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Abe Vinjamuri

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New Study: How Wearables Will Drive the Mobile Wallet Revolution

Posted by Abe Vinjamuri

Tue, Jun 16, 2015

Mobile2015IconEvery year we hear bold new predictions about mobile wallet, and every year those predictions fall flat. So, with some trepidation, we ask: is this the year when mobile payments finally take off?A lot of pieces of the puzzle are finally in place:

  • NFC and tokenization have been accepted as the standard for payment tech (QR is fighting a losing battle although some heavyweights still back it)

  • Networks (Visa, MasterCard etc.) have managed to co-opt the mobile revolution and avoid the threat of disruption

  • Credit card providers see the opportunity to drive growth

  • EMV (chip and PIN) standards have forced retailers to upgrade payment terminals which now are NFC enabled

  • Mobile service providers have given up their bid to control the payments business

  • And most importantly, consumers are increasingly comfortable with the idea of using smartphones to pay for purchases-they are at a similar point in the adoption curve as they were with online payments a decade and half ago

So, yes, mobile payments will grow in the next 12-18 months. And smartphones will continue to drive that growth.  But the big news is that mobile wallets are poised to get a major boost from the proliferation of wearables. In our latest Consumer Pulse study, we surveyed nearly 2,000 smartphone owners about mobile wallets and wearables awareness and habits. Here are a few of the key takeaways:

You want to put that chip where?

Formerly confined to fitness trackers, and to some extent smartwatches, wearables are still emerging for the average consumer. Currently, about 60% of the market is at least somewhat familiar with wearables in the generic sense. And with the pace of technology, this is a low barrier.  A new product that fulfills a need (perceived or not) can gain attention in the flash of a Snapchat.

As the wearables category broadens to include trackers, shirts, bands and other devices that are an extension of the wearer, mobile payments are a natural offshoot. In fact, beyond table stakes (battery life, pedometers etc.) 40% of likely wearable buyers want built-in mobile wallet functionality. Our data shows that wearable and mobile wallet adoption is symbiotic in nature. A majority of those looking to buy wearables say having mobile wallet functionality would bring them closer to the purchase decision. And a similar majority say they would use mobile wallets a lot more if it were a part of their wearable functionality. Looks like a win-win.

Good news for smartphone makers

Although at present wearables are primarily associated with fitness trackers (smartwatches are perceived a bit differently though that line is blurring really fast); many see wearables as an extension of the smartphone category – and expect smartphone brands to lead the wearables march. While the top players are as expected: Apple and Samsung, the door is still wide open for a variety of players like Google, Microsoft, Fitbit, Sony, Nike, and LG.  And perhaps the best news is that, in general, buyers expect highly functional wearables to cost between $175- $275. Of course, there are always those who are willing to splurge north of $400.

What about payment companies?

In all this excitement around wearables and mobile payments we can’t forget the critical role of payment companies. As mentioned previously, networks and credit card companies have a critical role to play. At the moment, usage data indicates two things: one, usage of credit cards in a mobile first world mimic that in the physical world – card usage behavior (primary card, share of wallet) has not changed. Two, checking accounts, debit cards, PayPal have a large presence on mobile wallets. We continue to maintain that mobile payments present an opportunity to shake up some of the existing stalemates in the industry and at present it seems like no single player has a decisive advantage.

What does all this mean?

Depending on how narrow or widely mobile payments are defined, the trillion+ dollar industry is fluid at the moment, with everyone trying to get a large piece of the pie. From a purely consumer-centric perspective, the barriers are lifting, the options are expanding and before you know it a majority of consumers will have access to mobile wallets through smartphones or wearables. The key to winning them over will be to make the experience natural and seamless. The day someone can put together an experience where my jogging shirt tells me to run faster between miles 5 and 7 and then pays for my smoothie is the day wearables would truly achieve their potential. I’m betting that the day is not far away.

Abe is a payment-tech and ecommerce Project Lead, Strategist, and CrossFit enthusiast.

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Topics: technology research, financial services research, mobile, Consumer Pulse, retail research

The Price Is Right (or IS it?)

Posted by Abe Vinjamuri

Thu, Jan 22, 2015

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When Redbox, the movie rental kiosk company, raised their prices 25%, many analysts saw the move as desperate—predicting significant losses to market share in 2015 and 2016. At the same time, the company’s stock rose, with investors expecting customers to adapt to the higher prices. So who’s right?  I have some predictions, but we’ll leave those for another blog. Today, I want to write about some of the fundamental questions companies need to ask before they embark on a new pricing strategy.

If you think pricing isn’t all that important, here’s something to ponder: a 1% increase in prices of Wal-Mart products ($10 on a $1,000 TV), assuming a demand around existing levels, would increase operating profits by about 20% and add about $48 billion to Wal-Mart’s market cap.

Companies rarely approach pricing from a “value to customers” perspective. Even when they do, they don’t fully exploit the potential of value based pricing for fear of backlash. For decades, airlines have understood the importance of pricing, and, in my opinion, outside of CPG companies (and some new tech entrants) have best implemented and used pricing as a tool for competitive advantage.

