Table of Contents Executive Summary 3 Company Overview 3 Mission 3 Values 3 Brand Behaviors 3 Philips Hue Light Bulbs 4 Figure 1: Philips Hue Products 4 Attributes & Features 5 Target Market 5 Distribution Channels 5 Promotion 5 SWOT Analysis 6 Figure 2: SWOT Analysis for Philips Hue Lights Strengths 6 Weaknesses 7 Opportunities 8 Threats 9 Competitors Analysis 9
Marketing Study of Philips Hue Lights
Figure 3: Competitors Analysis
6
10 2
Market Demand Estimate 11 Figure 4: Estimated LED Penetration of the Global Lighting Market from 2010 to 2020 11 Figure 5: Global Device Penetration Per Capita 13 Conclusion 13 References 14
Executive Summary
This report provides a marketing analysis of Philips Hue – an innovative replacement lighting product of Philips. The analysis will thoroughly explain the features of the Philips Hue, the market analysis for this new product, the competitor’s analysis and the estimation of product demand in the next 6 years. The report finds the prospects of Philips nc. are very promising. Philips Hue is a portion of the !"# lighting market, which market penetration has $een increasing significantly from %.&' in (%)% to 6*+%' in (%(%. -s the leader of the new technology, Philips has the technological advantages with its innovative staff, its own reputation, and well+known distri$ution channels worldwide. Company Overview
n )), /erard Philips and his father 0rederik Philips esta$lished Philips 1 2o. in "indhoven, the 3etherlands. n )*, -nton Phillips, /erard’s $rother, reinforced the adolescent company with his excellent marketing and commercial talent, which led Phillips 2o. to $e the largest producer of light $ul$s in the world. Philips’ first research la$oratory was esta$lished in ))4 and the company started introducing its first innovations in the x+ray and radio technology. 0rom this point on, Phillips has continued to grow and improving people’s lives through many innovative products in lighting, healthcare and consumer products. Phillips Mission Statement
mprove people’s lives through meaningful innovation.
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Values
Philips has valued and positioned 51# and innovation at the nucleus of its strategies, generating numerous $reakthrough discoveries, such as the 2ompact 2assette and the 2#. The navy Philips word and the company shield logo have developed into an essential part of the Philips $rand, recognied all over the glo$e. These values continue to strengthen its glo$al vision, “At Philips, we strive to make the world healthier and more sustainable through innovation. Our goal is to improve the lives of 3 billion people a year by 202. !e will be the best pla"e to work for people who share our passion. #ogether we will deliver superior value for our "ustomers and shareholders.$ Brand Behaviors
Phillips strives through its vision $y three core $ehaviors the compan y and shareholders promise. Phillips promises $eing eager to win, take ownership, and team up to excel. Their products overlap in three sectors healthcare, lighting, and consumer lifestyle. Phillips will strive to create, designed, and effectively execute meaningful techno logy and applications that improve people lives. Phillips Hue Light Bul
n (%)(, Phillips expanded its first product, the light $ul$, into an innovated, smart, and multi+colored product that is controlled $y a smartphone or ta$let. The Phillip Hue is personalied wireless lighting system that allows you to control at your fingertips. t is the world’s smartest we$+ena$led !"# lighting system. Philips Hue is more than 7ust a connected $ul$. t can $ecome an integral part of your day+to+day living.
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Philips Hue is currently availa$le in four formats8 "(6, "(9, /:)%, and ;5&%. There are three components that are needed8 the light $ul$, the $ridge, and the app <-ndroid, =indle, i>?, and @indows PhonesA. ?imple steps to get Hue started8 ). ?crew in. (. Plug in. &. 2onnect !igure "# Philips Hue Products
$he Bul
"(6 "(9 /:)% ;5&%
!unction
6%% lumens 6%% lumens &%% lumens 6%% lumens
$he Starter &it
) ;ridge 1 & ;ul$s
$he 'pp i>? 1 -ndroids
!unction
%etail
B *.* B *.* B *.* B *.*
Energy
%' less power %' less power :ses * times less energy %' less power
%etail
;ridge communicate $etween light $ul$ and smart devices
B ).
