Product Differentiation in the Consumer Drone Market

By: Matthew Kent

The market for drones has grown exponentially over the past few years, and the consumer market – alone – is estimated to be worth $2 billion. As of late, the market has become saturated, mainly with low priced “user friendly” drones. DJI, a Chinese technology company that manufactures commercial and recreational drones for aerial photography, seems to be taking a different approach to their new line of drones. While recent trends points to lower priced drones targeting the amateur pilot/photographer, DJI is introducing its Phantom 4, which comes in at a substantially higher price point. DJI is differentiating itself from its competitors in more ways than one with their release of this new product.

One of the main factors when it comes to developing and releasing new products involves identifying product opportunities. DJI did just this in developing its new Phantom 4. While the majority of drones on the market boast that they are easy to fly, they are often just as easy, if not easier, to crash. Taking note of this, DJI designed the Phantom 4 to compensate for human errors, making it very hard to crash. This new innovation is enabled by two optical sensors in the front of the aircraft that essentially let the drone “see” its surroundings. This new technology, coupled with the camera, allows the drone software to “create a volumetric map of its environment,” in essence avoiding any potential crash. The Phantom 4 also boasts new features such as a manual flight sports mode, which enables the user to pinpoint a spot on a map and tell the drone to fly its self to that spot. The drone can also fly up to 45 mph for users that are after this sort of thrill. DJI successfully identified flaws in current products along with opportunities in the market and capitalized on them.

In terms of DJI’s marketing strategy, they seem to be following in the footsteps of Apple. Current price points for consumer drones are aiming to be low, in the sub $500 area, while DJI’s Phantom 4 is doing the opposite, coming in at $1,399. On top of differentiation through new technology, DJI also seems to be achieving product differentiation through price. Studies have shown that consumers will pay a premium for a product that truly works better, which seems to be exactly what the Phantom 4 is offering. I think this is a great marketing strategy as Apple has proved this concept through almost all of their product offerings. Setting a higher price point for a product of higher quality that works better is something I believe is attractive to many consumers. As a consumer, when you pay more for something that comes in fancier packaging and offers better functionality, I think it makes you feel better overall about the purchase. I think the idea of higher quality reflected through a higher price point is something that is appealing to many consumers and is an effective marketing strategy that overall attracts more customers

Sources:

http://fortune.com/2016/03/03/dji-phantom-4-drone/ (Article)

http://www.businessinsider.com/5-keys-to-product-differentiation-for-fun-and-profit-2014-7 (Support)

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16 thoughts on “Product Differentiation in the Consumer Drone Market

  1. Aishwarya Gunti March 21, 2016 / 1:08 am

    It is a fascinating article. Drones are gaining so much potential in technology market is eye-catching. I am wondering if DJI could be compared to Apple as what Apple selling are products of mundane use and in mass production. Does DJI have the same market size and growth?

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  2. Justin Flory March 22, 2016 / 8:25 pm

    This price point strategy is exactly like Apple. The high price, and premium feel of the devices makes customers feel like they are spending extra money for the highest quality, and the best products available. Many people are willing to spend the extra money to get the absolute best. Apple has been doing this for a long time, and they sell millions of products each year.

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  3. CJ Enos March 24, 2016 / 12:54 am

    I agree with your view that consumers will pay more for a higher quality product that works rather than less for something that will just break. I know as the drone market grows more popular that consumers will want to buy a product that works and is durable. I think the price point does fall in line with Apple’s model.

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  4. Ronald Zampanti March 29, 2016 / 10:43 pm

    This article is a great example of the pricing strategy involved in marketing. The Phantom 4 seems to largely exceed the quality of any other drone. In this case, I agree that DJI can make this new product much more expensive than the other drones. Products that are of high quality and are much more expensive tend to not sell as much as the so called “average product”. For instance, the quantity of sales of a certain rare car that is extremely expensive is much lower than the amount of sales of a normal Toyota. Not many people can afford extremely expensive products. In the case of this new drone, I believe it will sell just as much, if not more, than the other drones. The Phantom 4 seems to be much more advanced in quality. All of the future drone products will likely follow this type of quality and offerings. Although the price of the Phantom 4 is about three times higher than the average price of drones in the market, it is only priced at $1,399. If drones were as expensive as a car, their new product that is three times more expensive than the average will likely not sell as well.

