How do you find your way around these days? If you are like most of us, you probable own one of those pocket sized GPS receivers that show you a map of where you are and how to get to where you want to go to. Lots of companies make these, but Garmin was one of the first and still holds a big chunk of this market. How are their product managers doing this?
Why Selling Directions Is Hard To Do
If you haven’t seen one of these GPS units, then what rock have you been living under? You may not be able to make a phone call on them, but they are pretty much the coolest thing since the cell phone. I own the Nuvi 200 unit and I like it so much that when I travel for business I take it along and use it in the rental car.
Now you do need to feel some sympathy for the Garmin product managers. Nowhere on their product manager job description did it ever say that their job was to produce the perfect product. In fact, nobody would want to do that because then every customer would be a one-time buyer. “Thanks for the product, I’ll see you, like, never”.
Selling GPS map units requires a bit of strategic management on the part of the Garmin product managers. I’m sure that it wasn’t long after they introduced these products that at least one Garmin account manager and business development manager dropped by the product manager’s office and complained that there was no way to get repeat business.
It turns out that they were wrong. For you see, maps are constantly changing. Maybe not a lot, but new roads are always being built and old roads are going away. This means that the map database in that little US$200 GPS navigation unit might have been correct when you bought it, but over time it’s going to get out of wack with the real world.
This is when the Garmin product manager had a great idea: why not sell map database updates to their existing customers. This is the kind of breakthrough idea that can go onto a product manager resume. This is exactly what Garmin (and all of the other GPS manufactures) does today.
How To Put A Price On Accurate Directions
If you want your customers to come back to you and purchase upgrades to the products that they already own, the trick is to get your pricing right. This means that your price for the “refresh” needs to be not too high and not too low.
In the case of Garmin, here’s how they do it. The actual Garmin GPS unit costs about US$200. They’ve priced a single map upgrade at US$48 and a lifetime upgrade for a single device at US$120. Can you see what they are doing here?
If you are getting ready to go on a trip and you remember that you purchased your GPS unit over a year ago, you might be thinking that those maps might not be accurate any more. That US$48 update price is probably right on the border of being reasonable: if it was any more you might as well go get a new GPS receiver, at that price you’ll probably just purchase the map update.
I would suspect that very few people buy the US$120 lifetime option – but the product managers need to offer it just to catch the few people who will want it. This pricing is a delicate thing: get it right and you’ll have a nice revenue stream, get it wrong and your competition will have your customers.
What The Future Holds For Garmin’s Product Managers
The world is changing and the Garmin product managers need to adjust with it. Those cell phones are getting smarter and are coming with more sophisticated mapping tools. Garmin needs to adapt to this changing world.
It’s once again time for some strategic management. A stand-along navigation device probably won’t last for long. Creating a Garmin app that runs on the popular cell phones might do the job. Alternatively, creating the ability to run apps on the Garmin device would allow the GPS receiver to become more of an optimized local search tool – something that customers would probably desire and be willing to pay for.
What All Of This Means For You
As product managers we need to take the time to learn from other product managers so that we’ll know how to handle the challenges that our products will eventually encounter.
The Garmin product managers have created a great product with one problem: customers don’t have to buy another one. They’ve solved this problem by offering their existing customers map database updates. The key to doing this successfully is to get your pricing right: not too much, not too little.
The future holds many challenges for GPS receiver product managers. Their product is going to undergo many changes and they need to be able to adapt to all of these changes. We need to keep our eyes on them, learn how they adapt, and we can all become better product managers.
Question For You: How much longer do you think that there will be a market for stand-alone GPS receivers?
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What We’ll Be Talking About Next Time
Come with me while we travel back in time, not far, just 5 years or so. Now that we’re here, take a look around. What do you see? I bet you see just about all of those corporate folks using their Blackberries to make calls and check email. Poof! Now we’re back in current times. Something has gone horribly wrong at the Blackberry parent company, RIM, and is it the fault of RIM’s product managers?