For any pricing strategy to succeed, you need a well thought out plan. Answer the following questions to get started:

1. Who is the customer?

a. While you might have customers you've served for a long time, you still need to ask yourself how people interact with your products. Are there touch points you’re currently ignoring? Are your current customers the ones you should be serving?

      • How can you answer these questions? Start by observing and getting these discussions going.
      • When’s the last time you did a Segmentation? If it’s been more than 2-3 years, that’s another potential starting place.

2. What are the closest competitive offerings?

3. What is the monetary value of your product to the market?

a. Think of this in terms of the savings your product could offer customers over competitor products. This doesn’t automatically mean a lower price. A higher priced product could offer savings in multiple forms—a few examples include a lower cost of ownership, lower maintenance costs, and peace of mind. 

4. How are the different product features valued?

a. To figure this out, you can conduct choice exercises that replicate the market behavior of consumers. A good choice exercise must include, at a minimum, products that together control 60% of the market. Here’s another tip: make sure you also include future offerings and even some potentially ridiculous products you would never offer. 

5. Based on the above steps, are there different customer segments? If yes, what are the optimal product and pricing tactics for each segment?

a. You also need to consider whether there are psychological price barriers for different customer segments that must be kept in mind.

Answering the above questions is a battle half won. For pricing to be truly successful, you need to go beyond coming up with tactics. Answering the next set of questions can be the difference between a good strategy and a great strategy.

1. What is the messaging and communication strategy for...?

a. Product value?

b. Pricing?

2. Is the above pricing strategy feasible? Think:

a. How crowded is the marketplace?

b. Is there a clear market leader?

c. How mature is the market?

d. Is your organization trying to maximize profits, gain a foothold in the market, or maximize share?

3. What is the action plan to react to competitive moves in the marketplace?

4. How do you plan on approaching end-of-life pricing for your products and services?

As you can see, building a thorough pricing strategy is not an easy task. At CMB and South Street Strategy Group, we take our pricing research seriously. We're experts at not only conducting research but also helping clients with rollout plans, and we have a lot of experience guiding clients from a wide range of industries through these steps.

If you’re interested in reading about this further, I’d highly recommend Thomas Nagle’s The Strategy and Tactics of Pricing and Rafi Mohammed’s The 1% Windfall. And, of course, I’d be more than happy to chat with you about pricing structures in the comments! 

Abe is a Senior Project Manager, strategy junkie, and CrossFit enthusiast. He's recently taken up snowboarding so watch out if you're headed to the slopes. 

Topics: strategy consulting, market strategy and segmentation

Tackling the Innovation Challenge in Large Organizations

Posted by Abe Vinjamuri

Tue, Jan 14, 2014

Innovation challengesYou might not know it from the constant attention lavished on startups, but some of the most established and largest companies in the world are amongst the most innovative—they routinely out-innovate their smaller peers. Where they falter is in failing to bring these game-changers to the marketplace without diluting, complicating, or killing them.If you have doubts about what I just said, here are two of my favorite examples that illustrate the issue really well.

Ever wonder why despite inventing the concept of cellular phones and having a virtual monopoly on telephones, AT&T had to acquire McCaw Cellular Communications in 1993-94 for $11.5 billion? OR better, despite coming up with filmless photography in 1976 which dominates the world today (think of cellphone cameras, selfies, instagrams, Snapchat, Google Maps) Kodak today is a bankrupt company (the hyperlink is a great read by the way).

It’s not the lack of ideas that hurts large organizations the most. It’s not even the lack of awareness of implementation hurdles. It’s the inability to forge consensus, a constant focus on responding to immediate pressures and meeting short-term goals (both organizational goals and employee goals) and lack of sufficient communication across autonomous business units that play spoilsport. You could describe it as a lack of push to the “Strategic Intent”; a phrase popularized by the late C.K. Prahalad and Gary Hamel in 1989 (strategic intent is an ambitious and compelling dream that energizes, providing the emotional and intellectual energy for the journey to the future. It has 3 components: Direction, Discovery and Destiny). I call it a lack of push and not a lack of intent because these organizations have these 3 D's, at least on paper.

Being a strategy groupie, I've spent a lot of my time specifically focused on innovation (both because the sheer volume of content that's been published on the topic recently, and the nature of my current assignments), I’ve decided to put down some of my thoughts on paper starting with a short list of questions (by no means exhaustive) that will help people think holistically about innovation and avoid some of the pitfalls:

  • Does your organization have innovation goals? What percentage of your organization’s revenue comes from breakthrough innovation, what percentage comes from incremental innovation and what percentage from existing products? How is success measured?

  • How do we define problems the market faces? (Note that I consciously use the word” market” and not customer)

  • How are target customers defined?

  • How is the innovation execution process handled?

Innovation is hard. It takes a lot of effort and patience and failure can be costly and even catastrophic, but the upside can be rewarding beyond expectations. In the coming weeks, I will attempt to expand on each of these questions with examples and my views on why it has or has not worked for specific large companies.

Abe is a Senior Project Manager, strategy junkie, and CrossFit enthusiast. He's recently taken up snowboarding so watch out if you're headed to the slopes.

Topics: strategy consulting, product development, growth and innovation