Show me the way to go home

The satellite navigation device market has been one of the fastest growing sectors for years, and TomTom was there from the beginning. Head of sales and marketing, Damian Woodward talks to Andrew Wooden about the current threats, opportunities, and the way the market is headed?
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How has the year been for TomTom in the UK?
It was an exciting and yet challenging time in the second half of last year, which you've probably heard from lots of consumer electronic businesses. In broad terms of how we performed, we maintained our share of the market and we launched a new Live product, which is something we very much see as the future. September through to November were very, very difficult months for the market. This was widely reflected in trends for some of the other categories. And then in December – a month that generally holds over 20 per cent of the year's business – we performed very, very well.

Also, we bought Tele Atlas last year, which was a massive acquisition for us and the start of something great. What you saw last year was the formation of the TomTom Group, which gave us a wider set of divisions. It really was the year where we stated our intentions for the next five to ten years.

How would you say the demand for sat nav devices in general stands compared to a few years ago?

It's a category that's obviously grown enormously over the last three or four years. It is certainly the fastest growing consumer electronics category of all time. If you look at the 2008 market, it was broadly 14–15 per cent up on 2007, which was probably 50 per cent up on 2006. The sector has actually gone through the roof. However that kind of growth, especially in the current economic climate is unlikely to continue. In 2009 we expect to see a slight contraction in terms of volume. We'll probably sell something similar to what we sold in 2007.

Up to the end of Q4 we estimate penetration is at about 23 per cent of car users overall. From our research it appears that around 60 per cent of car users intend to own a device at some point, so there's plenty still to go for.

Has the increase in smart phones with sat nav capability damaged dedicated devices? Do you think it will in the future?

The answer in part is no. If you look at what people want from a phone and what they want from a navigation device, they are diametrically opposed. People are looking for smaller compact phones that they can really tuck away, whereas navigation is moving towards bigger, wider screens.

Having said that, we've had the capability on mobile phones for three years now and TomTom has worked very closely with mobile phone manufacturers to bring satellite navigation out to a wider audience. In that sense its something you'll see us embracing as we go forward. But that's in compliment to, rather than instead of, the satellite navigation market at this point.

How much of a threat is the increase in cars coming with in-built sat nav functionality to your market?
Something like five per cent of cars come with sat nav pre-installed, and at the moment brand new car sales are going backwards, so there's no immediate threat of in-built sat nav taking over. Car manufacturers make cars, they don't make navigation. For them to be able to implement that on the scale they produce cars, it's not a massively attractive or cost-effective option.

Having said that, it is an area we are involved in. We are in partnership with Renault – the new Clios coming off the line have in-built TomTom devices. We are also working with Toyota for a semi-integrated navigation device. We see these things as opportunities rather than threats.

How is the sat nav market different now from when it started out?
For a start, the devices are about a tenth of the price! When navigation launched it really was a niche technology and TomTom were the first to really push into it. It had been in the realms of very high-end cars up until then. It was a small market, and it was a very expensive product aimed at high-end consumers and people knew very little about it.

By using retail, we got the message out so that people now broadly understand what satellite navigation is and how it can positively impact an individual's driving experience. It's a much more accessible technology these days, and that's through the prices you can buy them at now, and certainly through the distribution of the products. I don't think there are any retailers out there any more that stock consumer electronics and don't offer some form of satellite navigation device.

If you look at the hardware, that's how it has changed. In terms of how it will go from here, going back to the Live software I mentioned before, the emphasis starts to move onto live content and service and dynamic information. It's not just about using a device to get from A to B even when I know how to do that, it's about how can the technology make my journey better, safer and more efficient.

What will the market be like in five years time? What do you think the next technological trends in the market will be?
What we and other technology companies are very good at doing is bringing out new and better things, and constantly chucking new technology on top of the other. The danger with that is you alienate people that haven't even bought it yet. The next two or three years will be about making navigation more applicable to more people. Lots of people probably don't buy navigation at the moment because they think they know the best route to where they're going at the time, and they may be quite happy to essentially use a paper map if they don't.

We need to explain the technology we've got now, and to mature that technology over the next two or three years, so that we can capture those people, and capture their imaginations. So the future will be simplifying the technology rather than massive steps forward, such as shoving cameras or MP3 players onto it. All the bits and pieces you can add into a device potentially clouds the basic issue of opening the market to more consumers.

I don't foresee massive changes, certainly from what you've seen from TomTom. The software will always be improved for better navigation, and we are looking for ways to add content and service on top, which makes the device more applicable to more people, more of the time.

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