Marketing Plan
Part I & Part II
By: Raoul Oppenheim
Date: 28/11/2012
Subject: MRK106MR
Professor: Steven Litt
Seneca Markham
Executive Summary
The objective of this marketing plan is to theoretically qualify a well- executed entry for the NEST
thermostat within the North-American/Canadian market as well as understand it. So far, Nest has
introduced their thermostat exclusively in the United States and Canada, and can also be purchased
directly online via their website. The main obstacle is, being a recently founded company; Nest has to
establish an image that effectively attracts consumers, a set of target markets to cater to these consumers
and identify the right marketing analytics to correctly penetrate the market and understand competitors on
an economic level—where and how comfortably they stand within the race.
This will provide a standard marketing conclusion ranging from the thermostat market analysis and
environmental issues and merits of the industry, to the different strategies suitable target consumers.
Although vulnerable due to size, Nest is facing some of the biggest competitors in its respective category,
with the bigger, more enticing four; Honeywell, GE (General Electric), Lux, and the similar in size Pepco.
Nest must array their strengths (e.g. -design-driven) and weaknesses (e.g. -short on funds and market
presence) to infiltrate through a clearer picture of the industry in order to survive and potentially thrive in
the scenario they are in.
Company Background
Nest Labs, also known as Nest, is a newly found company put on the grid by Tony Fadell; the man who
led the team that ultimately brought the world a new way of listening to music, the iPod (Nest). With
talent from Apple, Logitech, and even Google, the Nest team aims to take innovation very seriously—“At
the end of the day, look at our product and you’ll see a reflection of the people who made it,” (Nest). This
not only creates a core value, but maintains an easier access to brand loyalty in the near future, as well as
showcasing the team’s love and enthusiasm for great design. The team essentially focuses on making
helpful and fresh technology while still maintaining simplicity and user friendliness.
Nest’s mission is expanding tech into more than just yearly tweaks and style changes, they want modern
tech to make a difference (Nest).
Marketing Objectives
Nest values objectives and have therefore decided to include a SMART scheme on an international level.
NA (North America) SMART objectives:
Specific - Increase product awareness across The United States and Canada on the online basis.
Measurable - Increase sales by 20%. Slowly but surely gaining a higher market share.
Achievable – Reduce variable costs within the next year for a foreseeable price cut in the near future.
Realistic – Increase funds for marketing department in order to tap into more markets.
Time – Increase sales by 20% by the end of 2013.
Asia SMART objectives:
Specific – Introduce product in China and Japan.
Measurable – Gain at least 30% of market share/install base in Eastern Asia
Achievable- Create Nest branch in Eastern Asia
Realistic – Start negotiations with Chinese and Japanese investment firms and accessible government
officials.
Time – Establish a presence in Asia by Q3 2014
Market Analysis
The thermostat market has seen its suffering and prospering alike. According to Ladell in 2012, “this is an
underserved and unloved market,” (Nieva). And yet, Honeywell CEO Delaney response to Ladell is “the
thermostat business is big.” This conversation between these two great minds simply constitutes that
although the market is stale, there is still a demand for the product; a “big” install base if you will, ready
to buy smart energy saving thermostats for their homes.
Consumer behaviour plays a big role in a market and its size. The most predominant concern for
consumers throughout recent years has been energy saving; not only due to the environment, but also the
ever so frightening price of electricity bills. The question is, are people are willing to buy energy efficient
products despite higher price? When observing figure 3, it is clear the average that are for this is quite
high, as well as countries like China and South Africa are a lot more willing to use alternatives—are these
a potential market then? Absolutely.
Fig. 3. Understanding Consumer Preferences in Energy Efficiency.” Revealing the Values of the New
Energy Consumer.” Accenture. 2011. Web. 07 Oct. 2012
Customer Analysis
As this era unfolds, segmentation is becoming a more sought after duty for brand identity. Companies
such as Coca Cola have mastered this and have inserted their products into most local and international
segments alike. In terms of the given segments, Nest thermostats can attract any age home owners who
are looking for a modern, user friendly thermostat—due to the simplicity of the device, seniors and the
older generation will have no trouble fitting into this category. This could account for at least 25% of the
market if not more. A segment such as this can be reached by any sort of advertisement; whether it is
newspapers, television, posters and billboards. Creating at least one dimension for the company is entirely
necessary to attract such a broad segment however. Companies such as Honeywell, rely on their efficient
and environmentally friendly identity to win over customers—“Making your world more comfortable,
safer, energy efficient and secure.”(Honeywell International, Inc.) The passion for design, ease of access
and unmatched technology comes to mind for Nest, as well as a similar mindset for energy efficiency.
