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Launching Glass: a marketing plan to overcome the innovation curse

Group 5 I EMBALJ2014 I Marketing I November 2013

Table of contents:

1. Introduction………………………………………………………………...... 4

2. The consumer need: What problem is solving?……… 4

3. The marketing strategy: The 4 P’s of Google Glass…..……..………… 5

3.1 …………………………………………………………………… 5 3.2 Positioning………………………………………………………………. 6 3.3 Platform………………………………………………………………….. 7 3.4 Promotion………………………………………………………………... 8

4. The market potential: Scenario-analysis of consumer uptake….…... 9

4.1 Market potential for …………………………….. 9 4.2 Market potential for Glass-like devices……………………………….. 10 4.3 Actual market captured for Glass-like devices………………………. 10 4.4 Potential share for Google of this market…………………………….. 10 4.5 Revenue for Google in 2014-2018 period……………………………. 10

5. Summary: Overview of recommended marketing strategy…………... 11

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‘If your plan is to educate the market, you’re in trouble’ David Arnold, Adjunct Professor Marketing, London Business School

3 1. Introduction: assumptions and focus of the marketing plan

Will Google Glass be the next logical step in how we ‘explore and share our world’ or will it suffer the same fate as the Segway: overhyped and underperforming? With more than 80% of product launches ending in failure how can Google Glass avoid a similar scenario? This plan outlines our marketing recommendations for a successful launch and how Google can reach mass adoption in the next four years. This timeline can be split into three phases (figure 1) however we will mainly focus on the challenges in the first two crucial years after initial launch. This plan first identifies the needs that Google Glass is addressing and then structures our recommendations around the key challenges identified in those first years (Privacy, Positioning, Platform and Promotion – the 4 P’s of Google Glass).

Figure 1: The 3 phases and 4 pillars of our recommended Google Glass marketing strategy

2. The consumer need: what problem is Google Glass solving?

Modern technology and especially have a lot of features that people value and are willing to pay for. However, there are usability issues with smartphones that could be improved with technological innovation. Wearable devices, which allow you to monitor, observe or share any type of relevant information, can improve the task or activity, which you are performing at a particular moment in time.

Some examples of specific needs are: • Wearable devices that allow you to monitor speed, location, heartbeat and distance while running, biking or even skiing. • Setting up impromptu meetings within a conversation by tapping the device, viewing your calendar and confirming through technology. • General information about your surroundings, such as city tours or museum visits. • Improving leisure activities such as golf by enhancing the way you absorb information and make better-informed decisions.

Further to these specific examples of customer needs there is a less tangible, but arguably much more powerful, need that Google Glass addresses. This is the modern need to be constantly connected, in touch and never missing out. This can be easily observed through the explosion in social media over the past ten years and in particular websites such as , and Flickr. The average consumer now checks their phone 150 times a day (Kleiner Perkins, 2013) and this number is only going up. By providing a wearable device, with a heads up display and integrated voice commands Google Glass is able to meet this, and the other identified needs, by allowing consumers to interact with technology without interrupting the task / real world activity that they are doing.

4 Companies also have started to re-consider how they can incorporate wearable devises into their businesses to enhance efficiencies. At this moment the most important profession in which wearable devices are used is medical care. But other professions are following suit, primarily in the manufacturing industry, where processes can be monitored in real time and any system or machine failures can be addressed instantly in order to ensure a smooth flow of the production process. In any industry where improved efficiency can enhance productivity Google Glass could become an integral part of strong operations management.

