May 22, 2017

The big lesson for CES: don’t get run over by long refresh cycles

What’s the big question everyone should be trying to answer while CES celebrates its 50th year as the global flagship show for consumer electronics? It’s a great event, consistently exciting, with amazing levels of innovation, creativity and self-confidence.

The big question concerns product refresh cycles.

It’s clear that the length of time it now takes for the average consumer to buy a new PC – five years – is getting too long for everyone.

Do consumers really want to hang on to devices that are slower and have less functionality than what is available now? No, of course not.

There’s nobody at CES who believes that. But we all know that the biggest barrier to consumers refreshing more often is primarily the purchase price.

When there are no mould-breaking new models with amazing capabilities tumbling out of factories, the temptation for consumers is to put off upgrading and put up with ever-declining performance.

That is not good for consumers, resellers or manufacturers. Yet we know the solution is out there in the shape of risk-backed promotions.

 

It’s a question of the industry waking up to the potential of risk-backed promotions.

A survey conducted on Opia’s behalf by polling firm Censuswide revealed that across the UK and US, on average 71 per cent of consumers are willing to upgrade to a new laptop within two years if retailers can guarantee them a rebate of 50 per cent on the original purchase price of their current model.

Although there are slight differences between the two countries – with 73 per cent of US consumers and 69 per cent of UK consumers responding positively – the results point to guaranteed future value (GFV) promotions of this nature being a potentially powerful solution to the declining PC market, allowing retailers and manufacturers to reset consumer expectations and buying-behaviour.

 

Guaranteed Future Value (GFV) promotions are also very adaptable.

Whereas a 50 per cent rebate can be offered on upgrades to devices of equivalent or greater value, three-year GFVs with rebates of between 20 and 60 per cent can more closely track actual depreciation and be more efficient in some markets.

In addition, retailers or manufacturers can also take advantage of end-to-end sales promotion management, in which Opia can take care of the returned devices and distribute them to new owners.

 

The potential gains from Guaranteed Future Value (GFV) promotions need to be considered.

The average US consumer spends $500 on a new laptop and if the average refresh cycle were to be reduced to two-and-a-half years, from five years, retailers and manufacturers could theoretically see revenue balloon by more than $170 billion over a five-year period. Not bad.

The problem of ever-lengthening refresh cycles may be acute in the PC market, but these kinds of data-driven promotions have equal relevance in other consumer electronics markets, such as washing machines, TVs or smartphones.

If the industry doesn’t wake up to the insurgent effectiveness and flexibility of these propositions, in which the risk is carried by the promotions company, there’s a danger that just like CES itself, many consumers will eventually be celebrating a golden anniversary.

But in this case it might be the 50th birthday of their laptop. In whose interest is that?

Continuing in the old ways and making little or no attempt to break out of longer refresh cycles not only hurts retailers and manufacturers but also consumers, who are excited by the introduction of new features but feel unable to justify purchasing a new piece of hardware every two or three years.

The solution, however, is up to the manufacturers and retailers.


By Matthew Wallis, Sales Director, Northern Europe, Opia.