Stores such as Best Buy (already available) and Source could reach out to this segment easier, rather than
placing the product at Sears or The Bay.
Branching out; there are many young couples and recently formed families that are looking for cheaper
and older homes for ease of access and untainted mortgage solutions. Homes that are generally built
before 1980 often require renovations (and more so than often, hectic makeovers). This brings out another
segment; the renovators. What better way to make a house look upgraded and frankly new, then to install
new products around the home—Nest fits perfectly into this situation, especially since many older homes
don’t come with built in smart thermostats.
To access this segment, promoting in home ware/home electronics based newspapers, magazines and
television channels such as the HGTV (Home & Garden), BBC, and even the VIVA channel for a more
female oriented audience.
Another segment Nest is able to call out are the tech savvy individuals; generally in their late 20’s all
through their late 30’s. The priority for the latest or in other words current products is high on this
segment’s list, along with increasing concern for flawless design and the latest technology; including
feature like Bluetooth and Wi-Fi. These up-to-date individuals can be classified as a psychographic and
are usually made up entirely of males. Due to their general demographic, they have started a nuclear
family or have detached from their original families. As a smaller install base, promoting for this segment
must be handled with specifics. A joint marketing campaign could benefit Nest tremendously to receive
the most rewards from this segment. A good example would be, to use Apple as a partner/sponsor for
certain key promotions. Or, what has also been done, selling the product in the Apple Store and stores
such as Best Buy and Future Shop.
Last but not least, moving away from catering to general consumers is a must for truly succeeding in the
utility market. This segment focuses on institutions/workplaces and simply put; an overall “B2B” focus.
The problem institutions ultimately encounter is a complete lack of energy efficiency resulting in higher
fixed costs; electricity is expensive. With the average energy savings of 15-25% (Fehrenbacher) Nest
thermostats are a great way to provide schools, athletic centres (e.g.-YMCAs), studios, offices, police
stations and many alike with a solution and the potential to uphold such efficiency as a standard.
Great ways of obtaining information from these segments would include surveying, product/consumer
research, and product testers in which more than often fall under this category anyways. In addition, a
social media presence as well as a forum creates great opportunities to interact directly with consumers.
Competitive Analysis
Nest understands competition is vital for products such as a smart thermostat. Competition can bankrupt
businesses into the ground and can also evolve them into global corporations, but the best thing about
competition, is that it drives products to become better. The primary competition for Nest consists of two
leaders, as well as very few indirect secondary competitors.
Honeywell reports full-year sales up 13% to $36.5 Billion; where automation and control solutions (ACS)
are 40% of their revenue (Wikinvest). Honeywell had also upgraded their tech by implementing a “smart”
system into their thermostats long before Nest came into the market; however, have only put serious
effort recently. With many branches such as an Aerospace and Transportation department, Honeywell is a
thriving pioneer with access to a lot of capital and target markets. On segmentation terms, Honeywell has
long successfully tapped into the broad residential segment. “Honeywell technologies for the residential
segment could hold projected energy growth to 9% in the next 20 years, reducing forecasted growth in
fossil fuel emissions by the equivalent of 200 million metric tons of CO2, while significantly lowering
overall costs for the homeowner. In fact, our programmable touch screens thermostats can generate up to
33% savings on home heating and cooling bills.” (Cote, 2008)
Honeywell’s competitive advantage comes from its diversification roots as well as its already established
brand. With many departments catering to different markets, Honeywell has established a strong
backbone consisting on multiple legs to lean on. They are by far Nest’s biggest threat.