?oftware
0ree
'ttriutes and !eatures
These $ul$s are !"#, making them $right, cool to touch, and are compati$le with most sockets. The Hue lights can tell you when you receive an important email on your device or any significant weather changes. The Hue -pplication allows the user to change their light $ul$s to any color on your device’s screen $y simply touch that color point. The Philips Hue is compati$le with 000
The main things that consumer needs to operate Philip Hue light $ul$ are a smart phone, the apps, and the $ridge. -nyone with a smart phone can use this product easily and effectively. The target markets for Philips Hue are homeowners and $usiness owners. The amounts that Philips Hue can do for homeowners and $usiness owners are infinite. )istriution Channels
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Philips Hue has a very wide distri$ution channel ranging from popular online andCor store retailers such as -maon.com, Home #epot, ;est ;uy, and Derion in the :?. t also has a strong distri$ution channel in many countries such as reland, :=, Turkey, and the -sian Pacific area through the local retailers. 5ecently, Hue light $ul$ was added to ;ul$s.com, the largest online distri$utor of replacement lighting. This is a very promising opportunity for Philips Hue as its reputation and customer awareness will increase significantly. Promotion
The Philips Hue has started to $uild up its reputation in a $road range. n the summer of (%)4, ?kyEall Eagaine had a multi+colored smart lights presented on the front cover. The lights advertised were not Phillips, $ut an off $rand lumi. This is a lucid indication that additional competitors are entering the market creating more competition and ways to promote. The ?kyEall magaine descri$es the lights as, Fa$ility to paint amaing atmosphere color from $right white to rich color. @irelessly control your lights from anywhere in your homeG
0igure ( is a ?@>T -nalysis for Philips Hue. This ?@>T -nalysis highlights the strengths, weaknesses, opportunities, and threats of the Philips Hue product in the current market. This ?@>T -nalysis provides valua$le information for the co mpany to see where the product has $een recently, where it is now, and where it is heading in the market. This allows the company to develop an effective marketing plan to achieve its mission and o$7ectives. !igure +, S*O$ 'nalysis -or Philips Hue Lights
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& d i o r d n A ! S % i $ # " A n e o ! s A Weaknesses s b l u b t h g i l t n e i c f e y g r e n E m e t s y S g n i t h g i l s s e l e r W i - -E'ensi(e d n a r b n w o n k - l l e W - -Wireless network re)uired -*imited romotion s h t g n e r t S -Selecti(e distribution channels $Ale+ ,est ,uy+ ome .eot+ /eri0on+ Ama0on1com&
Opportunities
SWOT Analysi s y t i l b a r e n u l a ( y t i r u c e s l a i t n e t o " -
-rowing market -Ad(ancing technology -#ncreasing smart hone users -ore distribution channels $,ulbs1com&
n o i t a l u g e r w e 5 e t s a t r e m u s n o c n i t 4 i h S n o i t i t e m o c g n i s a e r c n # -
s t a e r h T
Strengths
Philips is a well+known technology company that has a mission to improve and make a difference in people’s lives through innovating products. The company focuses on delivering innovation that matters to its customers. -s a well+known company, Philips $rand illuminates across the glo$e and attracts $illions of customers. @hen Phillips launched the Philips Hue in (%)(, the product has $rand euity attached to it $ecause Philips takes the multiproduct $randing approach. The company’s $rand gives the new product a competitive advantage. 0urthermore, the Philip Hue is not 7ust an ordinary light $ul$ and lighting systemI it has revolutionied the lighting and home industry with its unlimited possi$ilities. The Philips Hue is a we$+ena$led light $ul$ that allows customer to control the light $ul$ from anywhere in the world and from any smart devices. This is one of the strengths of the product $ecause the customers have full control over its functionality to meet their needs. 0or example, a user can walk into a room and the light can turn on automatically without having to use the light switch. This concept is called geo+location, where$y your smart device communicates to the Hue lighting systems your location and triggers the command that you set as you enter a designated location in your house, which gives users the a$ility to improve their lifestyle. -nother strength the Philips Hue has is that the light $ul$s are made out of !"#s. -s many -mericans desire to preserve the environment, the Philips Hue light $ul$ addresses those needs $ecause it is $uilt to $e more energy efficient and environmental friendly. F!"#s are a new generation that Philips is $etting will affect not 7ust peopleJs homes, $ut agriculture, health care, and ur$an safety. t has the potential to reduce the amount of electricity used in the :.?. $y *%', saving B(*% $illionG