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  5. reganka March 31, 2016 / 4:51 pm

    I definitely agree that consumers are willing to pay high prices to obtain high-quality products. One could even argue that a consumer would buy something just because it is expensive and appears to be a luxury item to onlookers. With that being said, I think that this drone market is very comparable to Apple, as previously mentioned. High prices with a luxury or premium affiliation appear to be desirable to consumers. With this new launch of the Phantom 4, which is supposedly easier to use, drone fans are likely to purchase this new line.

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  6. Jennifer Buonarosa April 1, 2016 / 9:31 pm

    If a company has a good product and has proven to be sucessful that enables them to ask a premium price. I would rather pay the $1399 once than have to pay they $500 three times because my drone crashed and is now broken. People don’t mind paying for a good quality item that can be depended on, they would almost rather do that then pay for an inexpensive item that is going to break in a short amount of time. I think the phantom 4 has a real chance at being successful and people will purchase this item.

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  7. Meghan Gulbrandsen April 3, 2016 / 9:10 pm

    I agree with that fact that if the consumer is paying more, than they feel they are getting a higher quality top brand item that is out on the market. People are very willing to pay more these day just to get the brand that they want, as a great example being with Apple products. There are always going to be many different brands of the same exact item, but it is what that brand does that the others don’t that separates and differentiates them from their competition. I think that the feature that takes into consideration human errors is brilliant. If the buyer knows that this is there to eliminate the chances of them crashing and ruining the product, then they will be more likely to spend the extra money to know that it is probably going to last longer.

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  8. Andie-Jane Phinney April 15, 2016 / 5:35 pm

    Drones are something that have become very popular in the recent years, and I feel that the DJI Drone is going to be successful. I believe the uniqueness of this product eliminating as best as possible the human errors is a main reason why they will become successful. If they can eliminate the human errors, it is going to attract the customers, as it will last longer for them. The product is priced a bit higher than the average Drone, but just like Apple, they sell products for a higher price, but they are durable. I feel the DJI will become very successful, and I’m curious to see how well it does.

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  9. Julie Wusenich April 17, 2016 / 1:46 am

    I agree a consumer will pay a premium for a product that works well. Consumers don’t want to purchase a product that breaks soon after they purchase it and then have to buy a replacement. Overtime they will be spending more on lower quality products.

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  10. Aidan Kelly April 22, 2016 / 1:02 am

    I agree with Julie in the sense that consumers are willing to pay a premium price for a product that is superior to it’s competition. In the past I have purchased cheap pairs of sunglasses only to have them break or get lost. I was fed up with spending $5 a dozen times a summer for something that kept breaking so I purchased a pair of sunglasses that were guaranteed not to break.

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  11. Colleen Flynn April 24, 2016 / 9:16 pm

    The article makes many great points about the strategies that go behind a product release and how they are going to differentiate themselves from the competition. I think the Phantom 4 has great potential if it truly does all the things that the blog has mentioned. If a drone is coming out on the market that is very hard to crash and has all this cool new technology, people will buy it. No one wants a drone that they pay money for, just to have it crash and everything also wants the next best thing. Competing on the basis of price and quality will certainly create a demand and a great strategy for the Phantom 4. It seems like they are looking at one step further than their competition and making all the right moves.

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  12. Hechuan Lou May 2, 2016 / 9:52 pm

    Marketing strategy is very important for a company, Especially when they face a heavy competition. The strategies that DJI took is very great. However, they should also think some other way if don’t follow Apple’s footsteps.

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  13. cimminoc May 4, 2016 / 1:51 pm

    I wonder if other drones are going to follow the model the Phantom 4 has set and set their prices high. Similarly to how Apple and Samsung have competed for market share through competitive pricing. I’m not sure their is enough of a market for drones to have notable success with this pricing strategy. There are still many rules and regulations on where drones can fly and until these are loosened the market for drones will not be as large as Phantom hopes.

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  14. Joseph Sanfilippo May 5, 2016 / 8:50 pm

    I think that this is more of a novelty piece that only a select few will buy. I think that’s why the premium price is good, since the people who will buy it will be willing to pay for this product. By marketing this as a high class product, their consumers will be high class people.

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  15. Tyler Finigan May 5, 2016 / 11:10 pm

    I really hope that more restrictions are put on drones. A few weeks ago there were a couple of news stories about drones flying close to helicopters and airplanes. There is no need for these recreational drones to have the ability to fly high enough to effect these two transportation methods. All it takes is one drone getting sucked into one of the plane’s engines and cause a tragic crash

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  16. Derek Lawton May 7, 2016 / 12:48 am

    I think as the drone market grows more customers will want to buy a product that is more durable and reliable. They need to market their product in a right way or they will not gain customers because their products are so expensive.

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