It is a common assumption among consumers that the retail price of flagship tech devices and features will gradually drop over time. Moreover, it is often assumed that the release of new models accelerates the price decline for the, now obsolete, previous models.
That means consumers often think it is better to wait a couple of months before buying the latest tech device. But how much is price affected? We looked at a huge range of online pricing over time, to answer this question.
The worldwide TV market recently saw the introduction of exciting new display technologies, such as OLED and QLED. Looking at the average price of three 55 inch OLED/QLED TVs (Samsung, LG, Panasonic), we see that the average online price has fallen by 34% between October 2017 and July 2018.
Other consumer electronics categories show similar trends, but to lesser extents. For example, the online retail price of a laptop featuring a Core i7 processor has fallen 8%, on average, since the beginning of the year. Similarly, the average price of a smart watch has fallen 6% year-on-year (YoY) to August 2018.
Overall, there is a considerable degree of variation between different products, reflecting their peculiar product characteristics and strategies, but data suggests a general downward trend over time for ageing technology features.
Sim-free smartphones offer a great case study in this area. So, let’s look at the impact that the release of two flagship devices (Galaxy S9 and iPhone 8) had on the average online prices of previous models (Galaxy S8 and iPhone 7).
The release of Samsung’s Galaxy S9 in March 2018 seems to have had a noticeable influence on the price of the Galaxy S8, which decreased 14% in the following 5 months. A similar, albeit weaker, dynamic applies to Apple. The iPhone 8 release in September 2017 induced a decline in the price of an iPhone 7 of 6% in the following 5 months.
It is worth noting that the average online retail price of the Galaxy S8 and iPhone 7 does follows a long-term decline trend (the iPhone7 lost 7% and the Galaxy S8 lost 15% YoY, compared to July 2018 prices), but it seems clear that the release of new models certainly had an influence on price movements.
The price variations we tracked during the considered period highlight a key contrast between the approaches of the two brands.
Samsung’s device is subject to higher seasonal fluctuations, while Apple focuses on limited price variations in key periods (e.g. Black Friday). This shows that, although there is a long-term price trend in place, brand strategies and retail promotions can have a big influence on average prices and drive considerable discounts.
This dynamic is even more apparent if we overlay the average online retail price and the lowest online retail price. We can see from the chart below how promotional prices can cut deep under average prices and anticipate the price decline trend by many months. For example, Galaxy S8’ lowest price touched £550 in November 2017, 6 months before the average price reached the same level.
The assumption is true, that there is a general trend of price decline over time key tech devices, which is influenced by the faster release of new and upgraded models. However, long-term price movements are also heavily influenced by brand strategies and retail promotions, which can drive deeper price cuts across a shorter amount of time.
This has important implications for both consumers and marketers:
For a consumer wanting to buy the latest technology or a newer model, looking out for key promotional periods is a better strategy than waiting for the price to drop over time.
For Retailers and manufacturers bringing new technology and new ranges to market, the key lies in understanding consumers’ expectation that prices of older models will fall, and their consequent spending behaviour, based on that belief.
Brick-and-mortar retail turnover is expected to increase nominally by +2.1% across the EU-28 in 2018.
The GfK Millennial Report is now available.
As of September 24, 2018, Saunders will take on responsibility for GfK’s business activities in this region and will report directly to GfK Chief Customer Officer, Christian Erlandson.
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UK Consumer Confidence dropped by one point in July 2018 to -10, despite increases in both measures for people's personal financial situation.
We ran different ad tests during the World Cup, including using biometric testing on 21 ads. The ad that ‘won’, in terms of greatest subconscious and conscious audience response, was the Ladbrokes’s advertisement, which is driven by verbal and visual humour. But what was it that resonated so well with the audience?
According to a recent study published in the journal ‘Cerebral Cortex’, visual humour engages parts of the brain responsible for vision, and verbal humour activates the language-processing areas. These big brain areas tend to be in different hemispheres of the brain (with some exceptions) – so an ad that is working both on a visual and linguistic level is engaging both hemispheres.
Engaging both sides to the brain in a positive way (we confirmed positivity via the subjective accounts viewer gave to the Ladbrokes ad) improves the ad’s efficiency in grabbing and holding viewers’ attention, and creating a lasting impression of the brand.
Advertising needs to resonate with the audience’s current mood. While it is very hard to predict this in general, it is much easier with audiences focused on a major event. For ads aired before and during a major sporting event, for example, the audience’s mood is likely to be social, enthusiastic, emotional, and so forth.
In our test, the ads that were projecting a relaxed state of mind with representations of peaceful lifestyle elements performed very poorly. They were not in line with the audience’s prevailing mood at that particular time and therefore triggered very little subconscious engagement and subjective liking.
Similarly, such events are not the right context for ads that need the viewer to try hard in order to ‘get’ the joke or decipher the puzzle. People geed up for a big social event, and very focused on that, don’t want to be distracted by complex advertising. They respond better to the more obvious, or ‘slapstick’ type humour that doesn’t take their attention off their main purpose for watching.