3. The marketing strategy: The 4 P’s of Google Glass

One can argue that the only way to achieve real growth is to create brand relevance (rather than preference) through transformational innovation that creates completely new categories therefore making competitors irrelevant (Aaker, 2012). So the upside of launching an innovative product like Google Glass is clear. In reality however the innovation curse first needs to be overcome. Research has shown there is a mismatch of nine to one (or 9x) between what innovators think consumers desire and what consumers really want (Gourville, 2006). Google will need to tap into the psychology of behavioral change and convince consumers that these gains outweigh the losses by a factor of 3. To do so Google will have to get each of the 4 P’s for Google Glass right: privacy, positioning, platform and promotion. Figure 2: The 4 Ps of Google Glass

3.1 Privacy Since its announcement, Google Glass has sparked discussion about whether it would compromise the privacy of people who would no longer be able to control when their personal information, image or even preferences were being recorded or shared. Consumer Watchdog has described Google Glass as “one of the most privacy invasive devices ever” and called on Google to give citizens a way to remove videos or photos taken of them by the device. Google CEO has received a formal letter from the American Congress outlining several areas of concern regarding privacy. This is a sensitive topic for a company whose most valuable asset is the trust of its users and that has made the news several times in recent years related to privacy concerns.

In that context, Google’s marketing strategy should consider some additional modes of segmentation beyond merely demographics that would allow Google to target the segments most responsive to the characteristics of Google Glass as well as those skeptical about this product.

Figure 3 shows a suggested segmentation according to privacy concerns and level of technology adoption, which allows Google to direct the appropriate amounts of promotional attention to different segments. With this in mind the following strategies are suggested for each Figure 3: Privacy segmentation framework segment.

Ambassador (A) strategy: Based on research about Devices from SurveyMonkey, this group represents about 20% of consumers. They are early adopters of technology, without any

5 major privacy concerns, and it is usual for this group to own several gadgets, as they want to be the first to experiment with new devices and its features. Considering this segment is naturally motivated by hype, Google should approach these consumers as their ambassadors to the market, inviting them to join “The Glass Explorer Program”. Designed for developers and consumers to test Google Glass, and gauge how people will want to use it, this program has a significant potential to contribute to the mass adoption of the product.

Neutrals (N) strategy: Google should focus very little time/effort to Neutrals as, although they have few privacy concerns, they also are not open to embrace new technology, representing a market still some steps behind the adoption of such an innovative product like Google Glass. Besides that, they are the least representative segment of the market, with only 17% of consumers, making clear this is not a key segment for Google.

Potentials (P) strategy: This segment has privacy concerns as well, but in general is more open to being convinced as they show patterns of behaviour and consumption open to adopt new technologies, even though they still want to feel safe about it (inevitability of progress attitude). Google should put most of the focus on this group as, by definition, they are the most sensitive to Google campaigns. Potentials represent 23% of the market, but have a much higher reach, being the key to influencing Skeptics, due to their similar apprehensions. Due to their crucial importance for the success of Google Glass, Google should have a program specifically focused on privacy issues, inviting Potentials to give their feedback. Suggestions around privacy features and settings should be incorporated into its products, increasing the acceptance of Potentials, whilst still educating this segment and reinforcing Google’s commitment to their privacy concerns.

Skeptics (S) strategy: Even though Skeptics represent 40% of the market, focusing efforts on this segment may not be a good strategy, as it could only raise more critics regarding the privacy risks offered by Google Glass. However, not working this segment may negatively impact the adoption of the product by the other segments. Indeed, Skeptics are the most susceptible to criticise the product, due to their low level of understanding about the possibilities offered by technology devices and its high privacy concerns. So, Google should adopt a user-friendly approach when explaining the features available in its product, educating the customers and illustrating why the concerns are unfounded. Example: demonstrating which are the explicit signals presented by the device to make people aware of what is happening whenever it is in use. The promotion section later on is closely linked with this strategy.

Privacy Recommendations • Focus privacy initiatives on segment P, due to its high potential impact on the market. • Communication with A should focus on features and functionality, motivating hype. • Should not ignore Skeptics, due to potential negative impact.

3.2 Positioning Once Google has addressed the privacy issue the next step is to position the device in such a way that consumers feel it’s worth the investment. In our opinion Google should be positioning Google Glass as an affordable, easy to use improvement to everyday life, which is accepted by society because of clear user etiquette. Let’s look at each part of this suggested positioning strategy in more detail.

