Tech firms should sell 'digital experiences,' says Forrester

Out-Law News | 05 Jan 2006 | 5:27 pm | 2 min. read

Consumer technology firms are missing out on around $3.8 billion in revenue because they are not building on their sales of digital devices to sell the additional products, services and content that bring those devices to life, according to a report from Forrester Research.

The analyst firm is advising the industry to start selling digital experiences that integrate products, services and content in a way that is easy for consumers to buy, install and use.

According to the report, Sell Digital Experiences, Not Products, 80% of the 18 million web-enabled-mobile phone households do not currently buy data services – a discrepancy that will create a revenue gap of $5 billion by 2010. Half of those consumers who own HDTV (High Definition TV) sets do not subscribe to HD programming. The revenue gap in this sector will be $3.4 billion by 2010, says Forrester.

The report also looks at MP3 players. Only one in four consumers who purchase an MP3 player actually buys music online – a missed opportunity that could cost the industry $3 billion in revenue by 2010.

The position is the same in the digital camera sector. One in three owners of digital cameras do not print their photos anywhere. Failing to capitalise on this market could lose firms $1.6 million by 2010, according to the report.

"Consumer technology sales are broken," said Ted Schadler, Vice President at Forrester Research. "Consumers are being forced to assemble the different components of their digital lifestyle themselves, and they're not equipped to do it. Retailers' traditional approach of lining up racks of products at the lowest price isn't cutting it. Digital experiences are too complex, and technology is changing too rapidly."

The report identifies Apple Computer, with its highly successful and tightly integrated iPod and iTunes, as the only consumer technology company that has perfected the digital experience playbook. But while Apple is unique in being able to control software, hardware, and content, Forrester sees companies like AT&T, Best Buy, Hewlett-Packard, Tweeter, and mobile retail newcomer IMO beginning to offer other digital experience solutions.

"Apple's legacy is not just about cool products; it's about recognising the need for an end-to-end digital experience," says Schadler. "The iPod's impact is reverberating across every sector of the consumer technology industry."

Forrester believes that the most promising opportunity for selling digital experiences lies with companies that can assemble solutions at the point of sale. But most big-box retailers' strategies rely on offering consumers the widest selection of products at the lowest price. That opens the door for a new kind of nationwide retail specialist that Forrester calls a "solution boutique."

What is a solution boutique? Think Starbucks, not Wal-Mart, says Forrester. Solution boutiques – whether online or off-line – will offer consumers the opportunity to get an education about what digital products, services, and content make the most sense for their lifestyle, resulting in a complete solution.

Profitability at a solution boutique comes from the higher-margin service contracts, in-home installation, product upsells, and service bounties, says Forrester.

"Every consumer technology company – manufacturers, service providers, installers, and retailers – has a role to play in delivering end-to-end digital experiences," says Schadler. "Product-service bundles, global media and technology standards, and non-profit certification groups that implement and test standards are all critical to bringing digital experiences to life for all consumers."