August 29, 2006

Clarification on BusinessWeek Article

So yesterday I posted about a BusinessWeek article that I said was biased in favor of TomTom and called it wrong. Biased is a strong a word in journalism, and that was probably a bit harsh for the situation. Sorry about that. Author, Arik Hesseldahl, laid out his assessment in the article of what has happened in the GPS market. He's got the facts right, but my opinion is that still has a slant that paints Garmin as followers in the market. We don't know what changed things for Garmin in 2004, but they certainly got a wake-up call at some point to spur their innovation cycle on. Did they follow TomTom? Did they try to sprint past a sagging Magellan? Don't know.

TomTom shook things up when they entered the US market. Garmin stepped things up and launched strong models throughout 2005 as a result of big R&D spending increases – what their motivation was to step up their R&D spend, we won’t really know. Was it the competitive threat of TomTom or was it that they recognized that Magellan was being neglected. Either way, Garmin owns the US market at this point, and it is theirs to lose.

The other issue that I brought up is really the fact that TomTom has expertly positioned the TomTom ONE in the media as an entry-level device. They are essentially changing what people should come to expect as entry level. I believe that a unit with at least a 3.5” touch screen that has pre-loaded maps and points of interest is long term where you want to be for a high quality experience, which puts you into the mid-tier of the current market (TomTom ONE and the Garmin C-series fall into this classification).

There happens to be a true entry-level line of products out there, the Garmin i-series. Now, these are smaller, and while cheaper, they do sacrifice some user satisfaction because of the lack of a 3.5" touchscreen. To me “Entry Level” is a sacrifice, and you will sacrifice some features and aspects; it’s the car without alloy wheels, it’s the refrigerator without the ice-maker. The i-series is like this. You can still get a fully functioning (all maps pre-loaded on the StreetPilot i-5), reliable GPS for a little over $300. Not bad.

I still stand by the fact that TomTom is not the only one out there at this price point with the features – the Garmin StreetPilot C330 is a good example; prices are below $400.

I applaud the marketers at TomTom for the positioning of the TomTom ONE; has anyone really questioned the fact that it’s mid-tier? No. Nice marketing muscle. Come on; no one would have latched onto the idea of “The New TomTom ONE – a reasonably priced Mid-Tier GPS that’s not quite the lowest price on the street.” I don’t think it would have made a splash like it did. It will be fun to see this all play out; competition is good, consumers will be the winners.

Original Post is HERE