Social acceptance/Appearance: We believe that most of the behavioral change required to make this product a success will not come from the technical side (e.g. based on personal experience learning the new interface is rather straightforward) but the change in attitude required by your social circle when

6 you are wearing Google Glass. Put more simply: you don’t want to risk being seen as a ‘Glasshole’ when buying one. Next to privacy we feel this is the most crucial element to overcome and the two are closely linked.

The main challenge here is the asymmetric nature of Google Glass usage and its high visibility. While the latter has clear benefits in terms of awareness of the product it can also slow down adoption when people are uncomfortable wearing one among friends and colleagues. In this context it makes sense for Google to put even more effort behind their current ‘Invite a Friend’ scheme. Here early adopters (called ‘Explorers’) can invite 3 friends to buy a device pre-launch. Once out in the market it would make sense to extent this scheme to relevant Google+ communities (e.g. outdoor/extreme sports). Also when promoting certain apps it would be beneficial to focus on those that have a strong social element to it and where the usage becomes symmetrical (multi-person gaming or the ability to share videos/photos).

Ease of use: The aim here is to avoid the Segway Syndrome where a product has a reputation of being something of a sci-fi novelty exclusively for a tech-savvy and futuristic crowd. In order to avoid this reputation Google Glass needs to be positioned as the logical next step in the connectivity evolution following the global take up of smartphones. This will reduce the psychological cost associated with the required behavioral change. Consumers irrationally overvalue benefits they currently possess relative to those they don’t. So positioning Google Glass as an extension of your current behavior rather than a complete break with what we know will make uptake more likely.

The company should for instance stress the fact that more than anything it is easier to use and more intuitive than interacting with a as the main interface is voice-driven rather than a small keypad. Also the company has the benefit that most of the initial users will already have a and have experience with using voice commands on Nexus devices.

Affordable: We would suggest following a penetration launch strategy to maximize market share early and establish a dominant position in this new and potentially lucrative market. Also the more initial uptake of the device the sooner the ‘asymmetric’ nature of Google Glass becomes less of a problem. This means set Google Glass at a price point that moves it away from being an exclusive nice-to-have piece of tech equipment for the happy few and into the mass market. Where the initial price was set at $1500 we would suggest lowering it to $600, potentially even lower, and follow a Kindle strategy where Google accepts a loss on the hardware, which will be made up over time by a combination of direct content sales as well as advertising. There’s also the potential to price the device even sharper in combination with a range of devices.

Positioning Recommendations • Focus on certain social circles/groups to increase acceptance of using the device. • Leverage current Google products/sign-in to minimize learning cost. • Penetration pricing strategy including an initial loss on the hardware.

3.3 Platform The third ‘P’ of our marketing strategy is important in determining whether the uptake of this product will move beyond the early adopters. Assuming most privacy and positioning concerns are dealt with then the real question that needs to be answered is: what can it do for me and how will this develop over time? This is where the platform element comes in. There are three parties to the Google Glass platform that together have the potential to become a vibrant ecosystem of highly relevant and ever-improving applications: users, developers and Google.

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Google has already started with 3rd party developers to help them build services on top of the ‘Google stack’ by releasing API to build ‘Glassware’. The GlassCollective.com initiative, where Google partners with VCs to fund start-ups who develop for Glass, highlights the potential that the company alongside other financial backers sees in this relationship.

The range of applications available from the outset has a significant impact on a successful launch of Google Glass. It would be desirable that the applications on offer are aligned with the key components of the marketing strategy outlined above. 1. The applications should be targeted to the consumer market in order to build scale – business related apps will follow the consumer market. 2. There should be a broad range of applications to meet the needs identified in section 2. 3. The applications should be relevant to the different segments outlined in section 3.1. i:e they should be cognizant of privacy concerns and targeted to different levels of technological comfort. 4. Applications that increase likelihood social acceptance should be specifically encouraged. This would include applications that make it easier to share pictures, and socially connect – increasing the positive platform effects of owning a Google Glass device. In general the aim should be to encourage the developments of apps that enhance the real world rather than competing with it.