In Q1 2012, a lawsuit powered by Honeywell against Nest—for patent purposes—started nothing but a
rolling ball of trouble for the team and the product. Ladell states that the lawsuit is merely a foolish and
typical effort by Honeywell—the leader in the market, to try and cripple innovative competition (Clark).
Although since then, Nest’s product hasn’t changed to accommodate any patent infringements, this
showcases that Honeywell can almost effortlessly use their brand and experience to cripple competition.
General Electric Co. is another competitor that poses a threat. Although an aging company, they have
used that quality to create the multinational corporation they are today (General Electric). GE’s
diversification enables a certain degree of protection against poor product performance in any business
segment (Wikinvest). The direct threat GE poses is the fact that almost 50% of their revenue comes from
the United States and 24% from Europe (see figure 1).
Although only potentially threatening, Rogers, and/or AT&T are an example of a secondary competitor.
Simply due to these companies’ sheer grip on people’s homes, if said companies would enter the
thermostat race, Nest and other competitors would have to completely adjust their strategies.
Figure 1
(Refer to work cited #8)
With such a grip on the US and even Europe that these two primary competitors have—a tactical
approach must be utilized in order to get a foot into such a door without ending up with a broken leg.
Competitive advantages work very well to counter such odds (multinational corporations versus newly
emerging companies). Nest is relying on their design and technological advantage, as well as their ties to
many electronic companies to handle design, marketing, and even regulatory issues. What might need to
become the case here however; is Nest must reach out to its consumers as the ‘quality over quantity’
underdog that cares for the environment as much as they care for their consumers—a similar scenario that
Apple implemented before the millennia.
Internal Environmental Analysis
First of all, and most importantly, Nest delivers on their promise; the consumer will save energy. With the
option of viewing whether energy consumption has lowered (see figure 2), this creates a reassurance
factor for the consumer, which is extremely important in the electronics market—most consumers have
gone through buyer’s remorse. Nevertheless, it is important for a company like Nest to identify their
strengths and weaknesses. If a Nest SWOT analysis is in order, it would appear like this (refer to next
page).
Figure 2
(Refer to work cited #9)
Strengths:
Opportunities:
-Nest has a top notch design team (Lead by
none other than the “father” of the iPod).
- Can move onto a next project with ease (Nest
thermostat only took a year to design).
-Cares about the environment; “wants
technology to make a difference.
- Potential leader in environmentally friendly
electronics?
-Covers a wide range of segments and target
markets (Institutions, “Smart homes”, new
homes)
- Using inside connection through employees to
gain promotion/price/hardware advantages.
- Has a lot of room to grow.
-“Smart” is smart!
-Consists of skilled and experienced employees
-Execute the product’s connection with Apple
products perfectly.
Threats:
Weaknesses:
-Late in entering different global markets as
well as North American Markets
-Great design team, but where is the marketing
team?!
-Hasn’t necessarily tackled a problem (other
companies have already issued prior to nest).
- Small company—having to compete against
multinational corporations.
-Gaining very little market share if any. Too long
in this stage can result in bankruptcy.
-Brand awareness falling short
External Environmental Analysis
External environmental factors can often make or break a company. Let us analyze the four main
environmental factors:
Economic Analysis – Simply put, the economy isn’t doing well. Nevertheless as a part of a cycle, expect
growth, but until then, only the most “desirable” electronics get bought. However, that doesn’t mean
thermostats don’t sell, they do, they just won’t sell like hotcakes.
Social-Cultural Analysis – This factor complements Nest the most. As seen on figure 3 on page 4,
people are willing to spend money on alternative energy efficient products. The world requires a smaller
carbon footprint to sustain us, and people are willing to help. Demographics fit into this by identifying
that the newer generation is more exposed to the “save the planet” motto than any other generation passed
the industrial revolution.
Technology Analysis – Technology patents are to be careful of; however, “smart” electronics seem to be
the growing attraction, therefore barriers are limited.
Political and Legal Environment – Considering the Honeywell lawsuit, there are some barriers
involving patents and innovation; often leading to an attempt to sabotage one another.
Opportunities:
Economic – An “on-going” and a “window” of opportunity. The economy isn’t doing so well; therefore,
this creates time to set up and build a proper company infrastructure in order to prepare for when the
economy does in fact boom.
