Topic: Chumby Business Model
When I first got my Chumby, I absolutely loved it. Until yesterday, that is, when I was shocked to see ad channels surreptitiously added without my knowledge or permission. Certainly, when I bought the Chumby, there was no mention that I would be forced to watch ads. Nowhere in the web site, and nowhere in the activation process. Now this fact may be buried somewhere in the web site, but I certainly did not see it anywhere I looked.
Since I am an MBA student, I decided to look at the Chumby business model and see if it would work.
One thing that I have learned is that new products that are radically different from anything before them, like the Chumby is, take a very long time to penetrate the market. It can be five years or more before a product like this can penetrate 3-4% of the potential market. The key to success then, is: 1. Enough capital to sustain the company during this time; 2. Segmenting the market and targeting the innovators, who are the ones that buy new products like the Chumby; 3. Creating a positioning statement that articulates the value that the Chumby provides to the target market; and 4. Promoting and placing the Chumby so that it can achieve maximum exposure to the target market. After a few years, the product can start capturing a significant percentage of the mass market as well, but initially, it must be targeted to the right customers.
So who is the target market for the Chumby? Given the price point and the type of product it is, I would say it would appeal to affluent tech junkies. They probably own an iPhone, and a powerful PC, and are tech-savvy. They find the Chumby useful, but they also like the "cool" factor. Do you think that these people will stand for the intrusion of commercials in their chumby? How cool is the chumby with commercials? This is what happens: The Chumby stutters, the screen goes blank and then you wait while the ad is downloaded. Then a mute commercial comes on (because if the sound is enabled for commercials everyone would throw the Chumby out the window). Given the fact that the chumby sits unwatched most of the time, and the fact that there is no sound, there is little value for the advertiser, and certainly a lot of value is destroyed for the customer.
The other problem with the Chumby is that it does not know what it is exactly. Is it a highly customizable alarm clock with lots of cool extra features? Or is it some kind of general-purpose networked entertainment device? To answer this question, let's see how people would use the Chumby. First of all, where do you put it? The Chumby is not a portable device, so it will pretty much stay in one place. True, you could unplug it and plug it into a different location and wait for a while until it reboots, but this is impractical. Where do you keep it then? At your office you have a computer that provides a lot more information and entertainment than the Chumby does. In your living room? Maybe, but unless you are sitting right next to it, it is impossible to read information from the small screen, and you can't play games. Plus you have the television, stereo, perhaps a laptop, and they all compete with the Chumby. I think it is clear that most people will keep the Chumby next to their bed, and use it as an alarm clock. This is then the true strength of the Chumby, a cool alarm clock with lots of cool options. You can play music to sleep to, or wake up to. You can have lots of cool clocks on your screen. You can listen to podcasts before you sleep or when you wake up. You can play some games in the evening, or on a lazy weekend morning. You can check out the weather before you start your day. I believe that this is the way the Chumby should be marketed and promoted.
Of course, the company has to make a profit. How does it do that without income from ads? Again, let's look at the target market. I think someone who will pay $180 will pay $199 or a little more for the Chumby. Additionally, the Chumby should be thought of as any other consumer electronics device. You buy the hardware and you own it. Then you buy the software. Think computers, game consoles, even dvd players. Remember, the target customers have enough discretionary income to buy widgets. There could be a subscription model, where you pay an annual fee and you are able to access widgets on the company's web site. Or, you could buy individual widgets if you would like. Or you could have a try-before-you-buy model. Or a combination of the above. Anything but intrusive, unwanted ads that nobody will watch anyway!
The success of the Chumby depends on the early adopters. As a company, you must do everything to obtain and retain these customers. It is through them that the mass market will eventually adopt the Chumby. At this point, you cannot afford to alienate them! It's just basic marketing...
One more thing. There have been battles of the "clock people" vs the "non-clock people". Given the nature of the Chumby, I think it makes sense to always hae the time on the screen. This can be easily done by having the option to always display the time on the screen. The format can be user-selected too, from the time shown on the bottom corner of the screen, to a transparent overlay. The whole point of the Chumby is customization, so let people have the option to always see the time. That way, both camps can be happy.
I really like the Chumby, as long as it is commercial-free. I hope the company finds its way, and makes the Chumby a success.
