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Consumer Electronics Market: A Space Odyssey

1 Dec, 2016 By: Pat Cauley Response

Artificial intelligence, augmented reality, virtual reality … consumer electronics marketers leap into the future with performance-based marketing plans. And other marketers are also taking note of how they might use new CE tech to reach their consumers.

When the first videocassette recorders (VCRs) emerged in 1970, the consumer electronics (CE) market was officially born. Today, CE advancements are starting to tangibly mirror ideations that were once just fodder for Hollywood’s imagination.

Worldwide revenue in the consumer electronics segment amounts to more than $210 billion in 2016, according to Statista. Moreover, worldwide CE revenue is expected to show an annual growth rate of 12.5 percent, resulting in a market volume of nearly $380 billion in 2021.

For those in the CE product space, or marketers who use CE to reach consumers, staying abreast of trends and adapting novel strategies will determine whether they malfunction — or rise like a machine straight out of a Terminator film.

Rise of the Machines

“One of the biggest trends is the use of artificial intelligence (AI) and robots of various sizes and types as personal assistants — kind of Siri on steroids,” says Linda Goldstein, New York-based partner and chair of advertising, marketing and digital media at Manatt Phelps & Phillips LLP and a member of the Response Advisory Board.

Around the CE water cooler, Apple’s Siri is yesterday’s news, while Alexa — Amazon’s voice-activated virtual assistant — has seen demand skyrocket. “Alexa is sort of the next generation, but it’s moving even beyond that now. We are also seeing more brands tying into Alexa and finding marketing opportunities through the use of Alexa. Just from the standpoint of consumer behavior in general, that will be an interesting trend,” says Goldstein.

The CE industry is growing at a rapid pace, and advancement coupled with consumer demand dictate what innovations will catch.

“We are seeing consumers take more of an interest in high-quality wireless audio. And of course the launch of the new iPhone 7 without a headphone jack is propelling that trend forward,” says Carolyn Scott, senior director of marketing at Optoma Technology, a leader in audio-visual entertainment systems. “From a home entertainment standpoint, projection is becoming more mainstream. Consumers want a large viewing experience, but millennials — especially those living in cities with rising rents — often don’t have the space for a huge flat-panel TV. As projectors continue to become more of a mainstream product, innovations like ultra-short throw, displaying a large image from just a few inches away, have proven to be the perfect alternative for anyone living in a small space. And with the continuing focus on the Internet of Things, we’re seeing a lot more connectivity between content and various devices.”

The Internet of Things (IoT) is a computing concept that describes a future where everyday physical objects will be connected to the internet and able to identify themselves to other devices, according to Techopedia.

“It’s apparent that the most notable trends in consumer electronics are wearable and smart-home tech (IoT). Additionally, 3D-printing devices and technology have advanced in features and capabilities dramatically,” says John Francis, Los Angeles-based Hawthorne’s director of digital strategy. “One of the most exciting drone offerings is the new DJI Mavic Pro. Its ability to fly for up to 25 plus minutes, at distances of three to four miles away, and utilize geo-positioning to follow the user around, adds a dramatic visual angle to life logging.”

But, with the continued modernization of CE products, consumers still need to be nimble. “Overall, the most exciting trend is the continuing expansion of the breadth of the CE space, including categories such as next-generation TV devices, wearables, and smart home products,” says Charles Golvin, research director at Gartner, who’s worked with CE companies like Samsung, Motorola, Belkin, and Best Buy. “Particularly, it’s the products that integrate voice interfaces with intelligent software agents, such as Google Home and Amazon’s Alexa-powered speakers. What is less exciting — and frustrating — is how challenging it remains for non-technical people to make these products work seamlessly together. Also, this expansion has opened up the market to many bad ideas and it will take time to weed these out.”

Total Recall Marketing

As of January 2016, approximately 61 percent of the U.S. population owned smartphones, according to comScore. With always-connected CE devices in the hands of most consumers, they have a vast ability to engage with content — and, therefore, advertising.

