Introduction
Technology is deeply integrated into human society, and people can hardly imagine their life without various devices and gadgets. Shopping is one of the areas that has been transformed significantly. Shoppers do not have to leave their houses to receive goods. Amazon is one of the leaders in this area. A new product (the company introduced in 2014) is an innovative item that has received mixed reviews from shoppers and analytics. Amazon Dash is a device that enables the shopper to purchase products through scanning barcodes of packages they have or even simply naming the product they need (Kumar 2016). The device has a shape of a tube that has a barcode scanner, as well as the voice recognition sensor, and, of course, Wi-Fi enabling component (Shin, Jeon & Park 2016).
However, the innovation has turned out to be rather unpopular among customers who tend to prefer shopping through more conventional channels offered by Amazon. Tuttle (2016) states that the major factor discouraging people from buying with Amazon Dash is the price of goods as the products come at a higher price. There are also certain inconveniences as the shopper does not see the price at once, but has to go online or wait for a message to find out this essential detail. It is clear that the product needs some changes to become more popular. The new product can be called Amazon Magic Wand, and it can be described and analyzed with the help of the STOF model (see figure 1).
Product Description Using STOF Model
Service
The target group of the new product will be children and their parents (or other adult close relatives). Amazon Magic Wand can be a perfect gift for children who can imagine being wizards. The child can use the wand when in a supermarket or book (toy) store. Pointing at a barcode will result in buying an audio version of the book chosen, or purchasing a toy (or a print book) that will be delivered to the address mentioned in the customer’s profile (or provided additionally if a call is ordered). Some moments after the use of the product, the customer receives a message (and email) with some details of the product, request to affirm the purchase, a link to order premium delivery, and a link to order a call.
The audiobook can be downloaded after the affirmation and can be listened to through the device. The premium delivery can be provided for extra payment, and it can include the delivery within three or five hours. This is one of two crucial features customers value, so prompt delivery is likely to contribute to the product’s popularity (Tuttle 2016). The wand can be a hit during the Christmas period when children make wish lists waiting for their presents while parents are trying to buy the necessary items. Apart from the new form and meaning, the product will also have a new feature as the best prices will be offered.
This is the other vital feature that will make the product more valued as the customer expects the best prices from Amazon, which is its competitive advantage (Tuttle 2016). There can be a guide on how to use the item as well as stories to tell children. For example, children can be asked to collect points (for desirable behavior) to be able to use the wand. It is possible to say that the Wand knows better what exactly the child needs if some items are not bought. The child can be given the wand on special occasions (a birthday). Importantly, it is possible to introduce a service associated with the financial aspect. The customer’s profile can receive an additional account (or a card) with a certain limit that can be spent automatically without any affirmation.
Technology
Amazon Magic Wand will have the shape of a magic wand. Harry Potter’s wand can be an example. The device will be thick at one end and of the size of a pen on the other side. The color will be brown or black (to imitate wood), silver and pink (for girls). The product will have several buttons: the button to switch it (it automatically turns on Wi-Fi), the button to play the most recent recording, the one to play the favorite recording, as well as the button to decode the barcode and purchase an item. The buttons will be in the form of small buds for darker wands, while the buttons can be in the form of a star for silver and pink devices. As for playing audio files, pushing the button will mean choosing the following recording on the list (which can be controlled through the customer’s Amazon Profile). The wand can have recordings of some signals. For example, when the device successfully decodes the barcode and the item is added to the list, there can be some melody or a magic sound.
As to further development, the wand can be equipped with a fingerprint scanner. Children may think that the magic wand functions in their hands only as it is often described in movies. The wand will be plastic to reduce the product’s costs, though it is possible to consider making rub devices with the use of organic materials. This can be a premium line that can have a higher price. Furthermore, fixtures or cases for wands can be sold. These items can be used for storing the product and recharging it. Moreover, the case (fixture) and the wand can serve as a nightlight.
Organization
It is possible to note that the company will need only some new arrangements to come up with the new product. All the resources are already available as the new product is characterized by features and services the company is already providing. Some of the arrangements will be associated with the production of devices that acquire a new form. Instead of a futuristic tube, there will be a magic wand, which means that the organization may use the Quirky platform to develop a new design. Since the collaboration between Amazon and Quirky has already resulted in some successful projects, this collaboration will also be efficient and beneficial (Välikangas & Gibbert 2015).
Amazon may need to find new manufacturers, but this can be optional if the existing partners will be able to produce the product with the changes mentioned. In any case, numerous Chinese original equipment manufacturers (OEM) can be potential partners. The new feature associated with the calls from the call center will also require quite a few changes. The company may need to expand its call center and IT staff. Some training may also be needed.
At that, Amazon will have to invest in the development of its delivery system to make it more efficient. The delivery within several hours will be available for US residents. The organization may consider acquiring companies specializing in such kinds of deliveries, which has already enabled Amazon to improve its delivery services (Välikangas & Gibbert 2015). The expansion of the items available can also need investment. The organization should make sure that information management is effective and appropriate.
It is possible to address this issue through an effective value chain. One of the strategies will include publicizing particular items that are available. The major channel of the advertising campaign will be the Internet, but other media should also be included. It is possible to focus on television (especially children’s channels) and some print sources (for example, comic journals). The inclusion of hits of sales into the range of available products is also essential.