In addition to the applications, Google should also promote the development and sales of 3rd party physical products, e.g. carrying cases, colour scheme frames, etc., as they are visible and as such increase consumer awareness. Any ancillary products that create lock-in effect with the customers would be extremely valuable; examples could be something like connecting the Glass with your television, music system, car, etc. If the Glass can add value to any of the other devices the customers own, or add to the switching cost, it will be both more desirable for the consumers, and create longer lasting loyalty.

Platform Recommendations • Use the Glass Collective to financially support and promote 3rd party developers. • Focus the 1st phase application development on consumer applications. • Search for partnership opportunities with consumer electronics / device manufacturers.

3.4 Promotion So how to promote the device and, more specifically, what’s the right messaging when it comes to communication? Below is an overview of our recommendations both in terms of tone of voice as well as budget:

Education: It’s clear that already there are a lot of misconceptions about how intrusive Google Glass can potentially be in terms of privacy. A ‘myth busting campaign’ highlighting the top 10 common unfounded concerns (‘people will be able to tell who I am based on facial recognition’) will help the company correct this. To reinforce this Google should create a range of videos and let early pre-launch users tell about their experience and how they decided to use the product in social settings. The idea being that the rules are still unwritten and it’s not Google’s place to determine who and when to use the device. Let actual users talk about what they think is best practice on social etiquette.

Put society at the heart, not Google: Building on the prior point and the previously mentioned Ambassador strategy, throughout any type of marketing campaign we would recommend (perhaps

8 counter intuitively) limiting the focus on Google and instead have users and developers play a central role. This will demonstrate that there is already a growing community around the Glass of companies that are developing applications, which are truly changing people’s lives. Google should build on a piece of creative they did for self-driving cars showing a blind person taking the car and how it impacted his life.

Place: Innovation needs active sales channels so rather than an ‘online-only’ strategy where Google exclusively sells the device through it’s website it should partner with the same retailers who sell its and invest in shop-in-shop space as well as considering opening its own retail outlets where people can test the device. Also find other opportunities where people can sample the product so for instance partner with Disneyworld to let visitors to use it to navigate the park and take photos and videos throughout the day immediately uploaded to their Google account.

Budget: In terms of budget we feel that the size of the investment here should be substantial given the challenges faced. Reports suggest that about 25% of Google’s annual $2 Billion advertising budget is to be spent on promoting their Moto-X phone. Although the short-term potential of Google’s first fully in— house build smartphone is higher than Google Glass we feel that at least $100 Million or 5% of the total budget would be required to invest in promoting Google Glass. Looking at the split we would spend 30% on activating retail outlets, 30% on developer outreach and 40% on direct communication to ‘educate’ the market on privacy and positioning.

Promotion Recommendations • Make any communication about users and developers, not Google. • Don’t rely on online sales channels as Google did for its first smartphone. • Spend 60% of the budget on activating these channels and supporting developers.

4. Market potential

In this section we estimate the total units sold and the resulting revenue for Google in the period 2014- 2018. In order to estimate the market potential for Google Glass, we have to look at industry estimates of the how the wearable technology sector will develop as well as make estimates of what share of that will be Glass-like devices and Google’s share of that sub-category. Our approach includes 5 steps across three different uptake scenarios: high, low and medium. It also links with the segmentation set out in the Privacy section (3.1). See estimates in the table below.

4.1 Market potential for wearable technology Wearable technologies come in various forms from running wristbands to smart watches and devices like Google Glass. The forecast for annual unit sales for the whole category varies wildly as can be seen in the chart. Various research firms have analyzed the space and estimates for cumulative unit sales from now to 2018 range from about 300m (Juniper) to 1.8B (ABI Research). We’ve used these estimates for the Low/High scenario and then the average for Medium.