“With so much focus on digital content and providing consumers with interesting and engaging content — whether it’s through use of video or augmented reality — it’s given advertisers an ability to extend the level of consumer engagement,” Goldstein says. “The data that is being collected and utilized now is also giving marketers an opportunity to engage on a more personal level with consumers.”

She contends that some of the new platforms in technology, like chat boxes, are great examples of increased engagement and personalization. “Now, to the extent that they’re being built into apps, again that is providing a very personalized customer experience,” says Goldstein.

For its part, Optoma puts most of its marketing efforts in the digital basket. “Our target audiences are shopping online the majority of the time, so we are using a combination of media, social, and digital advertising to reach the right consumers. We definitely leverage insights to help us better reach our target customer and increase our marketing performance,” says Scott.

According to a new study by Euclid Analytics, 83 percent of consumers say their smartphones are central to their shopping experience and buying decisions.

“It may sound trite, but the biggest adjustments are still in accommodating customers’ changing research and buying habits — balancing consumers’ thirst for knowledge about product features and benefits with bargain hunting. CE manufacturers have invested significantly in content marketing, especially for these new classes of products, for which the question, ‘Why do I need this?’ does not have an obvious answer,” says Golvin.

Inspector Gadget

Clearly, data mining is paramount in the CE marketplace. In fact, 92.3 percent of marketers are maintaining their databases in order to host information on both current and prospective customers, according to ISBUK.

“CE marketers are leveraging personalization insights in data-driven marketing. Understanding demographic and behavioral data gives them an edge in more accurate segmentation. They are able to automate the delivery of customized content and messaging to reflect the needs of the consumers,” says Francis.

However, digital data tracking often comes with regulatory red flags. “Privacy will continue to be the key issue with consumer behavior and being able to be tracked across all devices,” Goldstein says. “The ability to collect and aggregate that data on an individualized basis will obviously create privacy concerns, and it’s going to be very important as more sophisticated tracking technologies become available that it’s fully disclosed and that consumers understand what, when, and where their activities are being tracked.”

CE products have evolved, not just in the technological or research sense, but in that they’re purchasing tools themselves. “The proliferation of mobile devices and the trend of larger smartphone screens has, of course, made it easier for consumers to shop anywhere at any time,” says Scott. “There is plenty of data that shows mobile shopping now accounts for more than one-third of online shopping. The improvements and increasing popularity of voice-controlled devices like the Amazon Alexa have also created new ways to research and shop.”


Last year, 43 percent of consumers stated they prefer to shop online, according to IBM. And that number is only expected to rise as the ease of the online purchase path on CE products continues.

“There is a dramatic increase in the ability to buy single products through exclusively designed apps with simple click-to-purchase features, with automated payment integrations with platforms like Apple Pay and Android Pay. The ability to buy something in less than three clicks is here,” says Francis.

Mobile shopping-related searches increased 120 percent in the past year, according to Google. ”The mobile device essentially has become the key to the castle. And I think that opens up, particularly for DR marketers, tremendous opportunity — because DR marketing has always been built on impulse purchase,” Goldstein says. “A mobile device and many of the apps that now exist allow you to look at something and purchase it with a click and pay for it — without taking out a credit card or anything — capitalizes on that ability to tap into an impulse purchase.”

CE products are almost akin to a digital consumer gold rush when they hit the right sweet spot. “In truth, most of the commerce driven by TVs, game consoles, and other CE devices is for digital goods of some kind — like TV shows, music, or in-game purchases,” says Golvin. “The vast majority of digital commerce still occurs on PCs, smartphones, and tablets. The latter two, via customized apps, indeed enable much richer commerce experiences, though many of the companies that benefit from this capability are those with strong brands and loyal customers.”

Referencing the Amazon Dot products’ one-click shopping as a prime example, he adds, “And, of course, there’s Amazon, which dominates digital retailing and is focused on removing as much friction as possible.”