Finance
As far as the pricing strategy concerned, it is possible to use a combination of the value and psychological pricing methods. Since there are no similar products so far, Amazon can set the price that is not based on the cost exclusively. The value pricing method is associated with the focus on the value of the product rather than particular costs and features. It is essential to concentrate on such features as convenience and uniqueness as well as the possibility to make children’s dreams come true. The price of Amazon Dash is $4.99, but it is quite basic as the company focused on facilitating sales through Amazon rather than sales of their Dash. Amazon Magic Wand can be sold at $9.97. This price is potentially more attractive than $10 due to people’s psychological traits.
Therefore, the profit potential will be $29,000 (approximately) for the pilot shipment of wands (1,000 items). It is important to note that complimentary products (for example, cases) are excluded. The price of an item will be $7 (approximately). The expected revenue is $99,000. Nonetheless, the major aim of the product is also to facilitate sales of toys and books, as well as to explore new aspects of online shopping. Hence, the price of the product itself is not the central point.
To come up with the market positioning strategy, it is necessary to address such aspects as the target market, promotion, price, and place. The pricing strategy has been described above. It has already been mentioned above that the target market includes children and their parents who will actually buy the item as well as will use it (affirm purchases, pay, communicate with call center specialists, if necessary). Thus, the major needs of the target customers are the convenience, availability, and a magical component. In fact, the major focus should be placed on the magical aspect as the company will, basically, sell the fairy-tale to its customers.
The promotion will involve scenes of little wizards (aged between five and twelve years old) using the wand. Another scene can feature a child using the wand in a store, and the same child holding the item gained with the help of Amazon Magic Wand. Another important message to articulate will address adults. There can be a scene (or image) featuring an adult talking on the phone or purchasing the item through Amazon. The central message can be as follows: ‘Help your little wizards make their dreams come true!’ Placing is an obvious choice as the wand will be sold through the company’s website.
Since Amazon Magic Wand is a new product, it will be the first one in the market, or rather it will create the market. Therefore, it is possible to expect 100% market share during some period (until followers come up with similar products). At that, Amazon can maintain its leading position due to its resources and the well-established brand. It is necessary to note that the company will use Quirky, so there will be certain revenue sharing in the partner network. However, Amazon should negotiate a fixed price for the design (as well as other ideas) provided through the platform. The sum will depend on the ideas and their value. First, the product will be sold in the USA, but it can also be sold in Canada and Asia if it turns out successful enough. The growth strategy will involve the expansion of the markets mentioned as well as penetration into European markets.
Risk Management Plan
Risk management is an indispensable part of any product development project. It is important to develop a risk management plan to make sure that all the risks are identified and mitigation strategies are available. The plan developed focuses on the production and launch of sales as well as the first year of the product on the market (See Table 1).
Table 1. Risk Management Plan.
Discussion and Conclusion
The brief analysis of the product shows its potential. The experience of customers who have bought Amazon Dash provided helpful insights into the most valued features of the IoT (Internet of Things) device. It is clear that the product should be characterized by such features as magic, convenience, speed. Tuttle (2016) stresses that customers dislike Amazon Dash experience as they still need to go online and see the price or wait for the price to be shown. With the new product, the person who pays will not be the one to use the device. A customer may learn about the purchase via a message. The adult decides whether the product will be bought while the actual user of the device (the child) can be told that the wand refused to give the item due to some reasons.
The fact that prices were significantly higher if bought with the help of Amazon Dash was another contributor to the device’s insufficient popularity (Tuttle 2016). This issue is addressed as Amazon Magic Wand will provide products at a price available for all Amazon users. This will be partially achieved through the higher price of the device as the price of Amazon Dash was very low, and products’ prices compensated this loss.
The delivery is another important factor contributing to the product’s success. There are no issues with audiobooks as they can be downloaded within minutes (which mainly depends on the one who pays for products). However, children can believe in magic if they get what they want within a short period of time. Using a magic wand means having something at once, or, at least, at home or the following day. Therefore, Amazon will have to develop its delivery services, which will be beneficial for other projects of the organization. Clearly, e-commerce is evolving at a considerable pace, and there are various competitors who may deliver goods faster than Amazon can. Therefore, prompt delivery is the key to the leading position in the market.
It is noteworthy that promotion becomes the most important stage of this product’s positioning activities. It is vital to make sure that potential customers understand the value of the product. Thus, adults should understand that they can use the product as a behavior-shaping tool since Amazon Magic Wand can be a reward for the desirable behavior (having good grades, being polite, helping with chores, and so on). It is possible to launch various promotional activities (for example, in malls).
In conclusion, it is possible to note that Amazon Magic Wand is a product developed as a version of Amazon Dash. The new product focuses on children and such products like toys and books. The product has great potential as there are no similar items, while the interest in technology and magic is rather constant among people. Amazon has all the necessary resources to produce and make the product popular. At the same time, some investment is required as the organization may need to develop new partnerships, implement some acquisitions, and improve some of its services. However, the major goal of the product will be achieved as the company will be able to explore peculiarities and the potential of IoT products.
Reference List
Kumar, R 2016, Strategic financial management casebook, Academic Press, San Diego.
Shin, H, Jeon, B & Park, JW 2016, ‘Method to design and analyze an interactive product based on design elements for creating an IoT-based service’, International Journal of Smart Home, vol. 10, no. 10, pp. 229-238.
Tuttle, B 2016, ‘Why people aren’t using their Amazon Dash Buttons to buy stuff’, Time, Web.
Välikangas, L & Gibbert, M 2015, Strategic innovation: the definite guide to outlier strategies, FT Press, Old Tappan.