CONSUMER BEHVIOUR Sony AIBO: The worlds largest Entertainment Robot

Submission by: Sec-A, Group 7 Satya Prakash (0327/48) Abhijit Roy (0011/48) Narsimha Rao (0229/48) Sai Hemanth VRP (0307/48) Raphael Gesulfo (1049/12) Sony AIBO Case The Facts: The Company: Sony Sony Corporation is a Japanese multinational conglomerate founded in 1949 by Aki o Morita and Masaru Ibuka. The company is one of the leading manufacturers of el ectronics products for the consumer and professional markets. Sony designed two main products: the Walkman and the PlayStation. Those products revolutionized the music and the game console industries. The product: AIBO It started as a dynamically continuous innovation by making it a companion and a dding a lovable factor to a robot toy. Evolving with a continuous innovation wit h the needs of the consumer Sony kept its competitive advantage and its consumer happy.

Owing to the extraordinary progress in Artificial Intelligence (AI), these compa nion robots would be able to learn and adapt to the people and environments they live with, enabling them to better respond to their owners functional and emotio nal needs.so every AIBO was different. During the spring 1999, Sony launched the worlds first entertainment robot, a roboti c pet dog, named AIBO. The 3.000 units of this first generation have been sold i n japan in just 20 minutes and 2.000 units in the US, through the website of the company at a price of $2.500. In the fall 200, Sony sold 50.000 units of the second generation of AIBOs. The bu lk of the demand came again from Japan. The price of $1.500 was significantly lo wer than the previous generation. However, Sony did not reached its break-even p oint. AIBO stands for Artificial Intelligence roBOt. The Japanese market The concept of AIBO was to put loveable pets in the house of old, isolated peopl e (an important part of the Japanese population). It was positioned as a househo ld "companion," the $1,500 AIBO has become a smash hit in Japan, appealing to bo th the young and the old, including those with little technical expertise. The Japanese consumers were innovators and early adopters. This AIBO project hop ed to achieve that objective through continuing to create a robotic pet with the capacity to have characteristics of a real pet without the inconvenience of hav ing to own a real pet, which makes it very attractive for family in apartments w here animals are forbidden. Furthermore, robots are considered as heroes in the Japanese culture. The Japanese culture had : Smaller houses was comfortable with the concept of robots had an ageing population which was looking for a companion The US market Only 20 to 30% of the demand comes from the Unites States. This lower interest c omes from the desire of useful features from the American consumers. Since Sony was creating a totally new market in the US, it should first educate the market about the AIBOs advantages. It was not comfortable with the robot concept they didnt had any space constraint Competitors The Sonys AIBO has 2 kinds of competitors. On one hand, there are the humanoid useful robots designed by other well-known e lectronic Japanese companies. Those robots were more easily perceived as functio nal household robots from the mainstream Americans. And on the other hand, there are the cheap copycats of the concept at a much lower price. Analysis : Marketing Strategy in U.S market: Sony should go for niche marketing instead of mass advertising in the U.S. marke t. According to the high involvement of this kind of products and its price, it

would be easier to seduce first the early-adopters, who will be much more willin g to pay more for a product not yet totally ready (in a functionalities point of view). Also Sony doesnt know the expectation of the U.S consumer from AIBO. Sony need to keep a close contact with customers to favors feedback and help further develop the performance of AIBO. Sony shouldnt take so much risk to create a market, since it will have to invest massively in manufacturing capabilities and in huge mass-advertising budgets. AIBO in U.S. market should attract the attention of people seeking an entertainm ent companion as well as people interested in Information Technology and robotic s. So it can be positioned as a hybrid product. It would take significant time to build economies of scale and leverage the econ omic curve so as to bring the price affordable to the customer.