Social Cultural – An “on-going” opportunity—build on the fact that the world cares about saving the
planet. Creating a “save the planet” package incorporating other companies’ environmentally friendly
products is a good example.
Technology Analysis – Due to Nest’s skilled and passionate design team, a quick implementation and
great execution of the next “fad” (assuming “smart” is the current fad) would benefit the company
greatly. A “window” of opportunity.
Political and Legal Environment – Use patent infringement against other companies as a means of
showcasing a presence. An “on-going” opportunity.
Threats:
Economic – An economic downfall could lead Nest to an even more unstable market share, possibly
eliminating any chances to reach a global market in the near future.
Social Cultural – There are no foreseeable threats. Perhaps globalization and specific global markets
could pose as a threat if North America ever loses the number one spot as the top market in the world.
Technology Analysis – Just like companies come and go, trends come and go. If new technology becomes
favourable amongst the electronic/utility market, then this threat can definitely Nest. The company must
learn to adapt and find a solid input/output of resources.
PART II
Positioning Strategy
Competitive Advantage:
The Nest thermostat is not the first SMART thermostat in Canada, let alone the first in the market;
however, there are a few things in which Nest and their product gain a feasible advantage. One being
within the company itself; the Nest infrastructure is made up of an extremely talented set of individuals
with an impressive amount of experience; varying from the famous Tony Fadell (leading director of the
iPod team constructed by Apple), Erik Charlton (Vice President of product marketing at Logitech), and
Yoki Matsuoka (served as head of innovation at Google).”At the end of the day, look at our product and
you’ll see a reflection of the people who made it,” an avid quote showcasing the passion for design that
Nest embraces. (nest.com)
Product wise, other than the sleek and easy-on-the-eyes exterior, the main advantage over other
thermostats is —“Its ability to use several different points to analyze your behaviour, then form an
energy-saving schedule to control your HVAC,”(howstuffworks.com). With energy-saving being a
growing consumer choice and ultimately a way of life for certain people, it is quite a big factor to take
into account for competitors and consumers alike (refer to page x about market size).
Thinking outside the box, another key advantage comes to mind—North Americans tend to
sympathize with the newcomer—the underdog; if done right, an underdog can call for a lot more attention
than entering a maturity stage for instance. Once again, another David and Goliath reference, consumers
appreciate the attempt for more competition because it equates into more variety overall.
The Nest thermostat attempts to resonate in consumers’ minds as a different, yet better product than its
competitors. Product positioning is very important, most professionals always take it into account, which
is why Nest is taking an innovative, new-age direction for how they want people to perceive their product.
With Wi-Fi updates, iPhone/iPad integration, and overall ease-of-use, the Nest thermostat is attempting to
be the iPhone of thermostats—whether it is due to the Tony Fadell and Apple relation or not, it’s surely a
step in the right direction in the electronic market considering the success Apple or Google have
achieved.
Value Map
$600
v
v
$500
$400
v
$300
v
Nest Learning Thermostat
(nest.com
Honeywell Prestige 2.0
(honeywell.com)
Lux Smarttemp Tx9100
(sutherlands.com)
v
$200
$100
v
Performance
Positioning Statement: For families apprehensive about cutting costs, concerned with saving energy,
and tired of the common complications involved with thermostats; Nest brings you the first learning
thermostat to include the whole package. The Nest learning thermostat reaches a point where accessibility
and ease-of-use are complete with a click of a button—learning and satisfying consumers simultaneously.
Marketing Strategy
Target Markets
While narrowing down the costumer analysis, a clearer picture of the specific segments comes to life.
With respect to all potential segments, the prominent target segments would have to include a necessity as
well as a reason to buy the Nest learning thermostat as oppose to simply being marketed towards or being
around the product in any way.
