LEDs Magazine recently released an article on Philips’ new sub-five dollar ($4.97) 60W equivalent LED lamphttp://www.ledsmagazine.com/articles/2015/04/philips-lighting-delivers-sub-five-dollar-60w-equivalent-led-lamp.html, which describes how the company was able to make a less expensive LED bulb by using lower priced mid-power LEDs, which decreases the lifetime to 10,000 hours (Energy Star requires 25,000 hour life expectancy), and is not fully omnidirectional (another Energy Star requirement).
The fact that price has historically been the ultimate purchasing driver for these lamps makes this a very interesting experiment; has EISA 2007 (the phasing out of incandescent lamps) and the introduction of LED replacement lamps forced consumers to change their purchasing patterns, to where Energy Star labeling and lifetime has diminished the importance of pricing? It is, of course, important to note that Energy Star certification does also influence the purchasing price paid by consumers, as state and utility rebates are usually only extended to LED lamps that have it.
Let’s say a potential purchaser comes into the store to replace his no-longer available incandescent A19 lamp. He might have heard something about LEDs, but is not an expert on lighting and hears that they are expensive. He now has three options (halogen, CFL and LED).
For simplicity’s sake, let’s just assume that he wants LED. He has heard about LEDs and how they are meant to last a really long time, but that’s about it, so he can ask someone or browse the selections. By making a conscious decision to learn more about these products he will probably realize that there are slight differences in the products. Light quality is comparable to the competition, but no Energy Star, lasts 10,000 (Only slightly more than the advertised 8,000 for CFL) hours vs. the 25,000 hours offered by the competition and is not omnidirectional. Through this research he will also learn that light bulbs are a high tech piece of equipment now, changing his perception on what he is buying.
This is where the 2 for 1 promotion comes into play for Philips. At $2.50 the consumer probably won’t care about these factors, since the price difference is so pronounced. That being said, the promotion is only going to last for a limited time. Once each lamp costs $5 each, I don’t think most informed consumers will be willing to buy the Philips product when the price difference is only $2-$3 more even before Energy Star rebates. So this leaves me with some questions:
A. Is Philips hoping that lots of people buy these products during the promotional period, like them, and then just keep buying what is familiar to them once the promotion is over?
B. Are they hoping to create some brand name buzz before more product launches?
C. Is Philips hoping that other producers join them in making 10,000 hour lifetime products?
D. All of the above?