This post is the continuation of Part 1...
Pricing Strategy for PicoP Projector SHOWwx:
I see two huge markets for the accessory pico projector SHOWwx...
• The after market... that consists of over a billion of laptops, smartphones, DMPs and camcorders that already exist worldwide.
• The value add market... that consists of over a billion of low power mobile TV/Projectors for the third world countries, gaming projection devices, information Kiosks, projection billboards, video infomercial boxes, etc.
The After Market:
For the purpose of estimating future ASPs for the accessory pico projector SHOWwx, you need to first consider billions of existing electronic devices that can utilize the added projection functionality for a decent price. SHOWwx is a standalone plug and play accessory that could be sold as such for premium prices in the after market... just like the after market for car accessories. Currently, the after market for pico projector accessory consists of more than 1 billion existing digital devices... over 700 million laptops, over 300 million smartphones, over 300 million DMPs and over 200 million camcorders.
The after market for pico projectors is huge and a quality product like SHOWwx can quickly capture a large chunk of it. For starters, just think about over a billion laptops and smartphones that are out there... ready and willing. The owners of such laptops and smartphones are mostly professionals and can easily absorb [and justify] the added cost... as price of added projection functionality that improves productivity, communication, collaboration, and infotainment. With the right marketing and promotion strategy, SHOWwx can very quickly tap into this billion plus unit after market at a decent ASP of say $495... And offer 35% commission to its resale channel partners.
The Value Added Market:
In the near future, dedicated Mobile TV/Projectors will make a big splash in the personal and public viewing of media content… both in real time, a well as, for time shifted mode. Accessory pico projector SHOWwx is a natural companion to mobile TV to start with and can also be embedded when the champion OEM like Qualcomm realizes the true potential of a mobile TV/Projector combo. Mobile TV/Projector for the bedroom is a huge captive market of over a billion households around the world.
Over a billion households in energy starved Asian and East European countries are potential customers for low power mobile TV/Projector combo that can be used for personal or public viewing of media content … with the flexibility of connecting the accessory pico projector to other digital devices when a need arises to do so.
As you can see, the value added market for pico projectors is huge and a quality product that includes the projection functionality of SHOWwx can quickly capture a large chunk of it. With the right marketing and promotion strategy, the value added product can very quickly tap into this billion plus unit markets at an ASP [to Microvision] of say $195. Since a champion OEM partner is embedding the PicoP display engine into the consumer product, there is no commissions involved.
Pricing Strategy for Embedded PicoP Display Engine:
Now let’s talk about the pricing and marketing strategy for the embedded PicoP display engine for the new consumer product cycle...
For the purpose of estimating future ASPs for PicoP display engines, it is a gross mistake to use the pricing model that’s more applicable to “touch screens” for smartphones... like Oppenheimer has done in their Report. Touch screen is not an accessory for the host digital device... it is a component. And as a component it could sit on the shelf for years until an OEM champions the technology and adopts the said component in the future models as an enhancement.
If a component reduces the cost or adds to the value perception of the added functionality... it will be adopted quicker and may even command a decent price such as is the case with touch screens. I’m surprised that it took so long for the touch screens to become common place─ because human prefer video over other means of communication... and touch screens is indeed the [visual and touch] man/machine interface in smartphones.
Let’s first review the current status.
This is what I see…
Currently there is more demand than supply for the laser PicoP projector SHOWwx and the PicoP display engine. At first blush, that is a good enough reason to command a premium price compared to the competition... assuming there was something that the competition had to offer.
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.
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 PicoP display engine pricing strategy today, tomorrow and every day… as long as the competition has nothing better to offer.
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 for both the SHOWwx and the PicoP display engine…
a. PicoP can replace a lamp based projector for small meetings and presentations… lamp based projector replacement cost $900.
b. PicoP 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. PicoP 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. PicoP 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. PicoP projects bright and vivid color with 5000:1 contrast ratio… replacement cost $400 [the cost of inferior quality product from competition]
f. PicoP projects higher definition images [848x480]… replacement cost $400 [the cost of inferior quality product from competition]
g. PicoP 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. It’s not quite like re-starting your car engine every time you stop in traffic... but you know what I mean.
h. PicoP 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. PicoP 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
k. PicoP 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 to money savings from product features, plus the value of improved quality of experience, the total value proposition becomes worth lot more than the $15 [in wholesale] that Oppenheimer projects as the ASP for embedded PicoP display engine for 2016.
Oppenheimer analysts estimates for ASP [average sale price] from FY 2010 thru FY 2016 are absurd; considering the fact that pico projection is not only a product [as in stand alone accessory unit] but it will also open-up new applications for the host [ when embedded]; application that never existed before. Pico projectors, as standalone accessory, will drive new sales in the non-existent pico projector market and sell more of the host product [with a service contract] when embedded to offer the added pico projection functionality.
That’s the way most all of us expect the market for pico projection to develop... and not the other way around where the host decides “if and when” to offer embedded pico projectors. Do you really think the pico projection market is going to sit on its ass [et] and wait for the host to get-off its ass [et] to let the market have the opportunity to embrace and experience all that pico projection has to offer.
Almost all mobile phone carriers offer a free phone in exchange for a service contract that legally binds the subscriber for two or three year service. Razor companies like Gillette offer free Razors in the hopes of selling you the blades for the rest of your life. More and more companies are adopting this business model... if and when their product lends itself to a perpetual service contact.
As this business model grows in popularity, innovative financial models will evolve, as these companies will need to make upfront capital investments and recover it from customers over many years. This business model will embrace PicoP projection like glove to hand and could be the game changer for the first adopter. Partnering with Microvision will be more like the partnership of champions... rather than Microvision looking for a strong OEM champion for its technology.
It’s not about technology... it’s about consumer experience and perception of quality and value.
Purchase orders from distributors, OEMs and mobile phone carriers are solid validation of consumer preference for Microvision’s laser PicoP projector.
Multiple features and functionalities of exceptional quality from one tiny PicoP display engine; will command a price that certainly will be lot more that the $15 in 2016.
In closing and at the risk of being redundant, I would repeat what I said before...
“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.”