Looking at the product as a whole, Nest can attract the following types of viable people to their
thermostat:
-Mothers (females) / fathers (males) with children living in a moderately sized and well-constructed house
that require a thermostat as a substitute for an old one or simply call for a healthier and balanced
alternative. (B2C)***
- Contractors and home inspectors for personal use, and an entry as a marketing tactic; enabling word of
mouth advertising. (B2B/B2C)
- Individuals with an affinity for thermo electronics for exclusive home/office use—particularly handy
natured men that take responsibility using tools and maintenance around the house. (B2C)
- Home makers; in this day and age, interior designers as well as many consumers work on making a
home more connected—a smart thermostat is a great step to achieve said goal. (B2B/B2C)
-Institutions such as schools, hospitals, office buildings, hotels. (B2B)
-Manufacturing/distributing industry, meaning Nest can access factories, wholesalers, warehouses and
even retail stores— people working in any in-closed space where temperature fluctuates according to the
time of the year. (B2B)
Smart thermostats can certainly reach a fair amount of people in today’s “smart” age, but if one had to
analyze roughly, a couple, a B2B (business to business) as well as a B2C (business to segment analysis
would benefit the situation a lot more than focusing on merely one of the two. In that case, the home
inspector/contractor segment (refer to as segment A) and the home owners with families (refer to as
segment B) fit seamlessly and are great examples of both a B2B and a B2C approach for Nest.
Segment A
This segment contains the house inspectors, the independent and general contractors and real estate
agents who go the extra mile to satisfy customers and lead them in specific home up-keep directions. All
are included as provisions of corporations such as the Canadian Real Estate Association, construction
companies and general contractors.
In order for the segment to be satisfied, the product must simply work as well, if not better than the
competition and include loveable features to cater to general masses. Real estate agents who portray
optimum service for greater amount of returns advise products they trust in the market—word of mouth is
a big deal for these agents due to the referral aspect of their industry. For contractors, the product has to
work up to thermostat standards as well as enable an easier than the norm installation. Say contractors are
satisfied with the product; they will not only use the product when dealing with similar future endeavours
in the workplace, but also advocate a certain internal promotion to themselves and their friends.
The amount of times the product will be used depends on the needs of the specific costumer these
services cater to (including segment B). The product will be purchased and installed through
contractors/home builders as a daily use function—whereas the real estate aspect would be unknown and
frankly relative.
The reasoning behind this segment derives solely from its growth rate and accessibility. “There are
more than 260,000 Canadian construction firms, more than 65,000 in residential construction and 150,000
in trades contracting.” As well as its tie with renovations—“Canadians undertook $37.0 billion worth of
renovations in 2007, accounting for 42% of all residential construction investment. This was a 10%
increase from $33.7 billion in 2006,” (statistics Canada)
Segment B
This segment involves a B2C approach. These are the consumers that Nest should ideally target—
people dealing with daily lives; their families and their homes and themselves.
Thermostats are quite common in households considering most homes are built with central heating
systems. For these homeowners, the product must showcase exceptional SMART technology that is
install-friendly, easy to use, and does what it’s supposed to. Other than the basic functions needing to
perform, style and features have to go the extra mile. An idea would be different colours (for the average
consumer subdivision of this segment) and a wider range of different phones and devices that integrate
usage with the thermostat. The product needs to WORK and LAST.
A daily usage in the winter—especially in Canada—is expected bearing in mind the price of electricity
bills. In the summer however, it would depend on whether the individual deals well with heat or not.
The reasoning behind selecting this segment is the segment size, as well as the amount of houses and
apartments are in Canada (related to segment A).
Refer to citation #13
Promotion Strategy
Fine promoting is regularly informing, persuading, and reminding—respectively, depending on the
maturity level of a product and or brand. Nest is at the growth stage seeing as they only have one product
under their belt. In this case, brand and product awareness must be top priority; by differentiating the
product from competition in addition to promoting a specific and likeable image. RIM’s Blackberry
launch applies well into this situation, not by being the first smart phone (it was one of the first) but by
doing it better than the competition at the time and finding a common appreciation that consumers would
take into account.
A pull and push promotional strategy alike would make the utmost sense. Being an electronic
company, Nest must familiarize themselves with their B2C as well as their B2B segments in order to gain
maximum potential awareness for their product. If utilized correctly, Nest can begin to release better or
completely different products with an already existing backbone. A great pull strategy is already taking
place by enabling Nest to sell their thermostats in the Apple store; this not only increases awareness, but
is a reminder that Nest can release more smart products along with their good relationship with Apple.
