Thursday, October 29, 2009

Microvision: Profitable Product Pricing and Marketing Strategy

It is very important to check the competition prices for comparable product offering, and then recognize [and charge premium if justified] for the value proposition of your product in formulating your product pricing and marketing strategy. This will assure you the highest revenue at the best possible margin. Higher revenues streams with best possible margins are the key to financial success in any commercial product launch.

Looks like Microvision has given considerable thought to their current SHOWwx product pricing and marketing strategy.

All of the SHOWwx PicoP projectors are going to Asia-Pacific and Europe at $500 [to $700] a pop in wholesale price… and as revenue to Microvision. The distributors in the two regions are selling it to end users for about USD $900… representing a net profit potential to them of approximately $200 to $400. If the two distributors want to sell for less… then that is their option and only cuts into their profit margin.

The Asia-Pacific OEM Uniden and the European Mobile phone carrier are also selling it for $900 or so… representing a net profit potential of up to $400 depending on their pricing and promotional strategy.

The bottom line is…

• Microvision is selling all of its SHOWwx production at $500 [to $700] a pop and there is no reason to sell it for less. In the short term, all of SHOWwx production is being used to open doors and establish valuable high volume sales channels [for the future] with global distributors, global consumer electronic OEMs and global mobile phone carriers. Recent announcements of initial purchase orders from Asia-Pacific and Europe are proof positive of this strategy.

• If you look at the details in the press releases and do some further digging into the sales literature of those engaged with Microvision as distributors, OEMs and mobile carriers… you will see that the retail price for the laser PicoP projector SHOWwx is in the USD $900 range.

• Microvision is selling all of its SHOWwx production at $500 [to $700] a pop and there is no reason to sell it for less.

• It is very important to check the competition prices for comparable product offering, and then recognize the value proposition of your product in arriving at a product pricing and marketing strategy. Looks like Microvision has given considerable thought to their current SHOWwx product pricing and marketing strategy.

This is what I see…

o Currently there is more demand than supply for their laser PicoP projector SHOWwx. At first blush, that is a good enough reason to command a premium price compared to the competition. However, it is important to investigate why the demand is high. With little digging, and snooping around, you will see that high demand is directly related to the higher standards of SHOWwx: image quality; large size projection; vivid bright colors; always-in-focus on any projected surface; small physical size and longer battery run features. This is the reason number one for commanding premium prices for laser based PicoP display engines and projectors… and that is today, tomorrow and to the day until supply catches-up with demand.

o Quality always comes at a cost. You want quality… then you pay for quality. As they say: “you can buy crap from the competition for half the price… but at the end of the day you still got crap at half the price.” In a nutshell, quality at premium price mantra applies to SHOWwx pricing strategy today, tomorrow and every day… as long as the competition has nothing better to offer but still wants to charge $400 for crap of a pico projector.

o Another way to arrive at product pricing is by placing a dollar value on replacement cost of products eliminated by your product and then add to this the intrinsic value of your product’s other differentiating features.

Here’s an example of pricing strategy…

A. SHOWwx can replace a lamp based projector for small meetings and presentations… lamp based projector replacement cost $900.

B. SHOWwx allows impromptu presentations in bright and vivid colors and always stays in focus with 8 font readability in normal light conditions… replacement cost $400 [the cost of inferior quality product from competition]

C. SHOWwx in the bedroom to watch movies, shows and other streaming videos on the ceiling with no concern for projector location, has short throw ratio from bed to ceiling and always stays in focus… replacement cost of TV on the ceiling $ 900 and $500 in install cost.

D. SHOWwx can project 200” image size under certain lighting conditions like watching movies outdoors while camping, or with friends and neighbors, on a dark summer night … feature value $400 as compared to the competition that is if you are willing to accept small size and washed out color projection.

E. SHOWwx projects bright and vivid color with 5000:1 contrast ratio… replacement cost $400 [the cost of inferior quality product from competition]

F. SHOWwx projects higher definition images [848x480]… replacement cost $400 [the cost of inferior quality product from competition]

G. SHOWwx projects always-in-focus images regardless of the distance or movement of the projector… priceless. This feature is the competition killer. Let’s face it, as an example, would you buy a car that needs starting again every time you stopped in traffic or at a red light?

Right, I didn’t think so.

You see, in case of pico projectors from the competition... you need to re-focus the image every time you move or want to change the size of projected image.  Its not quite like re-starting your car engine every time you stop in traffic... but you know what I mean. 

H. SHOWwx projector gives you twice the projection time per battery charge as compared to the competition… replacement cost $400 [the cost of inferior quality product from competition].

I. SHOWwx projector used as a mobile TV [with a set-top box] saves you money on energy usage over its operating life [consuming less than 5 watts per hour] … feature value $1,200 in energy savings over a 10 year period

J. SHOWwx projects bright and vivid color images without motion blur because of its inherent fast refresh feature from laser light source… priceless or replacement cost $400 [the cost of inferior quality product from competition].

Well, there you have it...

When you add the value of your product’s unique functionality, and money savings from product features, plus the value of improved quality of experience, the value proposition becomes worth a lot more than the $500 [in wholesale] that Microvision wants at this stage of commercial product launch.

Purchase orders from distributors, OEMs and mobile phone carriers is solid validation of consumer preference for Microvision’s laser PicoP projector SHOWwx that offers…

“large & wide screen, high definition, bright vivid colors, longer battery run on single charge, 2D video with fast refresh without motion blur, small physical size and always-in-focus images for all of video [static, streaming, and broadcast] communications.”

Looking at the retail prices of ASD $990 [USD $900] it is quite obvious that the wholesale price to Microvision is somewhere from $500 to $700 per unit. And the margins are over 50%... if not more.

Anant Goel
http://www.wealthbyoptions.com/