Brick-and-mortar sales in first-quarter 2016 still accounted for more than 92 percent of total U.S. sales, according to the U.S. Census Bureau. Therefore, CE products working in tandem with brick-and-mortar stores achieve ultimate success. In fact, Google recently reported that 82 percent of shoppers say they consult their phones on purchases they’re about to make in a store.

Furthermore, according to a report from Forrester Research, 66 percent of retailers agree that their results will continue to erode unless they find a way to incorporate technology as part of their store experience. Thus, in-store CE experiences are an essential, evolving piece of that retail pie.

Reality Bites

Augmented reality (AR) is one of the most prevalent ways forward-thinking retailers are bolstering their customers’ experience using CE. From Lego’s use of in-store kiosks that allow potential customers to visualize the creation of the project’s end result, to Home Depot’s app that allows users to see what a particular home improvement would look like in their existing environment, long gone are the days of simply looking at product packaging pictures or aimlessly flipping through a print catalog.

“Augmented reality, like standard video today, is going to become a key component of a lot of marketing.” Goldstein says. “You’ll see many more devices that are perhaps more comfortable evolving and coming into the market. Digital health-and-fitness related products will continue to have tremendous growth. Wearable technology will continue to expand, such as Fitbits, clothing, or other gear being developed now with some sort of intelligent technology built in.”

And while ventures like the wildly successful Pokémon Go game have allowed consumers to dip their feet in the AR waters, full-blown virtual reality (VR) devices are looking to become more mainstream with Google, Sony, Microsoft, Samsung, and Facebook all making plays.

“Since I have had the pleasure of experiencing VR with an HTC Vive, the ability to be more hands-free and move about and interact with the natural world while existing in the virtual will be the next evolution of VR. As the quality of the displays improve, the desire to put down the device will decrease exponentially,” says Francis.

Yet, when it comes to VR vs. AR, some argue that AR will be more accessible to the masses for the time being. “I suspect that while many brands will experiment with VR — both as an experience enabler and as a device category — it will remain something of a niche,” Golvin says. “Like other new media forms, it will take time for content creators to really understand the medium. I think AR will have a much greater impact since consumers are already armed with capable devices. The most promising developments are in software-based agents — both the call-and-response type such as Siri, Alexa, and Google Assistant, and future developments of intelligent agents that work as customers’ proxies in the background as they learn about customers’ preferences and are able to anticipate their needs,” says Golvin.

Back to the Future

As the CE marketplace progresses, those in the space eagerly anticipate the future. “We’ll be looking at greater interoperability and functionality between products. We’re really focused on shaking up the mobile and home entertainment experience, driving innovation to the mainstream so that consumers have the ability to enjoy professional-grade viewing experiences at affordable costs,” says Scott.

But, where exactly does performance-based and direct response marketing fit in to the evolving CE world? “DR will have to live through mobile apps and websites primarily,” Goldstein contends. “At one time, that may have been a very frightening thought to marketers. But, with the evolution of technology, and the importance of video and video sharing, the opportunities and advancements in digital media and the power of social media offer more exciting opportunities than ever before.”

She maintains that what’s trending now and where brands are spending their money is actually in the sweet spot of what DR marketers have been doing for years: native advertising.

“What is an infomercial? It’s the original native ad,” Goldstein adds. “What are social influencers? They’re testimonials. And, today, it’s all about content — particularly video. That is where DR marketers excel. So, I would look at what’s happening as really tapping into the sweet spot of DR marketing expertise.”

Similarly, Golvin contends that future success in the CE marketplace comes down to another basic pillar of traditional DR: clearly defined product features and benefits. “When it comes to emerging CE categories, the most glaring omission is clear communication of the benefits delivered by a new product,” he says. “Marketers can grow overly enamored with the technology and comparing their product to competitors’, when — in fact — potential customers can’t easily answer the ‘Why do I need this product?’ question. If the brand can’t provide a concise and compelling answer to that question, they need to go back to the drawing board on messaging.”

For those still pondering questions about the CE market, chances are Siri or Alexa have an answer. ■

About the Author: Pat Cauley

Pat Cauley

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