Vision - July/August 2008 - (Page 28)

CEAnewsline in ownership and spending. Today, U.S. households own an average of 24 products, and households spend an average of about $1,400 annually on CE hardware. The industry has done phenomenally well and will continue to do so, but the CE landscape is changing. As the household penetration rates of numerous categories cross the 50 percent threshold, as replacement buyers supplant first-time buyers, and as some products reach their market potential, manufacturers and retailers will need to evaluate how they design and sell their products. When doing so, it pays to understand a few key metrics: 1). Where is the CE device on the product lifecycle curve? Using digital cameras as an example, the s-curve in the chart below indicates this product category is nearing its market potential of around 80 percent household penetration. The remaining 20 percent of U.S. consumers will likely never own a digital camera due to lack of need or because of the preference for a substitute device. 2). What is the installed base of the product category? This metric is important in understanding the potential for lucrative attachment accessory products, as well as the potential for content and service sales. Among digital camera owner households, an average of 1.6 cameras are owned, which translates to an installed base of 133 million units. 3). Is the market dominated by new buyers or replacement buyers? In 2008, roughly 70 percent of digital camera buyers will be repeat buyers upgrading their device or buying an additional unit for the home. Conversely, 30 percent of buyers will be first-time buyers. Obviously, these two buying segments require different sales and marketing strategies. Moreover, further segmentation of buyers across all CE categories reveals about 20 percent of buyers account for 84 percent of dollar sales. 4). What is the market concentration of the product category? In a highly concentrated category such as digital camcorders, the top five brands accounted for 83 percent of unit sales in 2007, down significantly from 94 percent in 2006, according to the research firm Synovate. In contrast, a category such as LCD television displays is much less concentrated, with the top five brands accounting for only The Maturing Digital Camera Market Household Penetration Rate 59% 100% 64% 70% 80% 48% 59% 60% 70% 40% Assessing Market Potential By Tim Herbert 52% 20% 41% 30% 0% 2006 Repeat buyers 2007 2008 First-time buyers Source: CEA Market Research I t seems like only yesterday when many of today’s hottest tech products were but a glimmer in the eye of a dreaming design engineer. And how fast they grow up. It’s easy to forget the rapid pace with which many CE products transitioned from niche player to mass-market darling. Consider, in 1997 U.S. households owned an average of 13 Tim Herbert non-discrete (meaning possible duplicate ownership) CE devices and spent an average of around $800. Jump ahead ten years and witness an explosion Digital Cameras — Expected Market Potential ~ 80 percent Digital Camera Stats Average wholesale price: 2006 $237 2007 $250 2008 $248 Average number of digital cameras per household 1.6 Market potential 80 percent Purchase intent over next 12 months All households 20 percent Households with kids 29 percent Ages 18–24 38 percent Source: CEA’s 10th Annual CE Ownership & Market Potential Study Current ownership = 64% Time 50 percent of unit sales in 2006. Retail channel analysis provides additional insight to market concentration. For example, nearly 60 percent of unit sales of portable GPS devices flow through five retailers, roughly on par with the 2006 rate. Understanding the metrics goes a long way toward ensuring a profit maximizing course. For additional insights, see CEA’s 10th Annual Ownership & Market Potential study. • www.ce.org 28 Adoption July/August 2008 http://www.ce.org

Table of Contents Feed for the Digital Edition of Vision - July/August 2008

Vision - July/August 2008 Contents Shapiro's Spectrum In This Issue The Economist C4 Trends Visionary Embracing Disrupting Technology Vaulting Ahead with Your Brand International Risk Stop Boomerang Products CEA Newsline Tech Speak Tech Policy Going Global Eye on Business Market Insider Just the Stats

Vision - July/August 2008

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