Businesses have never been as bold as they are today. Corporations are jumping vertically, horizontally, and diagonally into markets only vaguely related to their core product lines. Ever wonder what strategy drives these flighty stabs into new markets?
Wearable tech has been one of the focal points of these uncertain movements. Google is diving into glassware. Nike has suddenly targeted people over 40 years old with its FuelBand. Samsung makes watches, and The North Face is 'wired.' Has the world gone crazy?
No, these new and innovative products are not randomized. They are driven by a deep understanding of their companies' core customers.
Fuelband tracks whole-body movement through a sleek, programmable bracelet, which can interact via Bluetooth or Wi-Fi with your mobile device. A recent Trefis analysis of Nike's FuelBand focuses on how the product will help Nike reach into the digital health monitoring market. This might be important for calculating overall impact of Nike's new product, the analysis leaves an iceberg of value beneath the surface.
Although the tech will appeal to people of all ages and levels of athleticism, Fuelband will more importantly help Nike's core customers, including runners, basketball players, and tennis players. These customers will use the bracelet to track their progress in training for marathons or upcoming tournaments. For these clients, the bracelet is more like a Christmas present than a "cross-sell."
Samsung Galaxy Wear
Similarly, the debut of the Samsung Galaxy Gear has been attacked for falling short of mass appeal. The Gear tries to jam a smartphone's capacity into a wearable 'smart-watch,' and critics claim the technology requires further development. For a company that sold more smartphones in 2012 than any other business, the Gear's 800,000 sales in its first two months seemed laughable, especially considering the epic advertising campaign powering the release date.
Samsung might have made a mistake in allocating so many resources to marketing for a premature market, but what it has learned from the initiative more than makes up for the lack of hard sales. Now, when its core customers begin to demand increasingly light and portable phone tech, Samsung will already have a market presence. Those customers will be more likely to stick with Samsung than look for a new brand when they make a purchasing decision.
Google did not make Samsung's mistake when it released Google Glass. Arguably, the product was underproduced. The company sold its Exporer Edition at $1,500 to a select group of customers. Unable to meet demand, Google must now watch helplessly as units sell on eBay for over $2,000. Did Google lose an opportunity for higher margins and millions in profit on a device requiring untold research and development? Did Google make a million-dollar mistake?
You would need to discount the benefits of long-term loyalty to think so. Explorer Edition has helped Google identify its loyal customers who have a remarkably high purchasing power. Glass also anticipates its customers' desire to be able to use the Internet more conveniently. For its core customers, Google is trying to create a seamless way to access the Web. The product still needs plenty more guidance in the fashion department, but that sends a strong message about Google's core customers too
The North Face: Connected Wear
In apparel, conductive thread has been on the rise. Customers want to be able to use their phones during the cold winter months without taking off their gloves. The North Face's Connected Wear go even farther than thread. The firm built iPod interactivity into their jackets, which sport external joystick control pads and other hi-tech functionality. These products have not hit the billboards or Super Bowl ad slots, but they will appeal to a number of consumers who enter a North Face store.
Why would someone enter a North Face store? They have bought North Face clothing in the past!
Warby Parker, and the Interesting Thing about Wearables
It was mentioned earlier that Google Glass needs some guidance from a fashion professional. Well, Google is seeking fashion guidance from Warby Parker, an eyewear brand.
Co-branding is almost necessary regarding wearables, because tech companies know almost nothing about fashion, and fashion knows almost nothing about tech. Almost any eyewear brand would have paid Google for the opportunity, but Warby Parker is probably the preferred brand of many of Google's customers. They focus on eCommerce in eyewear, which means their clientele trust the web more than most.
What Does this Mean for Your Brand?
Although fronting the cost of research and development for new wearable goods might be outside your organization's financial reach, there are some takeaways for any small business to note.
Firstly, focusing on your current customers can drive new products and features to unlock areas of growth. To forge into new markets successfully, you need to form partnerships with other products and services your customers use or might want to use in the future.
The results might not look explosive at first, but the cash flows " either now or in the future " may be.D