Any threat to our self-esteem triggers withdrawal or prompts us to push back in defense of who we are. Therefore, advertising needs to be careful with any type of humour that is directed at people’s daily habits.
This is especially so for audiences who are in a social, festive mood in anticipation of a big sports event; they are not in the mood to see humour in the mundane, awkward moments in their lives.
In our test, the ad that portrayed that type of humour triggered relatively high emotional engagement, but the conscious responses showed it to be mainly negative. In fact, it scored 15.77 points below the average ‘performance score’ of all the ads tested before and at half time – which is a significant underperformance. In addition, it had only around half the amount of peak moments of strong emotional reaction compared to the average seen during this test. The ad was out of kilter with that audience’s present mindset and mood.
Humans love to join the dots. We are intrigued by the lack of connectedness, because we are driven to make the connection – and this holds true in advertising. While we are intrigued by disjointed scenes, or unexpected pauses in the music or visual frames, we have a certain threshold of tolerating this. This threshold is even lower during times of emotional turbulence when the audience’s minds are focused almost wholly on anticipating a major event, such as a big sports game.
Again, our test showed that ads that include high levels of these elements (70% of the total copy) can prompt frustration and disengagement in viewers. In particular, the ads that showed partial body parts – i.e. legs or arms shown only partially – or where the music or visual element was interrupted for more than a second during the ad, scored up to 20 points less than the average performance score for all the ads tested. In addition, these ads triggered hardly any peak moments of strong emotional reaction, performing up to 40 points below the average for this metric, in this test.
By layering stated responses with biometric testing, we can deliver strategic and tactical recommendations that are much more future-proofed. We find out not just what people say, but how they instinctively react – giving us the ‘what’ and also the ‘why’ on both conscious and subconscious levels. By analysing these layered findings, we get a holistic, as opposed to a one-angled, understanding of human behavior and human receptiveness in different situations. And that means you can do more successful planning, based on this better understanding.
For advertisers, the key message is that an ad that performs well during a ‘normal viewing’ situation could fail to resonate if screened around a specific type of event, where the audience is in an elevated frame of mind. To make the most of prime-time advertising, such as around a major event, we need to project the audience’s most likely mood and ensure the proposed ad dovetails with all the connotations of that mood.
GfK and Shimmer, a leading provider of wearable wireless sensor products, monitored the physiological responses of around 50 participants as they watched the live France-Peru World Cup game – including watching 21 advertisements from a variety of product categories that were shown before the game or at half time. The physiological response was recorded via a biometric device, which sits on a participant’s wrist and picks up the signals via two non-intrusive electrodes. As well as tracking the audience’s second-by-second skin response and heart rate as each advertisement played, GfK also recorded their stated response to each advertisement at the end of the session.
Findings of the GfK Consumer Climate Study for July 2018
We ran a test recently on some ads that were airing in the UK during the World Cup, all from the same product category (consumer electronics). Some of the advertisers were official World Cup sponsors; others had an alternative football sponsorship association – and we evaluated them using a new pre-test methodology that was co-created with major advertisers.
All the ads employed a football theme and the results from our unforced exposure method proved this to be a strong hook that attracted – and held – viewer notice equally well across all the ads. Strong and consistent brand name presence in each ad also led to the viewers correctly recalling which brand each ad was promoting.
However, one key thing was not quite right in the majority of these executions. While the product was always clearly shown, it was not always the hero of the ad. The football theme was the dominant attraction, which meant that viewers too often lost sight of the product’s actual features and benefits. Ultimately, the connection between the product and the sport was not always clear to the viewers.
Even more crucially, most of the ads were not driving a direct or indirect call to action – be that an interest to learn more about the product or brand, or a desire to go out and buy one.
In this test we only focused on a small proportion of each brands’ advertising activity around the World Cup – however, it’s always worth remembering that, while a brand may be relevant to the event it sponsors, that relevance needs to be clearly communicated to the viewers, in order for the brand to benefit.
Our Ad FIT method identified that the strongest performer for an ad that fascinates (grabs and holds viewers’ attention), imprints (leaves a positive, branded lasting impression) and triggers (generates a direct or indirect response from viewers) was not in this case the most ‘exciting’ execution. It was the one that clearly communicated the product’s benefits in a way that was relevant to the ‘big sports event’ theme – thereby driving a timely desire for the product.
Read our linked press release: Humorous ads trigger greater response than sporty ads screened around a World Cup game
For more information on how you can increase your ad performance with AdFIT pre-launch testing, please don’t hesitate to contact us.
Findings of the GfK Consumer Climate Europe Study for the second quarter of 2018
Promotional events are gaining more and more importance across the whole world – and Latin American tech markets are among those showing the strongest impact. These events are changing traditional seasonality and concentrating yearly sales volumes in a few weeks. This is why it is of utmost importance for manufacturers to plan well and participate successfully in these events.