societal marketing concept where it is a win+win situation for $oth the company and consumers. The Philip Hue has an app that is availa$le for free via i>? and -ndroid. The Hue light $ul$ is an average light $ul$ if it were not for the app, $ut with the app comes the FsmartnessG of the light $ul$. The app allows users to personalie their settings and configurations. Philips has offered an open source platform known as -P for third+party developers to $uild new apps for the lights. The developers are exploring and unleashing more possi$ilities to experience and interact with light to enhance people’s lives. >ne example is flashing the light red when the smoke alarm detects a fire. -s more and more apps are showing up in market to support Hue, it makes the product more valua$le. *ea(nesses
- ma7or weakness of Hue is its high+end price. 0rom B*. for a single light $ul$ to B). for a starter kit that consists of three light $ul$s, one "thernet network ca$le, one power adapter, and one $ridge. The high price is due to the uality of the product. t is considered a shopping product $ecause customers need much more time to compare price, uality, or style of the product with other alternatives that serve the same purpose. The product may attract early adopters, $ut for the most part the cost has put it out of reach for a wide num$er of customers. The wireless lighting system is the nuts and $olts of the produ ct, $ut it may $ecome an issue if customers do not have a wireless connection on their smart devices or in their home. This poses a weakness $ecause customers will need to purchase a wireless network in order to utilie the full functionalities of the Philips Hue. Philips has not $een focusing on advertising the Hue. 0or the most part, it is promoted through word of mouth, online product reviews, and videos via KouTu$e. "ven though, the Philip Hue has managed to achieve a high level of awareness, the price is still the $iggest $arrier for entry. f Philips lowers its price, more people will $uy it. Philips needs to persuade more people to purchase the product $y highlighting its strengths compare to its competitors. Therefore, the product promotion is weak causing the de mand is not as strong. @hen Philips Hue first came out, it was exclusively distri$uted to -pple stores worldwide and on -pple.com. Philips’s partnership with -pple was to give Hue a spotlight with one of the world’s most popular $rands in -pple. FtJs unclear why Philips has chosen to sell the $ul$s exclusively through -pple, $ut the company clearly $elieves -ppleJs audience would $e more likely to purchase this kind of product from the outset than the owners of other devicesG <2heng, (%)(A. t can $e assumed that Philips chose to sell through -pple $ecause of a similar mission, values, and vision. ;oth companies can relate to innovation, high uality, and making a difference in people’s lives. Philips has learned to adopt to a selective distri$ution approach where not only -pple carries the product, $ut now you can find it at ;est ;uy, Home #eport, Derion, and -maon.com
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Opportunities
FThe Home -utomation Earket was valued at :?# &.6 $illion in (%)( and is expected to reach :?# )6.4 $illion $y (%), growing at a 2-/5 of (4.6' from (%)& to (%)G <#igital Lournal, (%)4A. -s our society is starting to depend upon automation in our ho me and life, we depend on products that promote automation and increase our well+$eing. The Philip Hue existed to target this segment of the market and it will continue to thrive with new innovations. 0or example, /oogle is working with Philips to integrate Hue with 3est, a /oogle+owned smart thermostat. The idea is to use the Hue lights to indicate smoke or car$on monoxide that is present in the room. This function can potentially save many lives as well as securing a safe environment with these products. "veryday technology is getting $etter, regardless if it is hardware or software. The Philips Hue light utilies $oth hardware
f the &&) million mo$ile phone users in the :nited ?tates, approximately 4* percent use smartphonesG <=erin, Hartley, 5udelius, &(*A. This opportunity indicates that cell phone and nternet users are $ecoming a huge margin. /eneration K, which are known as the Eillennial /eneration, are a tech savvy generation. They have grown up with technology and it has $ecome a significant part of their day+to+day life. The opportunity to target to this market of smartphone and ta$let users will increase sales, profit, and $rand euity. Philips has recently announced its partnership with ;ul$. 2om, which ;ul$.com is adding the Philips Hue lighting system to its !"# product assortment. This is a great opportunity for Philips Hue $ecause it is exposure $eyond the -pple stores and into the mass market. $hreats
>ne of the threats for the Philips Hue is its increasing competition. Philips Hue is a leader in smart lights, $ut many competitors such as !/ and ?amsung are entering into the market. Philips has to continue to stay on top of its competitors in order to hold its title as the leader in smart !"# lights. -nother threat is shift in consumer taste. The a$ility to have you r light $ul$ change colors is interesting now, $ut in the future there may$e $etter alternative to what the Philips Hue can provide. 0or example, with the introduction of smart weara$le such as smart watch a smoke alarm can vi$rate your wrist rather than flicker the lights.
