exclusively partner/sell through AT&T and Verizon? (Option 1)
■ Or pursue a partnership with other carriers in the market? (Option 2)

4. Framework For Case Analysis
To help keep the case analysis on track, use a framework that you can refer to
outlining what information you would like to gather:
a) Market size of the carriers:
○ Number of customers we currently have (assess the total market, calculate the
penetration rate)
○ What is the price we would be selling to clients?
○ What is the growth expected between Year 1 and Year 2?
b) Customer base analysis (via customer surveys):
○ Price sensitivity and customer demographics
○ Assess likelihood of the customer to purchase product
c) Retail footprint:
○ Number of stories

5. Data Provided
Carriers THEO Price Current Customer Base
(in the U.S.)
Expected Growth Rate
AT&T $400* 11M 20%
Verizon $400* 9M 20%
Other Carriers
(Sprint, T-Mobile, etc.)
$500 30M 20%
Total 50M
*Lower price due to carrier subsidization

6. Potential Market Size: Year 2 Customers
Carriers Customer Base Potential Year 2
Customer Base
Potential Year 2
Customer Base
AT&T and Verizon 11M + 9M
= 20M
24M 24M
Other Carriers 30M 36M 36M
Formula:
Customer Base x Growth Rate = Potential Year 2 Customer Base

7. Full Market Potential
Carriers THEO Price Potential Year 2
Customer Base
Full Market Potential
AT&T and Verizon $400 24M $9.6B
Other Carriers $500 36M $18B
Formula:
THEO Price x Year 2 Customer Base = Full Market Potential

8. % of Year 2 Customers Needed for Revenue Goal
Carriers Revenue Goal Full Market
Potential
Penetration Rate
AT&T and Verizon $1B $9.6B ~10%
Other Carriers $1B $18B ~5%
Formula:
Divide $1B revenue goal by Full Market Potential to get the Penetration Rate
Tip:
There are multiple ways to approach this calculation

9. Customer Survey: Most Important
Selection Criteria for Current Customers
Option 1: AT&T and Verizon
Listed in order of importance:
● Reliable network
● Customer service
● Business-focused
● Speed
● Brand
Option 2: Other Carriers
Listed in order of importance:
● Price
● Terms of contract
● Customer service
● Size of network

10. Current Retail Footprint
Carriers Number of U.S.
Retail Stores
Number of Non-U.S.
Retail Stores
AT&T 2,200 1,600
Verizon 1,800 1,000
Other Carriers 3,000 6,500

11. Case Analysis
Option 1: AT&T and Verizon
● Higher penetration rate (~10%), but
fewer carriers
● Customers focused on a reliable
network and customer service
● Since early adopters are not price
sensitive, AT&T and Verizon seem to be
a better fit for THEO
● Larger number of distribution channels
with 4,000 retail stores in the U.S.
Option 2: Other Carriers
● Lower penetration rate (~5%), but
potentially fragmented market
● Customers are concerned about price
(price sensitive)
● Slightly smaller number of distribution
channels with 3,000 retail stores in the
U.S.

12. Report Your Findings To The CEO
● You have a meeting with the CEO tomorrow
● You’ll have to:
○ Report on your findings to date
○ What your recommendation is based on what we’ve learned
○ Any risks that we perceive and
○ If we have any next steps

13. Final Recommendation
Find the data points that resonate in the case and defend your viewpoint in your final recommendation.
● Go with Option 1: AT&T and Verizon
● Rationale:
○ Reasonable penetration rates for both options
○ Customer base for AT&T and Verizon seems a better fit with our product. Customers are
less price sensitive and likely to be early adopters of THEO (a new technology)
○ Since the main distribution channel are the carrier’s retail stores, AT&T and Verizon have
a larger retail footprint with 4,000 U.S. locations (32% more stores than Option 2: Other
Carriers)
■ Customers will want to try on new technology and make sure its a good fit
● Next Steps:
○ Assess the risks for Option 1
○ Have the legal team write the contract with the best possible terms

14. Case Study Source
https://www.youtube.com/watch?v=psuKyBsH1oo