July 7, 2013
If you haven’t yet heard of the Pebble, you soon will. The Pebble may be the first stone thrown on what’s shaping up to be a new digital product battleground.
Last month the Pebble “E-Paper Watch” became the most successful project to-date on popular crowdfunding site kickstarter.com. Achieving its $100,000 goal in just two hours, the project ultimately raised $10,266,844. Partly based on this success, Pebble next raised an additional $15M in venture capital funding.
In early May, Seattle-based research company Hit Laboratories performed a product viability test on the Pebble watch. It scored 9.1 out of 10 on the InstaHit test, indicating strong market potential and mass market appeal. Of those who wanted to buy it, the average price they would pay was $91.87. The demand was found to be very elastic: 48% of respondents indicated strong interest in buying at a price of $99. Among a separate group of respondents the response dropped to 20% at a price of $150.
The InstaHit test employs a representative sample of US consumers who learn about the product from images and a brief description, then record their perceptions and interest in buying it. Their responses are used to calculate the product’s score and viability metrics, which include usefulness, uniqueness, effectiveness, and shareability.
The research suggests the Pebble is ready to become a mainstream product, addressing concerns that the market isn’t yet ready to support the “smartwatch” category.
Today Pebble enters retail at BestBuy stores at $149.99. It’s expected that competition will follow soon; Apple recently applied for “iWatch” trademarks in several countries, and Samsung, Microsoft, and Dell are also rumored to be developing smartwatch devices.
There is no question that Kickstarter was instrumental in Pebble’s early success. The campaign earned significant attention, proving the Pebble concept was at least interesting to the 68,928 backers. Investors and retailers undoubtedly gained confidence by watching the Kickstarter community “vote with their wallets”.
However not all products on Kickstarter reach their funding goals. Do failed campaigns indicate bad consumer product? Not according to Hit Laboratories CEO Alex Frakking:
“I don’t believe Kickstarter can reliably predict a product’s retail viability. That’s mainly because Kickstarter community members are very different from your average consumer, and they have different motives. I’ve also seen good Kickstarter products that didn’t gain traction simply because they weren’t promoted properly. There’s a strong popularity contest element there.”
The problem of market validation is not unique to Kickstarter products. The major consumer product companies use established and often elaborate systems for testing new product concepts before committing to their full development. Not all marketers however have the knowledge or resources for extensive testing. On this issue, Frakking comments, “The main challenge for product developers is knowing if a concept warrants the significant investment required to bring it to market. Many product failures can be avoided by listening to consumers early on – either by modifying the design, or by pursuing other opportunities.”