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>ne of the environmental forces that affect $usinesses is regulation. 0ederal regulation on the Philips Hue can cause potential challenges for the company to $e innovative. However, it is also true the other way around. 0or example, the #epartment of "nergy issued energy efficiency standards for light $ul$s, which reuired the use of more efficient light $ul$s. Philips Hue met the standard, $ut any future standards, laws, or restrictions placed on the $usiness can $e a threat. FThe latest threat to connected homes has emerged8 a popular $rand of connected !"# light$ul$s can $e hacked to change the lighting, and worse, to reveal the homeowner’s @i+0i nternet passwordG <=ing, (%)4A. Philips Hue is su$7ect to security issues. -nything connected to the nternet or wirelessly is a target for potential hacking. The idea of having an intruder turn off your lights at an y moment can cause even the most techno loving consumer to stay away. Competitors 'nalysis
0igure & is a 2ompetitors -nalysis of the Philips Hue !"# smart light $ul$. t illustrates the main difference $etween Philips Hue and some of its competitor’s products and marketing mix. Philips Hue is in the growth stage of its product life cycle, it’s important to communicate the points of differences to consumers $ecause it helps them distinguish the products. The points of differences are characteristics of a product that make it superior to competitive su$stitutes. n summary, the Philip Hue has $een in the market for longer and it’s more esta$lished than its competitors. Two years from its release, Hue had expanded to some retail and online stores to make it more availa$le. "ven though, its price has not change. t has recently added new a mem$er to its product line called Philips !ux. The Philips !ux is cheaper, $ut cannot change colors. However, the new product has a new hu$ called the FTapG, which is powered $y kinetic energy from one’s touch. n comparison to its competitors, many provide the same value to consumers. The main points of difference $etween Hue and its competitors are that they are eliminating a hu$, utiliing a ;luetooth connection, and allowing more $ul$s to $e control $y the smart devices. !igure ., Competitors 'nalysis
9:
Company#
/ame#
", Philips
Philips Hue
)ate#
>ct. (%)(
Product # !"#
Price#
Place#
B*. <$ul$ costA
?electiv e 5etails and online.
B).
Ear. (%)4
!"#
B4% <$ul$ costA
!ifx
3ov. (%)(
!"#
B.%% <$ul$ costA
• • •
•
?electiv e 5etails and online.
B)%%
Point o- )i--erence#
• • •
•
?electiv e 5etails and online
B&%
• • • • •
•
., $CP
2onnected
(%)&
!"#
B &% <$ul$ costA B)6
"xclusiv e 5etail stores and online
• • • •
• • • •
0, Bel(in
1, Samsung
;elkin @eEo
?mart ;ul$s
Lan. (%)4
Ear. (%)4
!"#
!"#
B& <$ul$ costA B)(
"xclusiv e 5etail stores and online
• • • • •
• •
Mig$ee ;ridge
99
and online.
2, 3E
!ink
Luly (%)4
!"#
B&% <$ul$A B9% <@ink Hu$A
"xclusiv e retails and online
3o hu$ 64 $ul$s can connect to mo$ile app
• •
@hite+light ;luetooth 3o hu$ reuired %% lumens of light )( watts of power *% $ul$s can $e supported
• • • • • •
Mar(et )emand Estimate
To estimate the demand for smart lights, we need to look at the market pattern for !"# light $ul$s $ecause !"# is the core of smart lights. The market pattern of smart lights will likely $e aligned with the growth of the !"# light $ul$s. !"# light $ul$s are also in growth stage of its life cycle with the expected market penetration as descri$ed in the following graph provided $y ?tatista.com8 !igure 0# Estimated LE) Penetration o- the 3loal Lighting Mar(et -rom +4"4 to +4+4
70
69
60
53
50
44 40 Penetration rate in %
35 30
26 20
97 99
10
6 0
:13
2 01 0
9
2 01 1
2 2 01 2
2 013
2 014
2 015
2 01 6
2 01 7
2 01 8
2 01 9
2 02 0
-ccording to former 2"> of Philips, !"# lighting would even reach %' market share of the glo$al light $ul$ industry in (%(%
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assume this &6% million !"# $ul$s include the smart lights. @e could not prove this point $ut we can reasona$le assume it $ecause none of the light manufacturers separate the num$er of !"# light $ul$s and smart lights in their financial reporting. ;ased on our assumption, we will estimate the demand for smart lights according to the percentage of the early adopters in the market. -ccording to Henry ;lodget <(%)(A, the $uyers of new technology products will fall under * segments8
-
nnovators <(.*' of marketA "arly -dopters <)&.*' of marketA "arly Ea7ority <&4' of marketA !ate Ea7ority <&4' of marketA !aggards <)6' of marketA
@ith the current price of the smart lights, we determine that the Fearly adoptersG will most likely purchase the products. ;ased on our estimate of &6% million !"# $ul$s sold each year, the market demand for smart lights would $e )&.*' of &6% millions, which is a$out 4.6 million $ul$s. This num$er will $e attaina$le and reasona$le since smart lights have wide and popular distri$ution channels in the world. nformation a$out distri$ution channels was discussed in the earlier section. @e expect the annual demand of 4.6 million $ul$s will $e sta$le for the next & years. -s more competitors are entering the smart light market, we expe ct a significant price reduction for this product starting in (%). This predicted price reduction would increase significantly $ased on the annual growth in sales of !"# $ul$s and as the Fearly ma7orityG class starts to purchase smart lights. -nother factor that would likely $oost the sales of smart lights is the popular of smart lights’ complementary products such as smartphones and ta$lets.
