Selling satnavs

It's easy to sell ice cream when the sun is shining but it's a completely different game when it's raining. Likewise, selling consumer electronics takes on a whole new perspective when the economy bottoms out. What was once as simple as shelling peas becomes as hard as pushing string through blackstrap molasses.

This is the sticky situation that makers of personal navigation devices (PND) find themselves in today and they must be on tenterhooks. Of course, it won't seem fair to them. They have invested millions over a dozen years to produce satellite navigation units that boost driver confidence, improve journey times and reduce emissions.

Early days of navigation

When I test drove one of the first prototypes around Paris in 1994, at the conclusion of Europe's Prometheus "car of the future" program, it was like magic. It took a little while, but by December 2007, satnavs had become the must-have extra for millions of motorists worldwide.

Naturally there have been shake-downs within the sector during the period of struggle and boom. The Dutch company, Philips, which made the wondrous prototype and followed up with some of the first mass-produced satnavs, withdrew from the market in 2006. Brands such as viaMichelin have shifted their ground substantially and only last year Cobra decided it would pull out of the mass market completely, a decision reflected in figures, which show it lost US$4 million on declining satnav sales in its most recent trading quarter.

Commodity trading

Now, though, a battle royale is under way. There's no doubt that drivers want the digital routefinders, but what was once a gem has become a commodity, with competition often based largely on price. The magic has gone and manufacturers who, just a few months ago, had glimpsed a golden horizon, see hammer-headed thunder clouds rolling in.

Which brings us to TomTom. Great name, good outfit. It has steadily carved its own route through the satnav market, to lead in some territories and become a substantial second in others. It has even been able to spend billions acquiring digital mapper Tele Atlas, outbidding its deadly rival, Garmin, in the process.

However, its most recent figures show that while it sold 70% more satnav units compared to the previous year, net profit for the quarter fell by 24%. The jungle drums have spoken and TomTom appears to have heard them. Higher sales and lower profits is not a sustainable strategy so changes are afoot.

Apple comparison

This week the company said it was restructuring the management of its PND division. Company co-founder Corinne Vigreaux is parachuted in as managing director with responsibility for all aspects of retail sales. Her familiar presence could boost confidence, just as it did when Steve Jobs returned to lead Apple Inc.

Vigreaux actually faces a situation similar to Jobs at Apple - a commoditized market where customers are desperate for something new. If she's brave, she'll spearhead product developments in peer-to-peer traffic information, GPS-enabled gaming and driver-behaviour assistance. At Apple, Jobs reversed a decline in spectacular fashion. The same opportunity is there at TomTom for Vigreaux.
 

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