During my final walkabout on the Expo floor at IACP 2013 in Philadelphia, I visited with my very good friend Rick Smith, who also happens to be CEO of TASER International. I’d heard it on the whisper wire that there might be some confusion in the market about the company’s pricing model on the new TASER AXON Body.
Regular readers of this space know that the new product that hit the streets back in August sells for less than $300 per unit. By comparison, the bulk of the body-worn video camera market is in the $900 range per unit (including TASER’s own AXON Flex!).
I kind of scratched my head when I heard there was some misunderstanding about the new pricing — I had written about the thinking behind that strategy when I covered the product launch — but I knew a quick visit with TASER might help to clear up any misconceptions.
The Amazon Model (Redux)
“I just don’t think the industry has seen something like this before,” Smith told me. “We’re going for mass-scale, fast.”
Smith — one of the coolest customers in a media interview I’ve ever met — then proceeded to lay it all out in the span of less than five minutes.
“The world of technology is moving faster and faster,” he said. “We’re seeing in law enforcement an industry that’s pretty far behind from a technology perspective. We’ve got long purchasing cycles and organizations that aren’t particularly set up to adapt to a lot of change.”
Smith explained that what their people have heard on the street is, “‘We need on-officer cameras. Everybody out there has cameras and right now we’re sort of the victim of video because they only show the stuff that makes us look bad — it’s not from the officer’s angle.’
“We’ve been hearing a lot of interest in the space, but there are technology challenges about deploying it and there are the financial challenges in obtaining it. To my awareness we’re the first company to take this approach of selling near cost, with the idea that we’re going to drive volume and help move the market so they can adopt this new technology,” Smith explained.
“We think the benefits over the long term — with what we’re doing with Evidence.com — is that agencies are going to find that cloud-based solutions are going to dramatically increase their speed, and dramatically reduce their costs.”
If by helping to get cameras out there really inexpensively, the company also helps to showcase the benefits of what it can do with the cloud-based Evidence.com, then so much the better.
That’s just sound business, in my opinion.
But it’s not just my opinion (or Rick’s, for that matter). A guy named Jeff Bezos figured that one out a while back when he launched a little website called Amazon.com. TASER’s strategy is reminiscent of what Amazon has done with its Kindle. Customers don’t have to use Amazon content on it, but the fact is, they will find the Amazon experience on it so compelling that they end up consuming Amazon services.
Genius. And repeatable, obviously, when you look at what TASER is doing with on-officer cameras and Evidence.com.
Which Is Better: 100 Percent, or 20?
The law enforcement industry — and by that I mean the vendors that sell to law enforcement agencies — tends to be highly fragmented. There are frequently anywhere between five and 50 companies with competing products. Consequently, pricing has to incorporate the understanding that any one company is only going to get a fraction of the market.
If all five vendors in a given category of products get an equal share of the market, each company has to base projected profitability (and consequently its product’s price) on winning just 20 percent of the available customers.
Smith explained, “Everybody looks at their business model and says ‘We’ve got to set our prices so we can survive if we only get five percent of the market.’ The move we’ve made is effectively saying, ‘We want to drive 100 percent of the market.’ This is a burn-the-ships strategy. We’re going to drive mass adoption so quickly that we’re going to take price off the table. That in turn will drive volume, which lowers our own cost, and we’re going to pass that savings on to the customer.”
Make no mistake, TASER has taken a certain level of risk in their pricing play. But remember, this company’s innovations have historically and inherently held some measure of risk. When you get to know Smith — and all of my good friends in Scottsdale — like I have, you get a clear understanding that while no one who works at TASER is careless or clueless, they’re completely unafraid of risk.
These folks are not going be happy with being a niche player. They’re not going to hedge their bets, shrug, and say, “You know, we’re one of five players, so we’re going to be happy with just five percent of the market.”
Evidence(.com) TASER May Be the Facebook of Policing?
Smith then added something well worth noting: Big networks don’t work if you cannot get lots of users, and the vision for Evidence.com is for it to become a very big network indeed.
“Facebook doesn’t work if there are 20 of them and people are all on different systems. That’s why we have a Department of Homeland Security trying to sort this out — because you have 18,000 different agencies and they’re all on 50 different types of systems.”
He also reiterated that video is a pretty new phenomenon, it requires massive amounts of storage, and so it’s a great fit for a cloud solution (think of Google’s acquisition of YouTube — a perfect fit, right?).
Smith added that the company doesn’t have to come in and disrupt existing systems in order to provide cloud-based services — agencies don’t have to give up the system they’re currently running.
“We can bring the cloud to them. If we can get everyone on the same system, the benefits that they’re going to have are going to be enormous. But it only works if everybody is playing. If we have to slash the prices to get everybody to play, then that’s the right strategy to follow.”
I’ve said it before, and I’ll surely say it again: the folks at TASER International constantly remind me that American excellence and innovation are alive and well.
Oh, and they also can throw one hell of a great IACP party. Thanks, guys.