!igure 1# 3loal )evice Penetration Per Capita
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-ccording to the chart a$ove from Lohn Heggestuen, ta$lets and smartphones are penetrating the market at an incredi$le rate8 ((' for smartphones and 6' for ta$lets <;usiness nsiderA. These penetrations mean that every 4 people in the world, one of them owns a smartphone and every )9 people, one of them owns a ta$le. @ith the strong growth of the complementary products, we $elieve smart light market penetration will increase rapidly in the near future. Conclusion
n conclusion, the Phillips Hue is a well+esta$lished product and it’s ahead of its competitors. The $enefits that Philips Hue has to offers its consumers are $eyond reach. There’s no dou$t that Philips Hue will continue to improve and impact con sumers. 3o one has ever thought a$out how a simple product such as the light $ul$ can $e a game changer. The demands for this product will continues to grow along with the nternet of Things that makes a difference in people’s lives. The next $rightest opportunity for Philips Hue will $e in its app. The possi$ilities are unlimited.
%e-erences
94
;lodget, H. <(%)(, ?eptem$er )&A. -ctually, The :? ?martphone 5evolution Has "ntered The !ate nnings. %usiness &nsider . 5etrieved Luly ((, (%)4, from http8CCwww.$usinessinsider.comCus+smartphone+market+(%)(+ 2heng, L. <(%)(, >cto$er (A. Philips selling colorful @i+0i light$ul$s exclusively through -pple. Ars #e"hni"a. 5etrieved Luly )9, (%)4, from http8CCarstechnica.comCgadgetsC(%)(C)%Cphilips+selling+colorful+wi+fi+light$ul$s+ exclusively+through+appleC #han7ani, 3. <(%)&, -ugust )&A. Hacking !ight$ul$s. '(itesh )han*ani' . 5etrieved Luly )9, (%)4, from http8CCwww.dhan7ani.comC$logC(%)&C%Chacking+light$ul$s.html "stimated !"# Penetration of the /lo$al !ighting Earket from (%)% to (%(%. 5etrieved Luly ((, (%)4 from http8CCwww.statista.comCstatisticsC(46%&%Cestimated+led+penetration+ of+the+glo$al+lighting+marketC 0ishman, 2. <(%%6, ?eptem$er )A. How Eany !ight$ul$s #oes it Take to 2hange the @orldN >ne. -nd KouJre !ooking -t t.. +ast ompany. 5etrieved Luly ((, (%)4, from http8CCwww.fastcompany.comC*9696Chow+many+light$ul$s+does+it+take+change+world+ one+and+youre+looking+it /ernter, L. <(%)4, 0e$ruary )%A. Philips. +ast ompany. 5etrieved Luly )9, (%)4, from http8CCwww.fastcompany.comCmost+innovative+companiesC(%)4Cphilips
Heggestuen, L. <(%)&, #ecem$er )*A. >ne n "very * People n The @orld >wn ?martphone, >ne n "very )9 >wn - Ta$let O2H-5T. %usiness &nsider . 5etrieved Luly ((, (%)4, from http8CCwww.$usinessinsider.comCsmartphone+and+ta$let+penetration+(%)&+ )% Home -utomation Earket8 -n >verview of /rowth 0actors and 0uture Prospects (%)&+ (%).
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