Another promising push strategy would involve using social marketing as an advertising and even
distributing channel. In terms of a pull strategy, a B2B focus applies—what Nest needs to do is utilize
Segment A, catering to construction companies and their thermostat needs (including product aftermath),
once again to establish a backbone. The different promotional mix elements must consist of mostly
advertising (television, web, pictures and magazines), as well as public relation because when one thinks
home hardware, fear of a buyer’s remorse is always apparent—reassurance is the key!
Place Strategy
Instead of the preference oriented and widely disregarded the thermostat industry has become, Nest
ought to directly take advantage of how knowledge-lacking consumers actually are, and how a smart
alternative can make a difference in their lives (making lives easier). By applying a selective market
exposure, Nest can begin to prove their brand over current leading brands without it seeming forced.
Subsequently, there aren’t many thermostat advertisements out there; the market might have been too dull
and un-hyped due to the certain degree of brand domination (brands like Honeywell are a multi-faceted
corporation which often don’t have the time of resources to further grow a less promising set of products).
On the other hand, for Nest, there has never been so much fanfare about the introduction of a thermostat
(Edson). Intensive marketing should come in at a later time, perhaps once the learning thermostat gains a
core install base and the strengths of the Nest brand. Once this is accomplished, Nest can begin to rival
companies such as Apple—where frankly, every promotion counts.
Thermostats have seen their share of demand throughout the years; therefore, like most smart
electronics, the Nest learning thermostat would best include a multi-channel (hybrid) distribution—
meaning a steady distribution through multiple channels.
Online Stores
Internet
Manufacturer
Official
Website
Mail
Middle-men
Retail Stores
For the moment, Nest should use a conventional marketing system. Resembling most other companies
in the growth stage, a VMS just isn’t possible until a maturity stage or a great amount of resources knock
on the door. To avoid any inter-channel conflicts, policies should be introduced and enforced as well as
multiple implementation of tests and run-throughs of the entire process. In terms of intra-channel conflict,
problems such as channel cannibalization, channel overshadowing and lack of effort/focus on the
different channels can effect efficiency and ultimately sales. Problems can be avoided when establishing a
good balance between push marketing and social marketing, although all distribution channels are equally
important; the retail channel should be the number one priority—at least until digital distribution truly
takes over. Connecting the distribution channels would also benefit Nest, this where promotion would
come into place—such as coupons and discount codes, the sooner Nest builds these channel relationships
the faster the brand value increases.
Retailors to sell the Nest learning thermostat:








Lowe’s (available!)
Best-Buy (available!)
Future Shop – Self-explanatory; same as Best Buy although smaller.
Home Depot – Similar to Lowe’s but a lot more home hardware oriented, enables access for
handymen (who tend to spend a lot longer in Home Depot than any other store they shop at).
Apple Store (available!) – Great for the Nest image!
Elegant specialty furniture stores – such as Mobilia, select Brick stores
Canadian Tire – More than often filled with Segment B
Bed Bath and Beyond – few stores already selling thermo products. Potentially a great place to
promote package deals with the Nest thermostat.
These retailors must complement the product through its strength(s) and product relations,
otherwise Nest’s image isn’t going to be taken as seriously as they would prefer. Selling the learning
thermostat at Leon’s isn’t going to do the job because Leon is for the affordable bunch, therefore the
‘rugged’ mentality of doing things doesn’t fit Nest’s brand personality.
Product Strategy
Let’s begin with analyzing the product as it is; to determine its core benefits, and its flaws.
Firstly, the installation—according to the already published reviews, the Nest installation is quick. As
long as ones HVAC system is fairly modern, it’s a pain free process since all the wires are colour coded.
Secondly, its look and design are both flawless and it’s safe to say, this thermostat is sexy.
Thirdly, the SMART aspect; what the Nest thermostat attempts to do is learn your habits through
manually changing temps and schedule after a week or so. Now, if one wants to modify the temperature
after, they don’t really need to use the thermostat again, but rather are able to modify settings through iOS
and Android apps or even through Nest.com. This functionality seems to be its strongest feature, and core
benefit.
