May 9, 2007

TomTom and Garmin Pricing This Spring/Summer

Pricing is about to take a big change as new models hit the market and the driving season is upon us. I have been seeing a few dynamics going on over the last year that has spurred me to take a look at the prices going forward, and I thought that I would share my speculations with you.

1) Value Models are starting to compete and bring new users into the market, while setting a price point for comparison sake. Not only are people discovering the GPS market through brands like Mio but they are influencing how people decide what to buy; “Unkown Brand at $169, Mio C220 at $199, or a TomTom ONE at $279?” This $200 price point will be the gauge to which all others are measured directly or indirectly. In other words, for now, the market will be driven by the $200 level and TomTom will price premium versus this level; Garmin in turn will price premium to TomTom.

2) TomTom has decided to gain market share through very competitive pricing. The TomTom ONE has dropped precipitously in price over the past six months, making it quite possibly the best value on the market; high quality interface at a reasonable price. See this pricing study about market prices and follow the link to the write-up to see a pricing study by brands. You'll see how TomTom went from premium pricing to lower overall pricing in the last six months. Partially driven by older models, but certainly by a pricing only move.

3) Conversely Garmin has decided to make money with price premiums to TomTom, while using their size to segment the market as only the market leader can do. If you have a huge share of the market, retailers are tolerant of your “few dozen models” approach, whereas if you have a small share of the market, retailers won’t tolerate proliferation of models such that each model moves one unit a month…. It just doesn’t pay out for them to stock you. Garmin knows this and is starting to leverage their scale with the smart segmentation of the market, and the launch of the Nuvi 200 series, and the additional Nuvi 650 unit to the Nuvi 600 series.

In the scenario below, I give you some important features, then current or list prices (in the cases where the units aren’t shipping yet), and finally the expected prices for the coming months. I may be wrong about this, but maybe this is where the prices SHOULD be.

Standard Screen Models

The TomTom ONE will be at $249 online soon. The Nuvi 200 will be priced close to that level, despite only having maps for the 48 states, and the Nuvi 250 will be priced premium to that. The European maps are going for a premium up until very recently of about $140 in the marketplace. I think that the Nuvi 350 and Nuvi 360 will have a tough time pricing-wise, as their added value may be hard for users to see: Optional Traffic feeds, Media player, etc. I do like the Bluetooth handsfree a LOT on the Nuvi 360, so to me that is a big value and point of differentiation vs the other 3.5 inch screen models here.

Widescreen Models

Similarly in the Widescreen models, we see the TomTom ONE XL setting the pace at a list price of $399, with an eventual price close to that for the foreseeable future. The new Nuvi 650 should be priced premium to that model and then we move up from there in a similar fashion.

Am I right on all of this? No probably not, but like any electronics category, expect price declines and skillful price setting to gain sales and market share. For instance, when I started to put this together a week or so ago, the Nuvi 660 was priced more than $50 above what it runs for today. Ultimately you are the winners of this price war, so enjoy.

Model Map Coverage Screen Size Handsfree Traffic Feeds Recent $$ Projected $$
TomTom ONE N. America 3.5 inch No TomTom PLUS $279 $249
Nuvi 200 48 states 3.5 inch No No $399 List $279
Nuvi 250 N.America 3.5 inch No No $417 $309
Nuvi 270 NA Europe 3.5 inch No No $496 $439
Nuvi 350 N.America 3.5 inch No Optional Adapter $375 $349
Nuvi 360 N.America 3.5 inch Yes Optional Adapter $405 $375
Model Map Coverage Screen Size Handsfree Traffic Feeds Recent $$ Projected $$
TomTom ONE XL N.America 4.3 inch No TomTom PLUS $399 List $389
Nuvi 650 N.America 4.3 inch No Optional Adapter $566 $449
Nuvi 660 N.America 4.3 inch Yes Yes $604 $529
Nuvi 670 NA Europe 4.3 inch Yes Yes $829 $729
Nuvi 680 N.America 4.3 Inch Yes Yes $769 $679

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Posted by Scott Martin at May 9, 2007 7:52 AM

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