9 4.2 Market potential for Glass-like devices The next step is to apply percentages to the above numbers to estimate the total units sold potential of the Heads-Up Display (HUD) part of wearable technology. Given that this sub-category is both priced at the high end as well as the fact that it requires more behavioral change, compared to for instance wearing a Nike FuelBand, we estimate that this percentage will be on the low-end and somewhere between 2% and 4%. Figure 4: total unit sales estimate for wearable technology – 2014/2018 4.3 Actual market captured for Glass-like devices We believe that the percentage of the potential market that is actually captured/realized is mostly related to how successful Google is on its privacy strategy. For the Low scenario we have assumed that Google is not successful in addressing concerns resulting in only the Ambassadors (A) to actually purchase Google Glass. The same applies for Medium where in addition to segment A Google also converts N through successful 'ease-of-use' positioning. In the High scenario we have assumed that Google's been able to convince segment P that the device is 'privacy-safe'. We believe that at least in the next four years the Skeptics (S) will not be convinced to invest in this new technology. Applying the percentages from the segmentation table in 3.1 gives the numbers under step 3.

4.4 Potential share for Google of this market We feel that as a 'category-creator' Google's success in step 3 will determine the entire HUD category so we still have to look at what share will actually buy a Google Glass vs competing models which are likely to hit the market in the next four years. We think Google's share will be high given it's first to market and will range between 30%-50%.

4.5 Revenue for Google in 2014-2018 period Finally we multiply the potential sales of Google Glass by the expected price. Given our previous recommendation of a penetration strategy we expect that the average price over this period is well below the introduction price of $1500 and will be anywhere between $700 and $500. Adding revenue potential from apps and ads results in potential revenue for Google over the 5 years from start of 2014 to end of 2018 in the range of $200M to $18B. Overall we feel that given the challenges the most likely outcome will be between scenario 2 and 3 so around $1.7B of revenue.

Figure 5: total unit sales estimate for Google Glass & revenue – 2014/2018 10 5. Summary of recommendations

The launch of Google Glass will be one of the most anticipated and discussed product launches of 2014. While the upside in terms of free publicity is clear the challenge will be to turn this massive awareness into mass adoption. To achieve this goal our marketing plan suggests focusing on the four pillars below:

Most importantly, it’s key that Google doesn’t assume rapid adoption comparable to the success the company has had with Android. As both the degree of product and behavior change is high then based on the psychology of new-product adoption (as developed by Gourville, 2006) it’s clear that Google will have to pursue a long haul strategy. Realistic expectations (and deep pockets) will be crucial to make this a success.

References

Aaker, D (2012), Win the Brand Relevance Battle and then Build Competitor Barriers, Management review Vol 54

ABI, December 10, 2012, ABI: 30M wearable sensors shipped in 2012, http://mobihealthnews.com/19448/abi-30m-wearable- sensors-shipped-in-2012/

Businessweek, August 6, 2013, Cheaps Out With ’s $500 Million Ad Budget http://www.businessweek.com/articles/2013-08-06/motorola-cheaps-out-with-moto-xs-500-million-ad-budget. Last accessed November 8, 2013.

ConsumerWatchdog, June 6, 2013, You Can't Wear Google Glass At Internet Giant's Shareholder's Meeting http://www.consumerwatchdog.org/newsrelease/you-cant-wear-google-glass-internet-giants-shareholders-meeting. Last accessed November 7, 2013

Gourville, J.T. (2006), ‘Eager Seller and Stony Buyers: Understanding the Psychology of New-Product Adoption’, Harvard Business Review

Meeker, M. (2013), Internet Trends, Kleiner Perkins Caufield Byers

SurveyMonkey, April 2013, SurveyMonkey Shakedown: Wearable Computer Device http://www.slideshare.net/SurveyMonkey/surveymonkey-shakedown-wearable-computer-devices

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