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According to Gartner, new products fail at a rate of about 50% or higher within the first year. And where it’s a constant struggle to survive, many retailers have just built that into their business. But what if they knew what products would succeed and at the right price?
Founded in 2007 by current CEO Greg Petro, First Insight is a predictive analytics platform working with retailers and brands to help them introduce the right new products at the right price through a combination of crowdsourcing and gamification. Customers including Abercrombie & Fitch, The Limited, PacSun, David's Bridal, and Vera Bradley are all using First Insight to get their pricing just right.
“We arrived at this idea of using gamification because we wanted to accomplish two objectives,” explains Jim Shea, First Insight CMO. “One was we wanted to get authentic responses: we wanted to place the consumer in a real environment as opposed to just a boring survey or focus group. And the second thing was we wanted to get high response rates.”
How First Insight does this is by creating a set of games that companies distribute to their fans. Essentially these are surveys asking customers for opinions and valuations on products hidden behind a “run your own boutique” style skin. The games specifically ask the customer what product they like and would sell in their own shop, and what the product would sell for.
“It's kind of like a ‘Farmville’ for retail,” Shea says. “All the while we're collecting all this data on what products are selling for and who's buying them as well as all sorts of other qualitative information.” Through these games, customers are getting a window into what may be coming out and they are getting a chance to weigh in with what they like and don't like.
Game Development
First Insight isn’t looking to muscle in on the Triple A gaming market. “If you see our games, they're a little bit more like what you might see in a typical social media game or Facebook game. It's not at the bleeding edge of video and graphics.”
“We start with ‘this is the data we need, now let's build a skin around that, and make it fun and interactive.’ We know the data that we need to get, so the algorithms are not going to change underneath. So what we're looking for is new and different games that keep the consumers interested and excited, keep the response rates very high, while still delivering the information and data that we need in order to run the analytics.”
Shea admits that he’d like to see his company creating a Farmville-scale craze, and is always keeping track of what games are big on social media, but the ideal “would be we create a game that people really want to play and go out of their way to play. There's an expectation among the teen demographic for a certain level of game quality and level of fun, so we're always shooting to hit that.”
What To Wear – And For How Much
Through the platform, Shea and First Insight think they can predict the future of the nascent wearables market. Their findings were documented in the company’s What Not to Wear? study released earlier this year. So will the wearables industry take off?
“Based on the study we did, we believe it will,” he says. “I think there's an established market for fitness wearables, and going forward that's really going to move into the mainstream.” He thinks that people still see these products as ‘a silicon valley trend/early adopter sort of thing,’ but there’s a growing interest in the mid-west, an early indicator that it's moving into the mainstream.
So what are people looking for in wearables? “We found that price and value will even trump design, and a product which is sort of middle of the road in terms of consumer preference can actually do very well if priced correctly.” When you look at the success of budget tablets – supermarkets in the UK such as Tesco & Aldi have sold hundreds of thousands of units – the findings perhaps aren’t all that surprising. “Conversely products people say they love, they don't end up buying because they're over-priced.”
While Shea feels that smartwatches and smart Glass-type products - currently at an early adopter price point - will have to wait until they get down to $300 or less before hitting the mainstream any time soon. There’s hope for simpler products. “A fitness wearable priced under $100 is going to do well - I think they are really going to take off.
So what’s the right price for a smartwatch? “We tested some of these smartwatches with a retail price in the $300-350 range,” he explains. “But the right price is more like $195, so under $200 I think these smartwatches are going to do well.”
Obviously in any conversation around wearable tech, Apple’s offering comes up. “How it decides to price that product could be one of the most important decisions it makes all year.” While the Watch hadn’t been officially announced when we had this talk, Shea’s prediction that Apple’s brand will command a premium was fairly accurate – the base price of $349 puts it at the business end of the market, but the rumours of $500 and even $4,000 models certainly put it in the ‘premium’ category.
But even before those prices were announced, Shea predicted Apple may have to rethink its pricing strategy in the long run. “If you think back to when Apple introduced the iPhone I believe it started at $599, and then quickly realised the price was too high and brought it down, so even Apple is not immune to making pricing decisions which lead to sub-optimal results.”
“It’s not creating the category for smartwatches, it’s a bit late. If you think about its other products, it has tended to be the first one, and when you create a category you have the opportunity to command a premium price.”
The study also showed that women are willing to spend more than men for a lot of these products. Shea doesn’t know for sure, but wonders if this is because women are just used to paying more for fashionable items, although he admits that would be his guess.
“A lot of [these products] start to cross over from technology into fashion and women, when they see something they like, are used to paying [so they] think, ‘well, this is a bracelet, it looks really great plus it has all this technology to it, I’m gonna spend a little bit more’."
We’ve already looked at how Beecham Research thinks that if wearable tech embraces fashion, the industry could almost triple its predicted value. But it looks like hardware companies need to get their pricing right and knock a few dollars off before they start looking at killer apps or functionality.