Last but not least, is it efficient? Does the product really save energy like Nest claims it does? Liquid
consumption wise, it takes more to tell. But, the thermostat does show the amount of hours of usage,
which results in the device itself displaying whether you have saved any energy with the relative amount
of use. Another neat feature is a recent cooling feature called Airwave; which essentially uses the already
generated cold air and distributes it around the house, saving energy on the A/C function.
The key value-added service is the thermostat’s ability to use Wi-Fi. This means that the product and
its firmware can be remotely updated from Nest headquarters—including updates and software upgrades.
This, as well as the remote control app feature, is the real difference maker that Nest should expand on.
The flaws within the product all reside with its “smart” aspects. It seems the thermostat isn’t so smart
when it comes to the little things. Small things that consists of; temperature fluctuations, complications
with learning a new set point, and limited utility make the thermostat a little disabled and not what it’s
meant to be. (Amazon Reviews) This needs to be improved; effort has to be put into eliminating all cons
in order to keep up with consumer demands and the image personality—TO KEEP OUR WORD!
Warranty-wise, there is presently one implemented; however, adding another year would sustain
reassurance for consumers (from the different distribution channels as well), at least until the product is
making a worthy profit.
Keep in mind, the Nest learning thermostat to consumers must be seen as a mix of convenience as well
as a specialty item altogether. It should be specialized enough to showcase exclusivity and enable (false)
rational decision making on the consumer part, and convenient enough to simply go out and buy hasslefree from any of the channels in the place strategy.
Product Life Cycle
Nest is in the growing stage. They have introduced the thermostat and have recently launched the Nest
2.0 update. With only a year in-between these two, Nest is ready to start their second half of their growth
stage—what is simply needed now is for the sales volume to increase for more marketing to commence.
Price Strategy
Nest is facing all types of pricing constraints. Looking at the emphasis on push strategy from the
promotion strategy, it’s apparent that supply will rise in order to meet with demand; thus enabling Nest to
price their product at a higher price. The fixed and variable costs play a small part as well, having to price
accordingly to cover these costs. Once again, Nest is quite recent and the thermostat has only been out in
the market for roughly a year now; meaning it is still acceptable for Nest to stick to the initial high price
point. Until Nest reaches maturity, the postponement of competitive pricing is inevitable.
The different price objectives Nest should be looking at are; first and foremost is to try and AVOID
survival. The last thing Nest needs is such a position, and the only way to fix such a situation is by
starting a new brand or selling the company altogether. What is best for nest is to profit-maximize and
increase sales revenue—all accountable for brand/company growth.
The pricing approach is going to be a mix of a skimming and a premium pricing strategy. Skimming
due to the higher price point—as stated before, still acceptable for Nest and will allow for fewer goods to
break-even. And, premium pricing because Nest is seeking an exclusive feel; a higher price with an
imaginary quality seal (such as Apple, and Sony).
The internal factors that could conflict the price would include; marketing mix, fixed costs, and
ultimately the company objective. External factors can consist of market/economy falling, catering to
segments in terms of bulk orders, and sales promotions for holidays and shopping days (Boxing Day,
Black Friday) eventually leading to a price cut once resources, parts or fixed cost decrease.
Break-Even Analysis
Office Expense
Salary and Commission Expense
Selling Expense
Salary for Administration
Advertising and Promotion Expense
Depreciation Expense
Total Fixed Cost
Unit Price
Unit Variable Cost
Breakeven
$400,000
$400,000
$60,000
$80,000
$800,000
$20,000
$1,760,000
$250
$70
9778
TFC/(Unit Price – Unit variable Cost) = Units to Breakeven
1,760,000/(250-70) = 9778 Units
Nest’s thermostat’s price point is $250 per unit. Assuming TFC, the expenses totalled $1.76 million.
Nest’s UVC (unit variable cost) is estimated at $70. Plugging them all together and solving for how many
units to break-even, gives us a calculation of 9778 units sold in order for them to break-even.
Work Cited
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---(speech, .pdf format)
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