It is not only about Black Friday, but there is a multitude of different events, most of which are in Q2 and Q4. While Brazil focuses on Black Friday in November, following the US model, other South American countries have created purely online events in order to push online sales – the most successful ones are Hot Sale and CyberMonday in Argentina and Cyberdays and CyberMonday in Chile, which make online sales boom. Peru and Colombia are increasingly starting to follow these models. These “new” events take place in addition to the traditional ones, such as Mother’s Day, Father’s Day and Christmas promotions, and in most cases outperform them. They even “outperform” traditional climate-related seasonality. For example, in Argentina and Chile, the second most important week for refrigerator sales is now in winter (off-season) and vice versa for washing machines.
With +29%, the market volume of technical consumer goods this year topped the 2017 growth during Hot Sale week, despite macro-economic challenges. The sales volume in Hot Sale week was more than double of the average week in Jan-Jun18, concentrating 8% of sales. With +84% growth, PTV was by far the most successful category, which can mainly be explained by the soccer world cup effect.
During this year’s Cyberdays, the technical consumer goods market grew again by 20% (units), with small domestic appliances, consumer electronics and major domestic appliances growing above average. Small appliances growth is coming from vacuum cleaners (+54%). The Cyber events created the perfect platform for selling robots, which showed huge increases. One third of the robots’ sales volume in first half-year was sold during the Cyberdays week. The value share of online channel within total tech market in Chile soared to 20% in the first semester and even 59% in Cyberdays week.
In Peru the traditional Mother’s Day remains the most important week in the year (equal to Christmas), with double sales volume compared to the average week in the year to date. Yet it also increasingly shifts to online. Although the product focus is slowly shifting, it seems as if many Peruvian women do not yet feel offended being offered home appliances for Mother’s day, as small and major domestic appliances showed again the highest sales peak. This year consumer electronics increased by 23% during Mother’s Day. This trend is seen throughout the whole year 2018 and it became stronger week by week. The main reason is obvious: After 36 years Peru qualified for the soccer world cup in Russia. In order to be able to follow well their “selección”, many Peruvians invested in new TVs.
Latin American consumers tend to be very price sensitive, which is why strong price cuts are key to success of promotional events in the region. This makes it very important for manufacturers to decide carefully how much to decrease the price, in order to participate successfully without sacrificing more margin than necessary. Most aggressive price cuts can be observed in Chile, with almost one third of all units sold with >20% discount.
However, the average prices per category often increase in promotional weeks, thanks to a strong push of premium segments. Especially during the online events, the share of ultra HD TV, ultra-thin laptops, wash dryers, side-by-side refrigerators or kitchen machines increased by up to 15 percent points, compared to an average week.
After all this recent promotional activity, it is not at all over. Important promotions are still coming at the end of this year, mainly from Black Friday and Cyber Monday, as well as Christmas promotions.
What is the best strategy to optimize your sales in these promotional periods?
The GfK Weekly Promotional Events Tracker helps you to figure out:
For more information, please contact us: Daniela.email@example.com
We are inundated with tech solutions for our daily lives that are fast, easy to use and help to reduce time spent on the mundane. Having used pricing tools for over 10 years, it has always been an observation that pricing tools were a “one size fits all” solution to a very integral business issue. So what should we really be focusing on when selecting a pricing tool?
The fact is that not all online pricing tools are born equal – so how do you filter out the ‘also rans’ to find the front-runner that delivers the very best market analysis for you?
Firstly, it’s easy to get distracted by a professional-looking user interface and fail to ask ourselves about the underlying data and analytics. Accurate data of the highest quality and comprehensiveness is essential… incomplete or poor data leads to poor analysis, which leads to poor business decisions.
So ask yourself: when you peel away the theatrics, are you willing to trust your company’s future on the data and analytics being delivered? What are data sources? Are they comprehensive?
The next thing is speed. As multiple intra-day price moves become normal, the speed at which your solution can provide your data is essential.
So look beyond the load speeds of your tool, and instead ask your supplier how frequently the data within your tool is refreshed each day. Is once or even twice a day really enough, when prices in the market are being changed multiple times a day?
After you’ve satisfied yourself the tool you’re considering fulfills these fundamental needs, it is time to consider the usability and functionality being offered.
We all need tools that are easy to use and that deliver the information we need in the format we need it in. Gone are the days of software solutions that fail to reduce the time we spend on the mundane.
So ask yourself: Can you customise your view of the data? Can your tool inform you when key changes that affect your specific parameters have happened in the market? Can you see beyond basic pricing and search on features, promotional activity or anything else that is pertinent to your business?
If you can’t do these things, you may find you are not getting the value out of your tool that you hoped for – or find yourself wasting valuable time getting your data into the format you want and delaying the speed at which you can make your critical pricing decisions. Didn’t you pay for this tool to simplify things?
A high-performing, high quality online pricing tool will give you more time and better market analytics on which to make your business decisions. To find your best-fit tool, speak to your provider about the requirements I’ve outlined here – and any additional needs that you want your tool to fulfil – and challenge them to push the boundaries and deliver on these. As artificial intelligence (AI) and algorithms get used more and more to complete huge chunks of analytics, our online pricing tools will continue to develop and improve at a rapid rate. So make sure you tie-in with a provider who is also planning and developing for the future.
To find out more, please contact Barry Meacher