Promotion: The U.S owners were a tightly knit group who tended to communicate frequently wi th each other. This network can be used to promote and recommend ABIO to other c onsumers. There are AIBO expos and clinics where one can bring one s AIBO for an annual ch eckup. There are AIBO chat rooms, soccer tournaments, Club AIBO, and a soon-to-b e published AIBO Town Magazine. These kind of events should be promoted in U.S w here the owners and seekers can communicate and take part and interact thus generating a lot word of mouth. Increasing trial also change t he traditional perception of the U.S customer towards the robots. AIBO is just the beginning of the home entertainment robots. After one and a hal f years since its birth, AIBO still seems to be in high demand and, for some own ers, AIBO has become a lifestyle. Was Lovability factor a mistake? Emphasizing AIBO s "lovability" factor was not a mistake. Sony was correct strat egically positioning AIBO as a "companion," at least in the first generation of robots, because it was generally considered an inadequate household robot. Perhaps in the future, after so many generations of AIBO, when the actually engi neering that comprise the robots is perfected, they can market AIBO as a "seriou s productivity tool." By having no functionality, it allows Sony to actually pla y around with ideas for functionality in the future. Sony s intelligent use of the value proposition helped them carve out a brand ne w niche in the industry. U.S Consumer Behavior: The main issue in this case is the difference of the customer behavior in Japan and American market. In the case of Robot Japanese market is more developed comp ared to the American market. The American people think robot as a functional pro duct to make life easier whereas Japanese consumer ready to accept the robot as companion like a pet. Another customer perspective is that the Japanese think Ro bot as Hero or companion where as Americans robots are the enemy, fighting again st humans. Sony should wait to develop a strong ecosystem of software and hardware develope rs around the AIBOs components. So to cater to the mass marketing, early majority and late majority has to be ta rgeted.

But in U.S market they are able to attract just the innovator and the early adop ters. So using Ansoff Matrix American Market would fall in new market, existing produc t category. Ansoff Matrix : Market development is needed in the U.S market. Sonys long term plan was to initiate a licensing program whereby third party deve lopers could use the open -R technology to create any number of software applica tion for the AIBO. In addition open -R provided third party developers with the ability to create hardware modules for the AIBO. Eventually AIBO owners would be able to customize their robotic pets by literally swapping their body parts at will. They can leverage on AIBO chat rooms, organize soccer tournaments, AIBO Town Mag azine to promote ABIO. The participation and interaction in these events will he lp in changing the perception of Technology being dangerous and threatening abou t the technology As the consumer behavior towards robot is different for Japanese and American Ma rket, SONY should adopt a localized strategy. Here they should focus on emic per spective that is variation across different culture. Americans are more of Techt opian and sees technology as a useful tool compared to the Techpressive nature o f Japanese who use technology as a way to attain pleasure. So comparing the two customer behavior perspective The SONY AIBO should focus on features in the American market. Product features for U.S market : American consumer gives more value for the tangible benefit and features in the robotic toy market. So in America we need to sell the product more based on prod uct modern features which can make their life easier. So the productivity part o f the product should be highlighted. For example the AIBO Messenger software, AI BO navigation software, AIBO Master studio, AIBO life, wireless LAN, GPS in AIBO and more updated software. Sony should stick to his pet concept but should add it more useful features for its owners such as reminders, emails notifications, calls, security. AIBOs looks gave it a worldwide acceptance as a robot which can act as a companion as well. So at this point of time it is not wise to change the shape of the product. To c ompete with the Honda s human like robot, Sony should do continuous innovation to keep the product updated and upmarket. Sony should take below steps to for successful adoption of this Innovation in th e American market. 1. Compatibility AIBO should match with the lifestyle of the American peopl e, so customized feature related to only American consumer behavior. 2. Trialability As the American customer knowledge about the product is low more trial need to be set up for generating awareness and interest. 3. Relative Advantage Customer need to understand the unique feature and fu nction AIBO offering compared to the competitor. A project he product as superio r product that the competitor or low cast toy cannot offer. Trialability was not needed for Japanese customer as robots were already accepte d in the Japan but it is needed in the U.S. market so as to change the tradition al perception of the U.S. consumer. Pricing of AIBO Considering what we know about the structural cost of the product it seems safer to let the price at $1.500 to reach the breakeven point as soon as possible. So ny ABIO should give a value proposition to their U.S customer. With economies of

scale reaching Sony should lower down the price after breaking even and getting the R&D investments. At the other end of the competitive spectrum, there were a number of major techn ology companies which were working on personal robots that could perform serious household tasks. Their focus was clearly on utility. So, once Sony starts focus ing on the utility aspect, it has to compete with these companies. With this com petition coming prices has to be in competitive zone. Currently Sony can plan to adopt a strategy where in it can provide a basic pro duct with minimum applications for substantial lower price then $ 1500. It may p rovide various other software applications which can implemented on AIBO. These applications can be provided at a premium. The various applications can be categorized as a) b) c) d) Utility aspects such as cleaning house. Reading mails, newspapers etc. Robots which can connect emotionally (lovable, caring) Mimic behavior and allow creating new behaviors

The various applications can price accordingly. They have to focus on different applications while marketing the product in various geographical locations like US, Japan. This keeps the base price of AIBO low appealing to the huge customer base and also providing revenues at the same time through the add on application s.