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Consumer electronics retailers need to make significant changes in their selling practices if they are to maximize the potential for home convergence products and technology in the United States.
That was the conclusion of an in-depth — and in-home — study of consumer sentiment toward home convergence that was recently completed by Coyote Insight (CI), a market research-based consultancy founded here by ex-Verity Group executives Grace Post and Bill Matthies.
CI's inaugural home convergence environmental observation research (EOR) project was based on more than 60 hours of in-home visits with nine pre-screened households from across the country. According to the researchers, the households are representative of about 80 percent of all U.S. households that are considered to be the primary buying population for home convergence products. (See TWICE, Jan. 8, p. 78.) Principals Post and Matthies conducted the in-home interviews personally.
Although the study suggests that retailers can do a better job of tapping into that market, the researchers fear that only a fraction of dealers will do what is needed to take early advantage of home convergence and related concept categories like home networking and distributed A/V.
"There should be no doubt about the potential for retail success for home convergence products, distributed A/V, entertainment servers and the like," said Post, "but not without a significant repositioning on the part of retailers. Unfortunately, history suggests that will not likely happen any time soon."
Explained Matthies, "In most other industries product change is evolutionary, which only requires a refinement of retail merchandising as opposed to a complete makeover. But that is not the case for high tech CE, and certainly not for home convergence. I fear 'business as usual' for most, which will mean false starts or worse — complete market rejection for many new products and technologies that are just now coming on line."
The CI partners said retailers need to understand that consumers have little or no basis for considering these new technologies, and therefore no ability to make buy or no-buy decisions. Aside from an extremely small fraction of early adapters, most are not in the store because they have heard of the new products, and certainly not because they know enough to buy.
Unfortunately, they continued, retailers merchandise as though consumers do know, leaving out essential information. Using school as an analogy, Matthies made the point that retailers must first lay a foundation of knowledge prior to attempting to move consumers to the next level of understanding. "We all know what would happen if we dropped most sixth grade children directly into second year algebra, and it's no different with adults and the new technologies. If they don't understand A and B, and they don't, they won't understand C. And when that happens," he said, "they don't buy."
Post indicated that in the process of conducting the research, she and Matthies saw broader applications for the data than they had initially expected. "When we began this, Bill and I presumed the bulk of subscribers to this study would be manufacturers," she said. "While that may still prove to be true, we also quickly concluded that retail, as much if not more than the manufacturers, needed to view the results of our in-home visits. This, in turn, has lead us to develop a retail version aimed directly at the floor salesperson. That is where the battle will be won or lost."
The full project includes detailed summaries of the participants' daily activities, floor plans of their homes, and two 90-minute edited DVDs showing video footage from the visits. The core of the material has also been distilled down to a one-hour video that coaches floor salesperson on their role. "I thought we were busy doing the field work," said Matthies, "but the time we will now spend speaking to retailers and their floor staffs will dwarf that. Creating the retailer EOR DVD will help us reach a lot more people a lot sooner."
While acknowledging the challenges facing both manufacturers and retailers, the researchers expressed optimism about the future. Said Post, "Yes, we believe that the marketing problems associated with these new technologies are numerous, but that is not to say they are insurmountable. I am convinced that many retailers, if not a majority, will adjust their approach to the market, if not today then over time."
"And when they do," she concluded, "they and the manufacturers who have developed these new products will begin to benefit."
Added Matthies, "Look, we are a technology industry where product lifecycles can be measured in a few years if not a few months. No one should expect that the marketing of these new products would not have to change as well, and what we have done will now be focused on that goal."
For more information, contact Post at (714) 626-0682 or Matthies at (714) 626-0680.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.