TableofContents

MarketingStudy
of
PhilipsHueLights

ExecutiveSummary 3
CompanyOverview 3
Mission
3
Values
3
BrandBehaviors 3
PhilipsHueLightBulbs
4
Figure1:PhilipsHueProducts
4
Attributes&Features 5
TargetMarket 5
DistributionChannels 5
Promotion 5
SWOTAnalysis 6
Figure2:SWOTAnalysisforPhilipsHueLights
Strengths 6
Weaknesses
7
Opportunities 8
Threats
9
CompetitorsAnalysis 9

Figure3:CompetitorsAnalysis

10
2

MarketDemandEstimate
11
Figure4:EstimatedLEDPenetrationofthe
GlobalLightingMarketfrom2010to2020
11
Figure5:GlobalDevicePenetrationPerCapita13
Conclusion
13
References 14

Executive Summary
This report provides a marketing analysis of Philips Hue an innovative replacement
lighting product of Philips. The analysis will thoroughly explain the features of the
Philips Hue, the market analysis for this new product, the competitors analysis and the
estimation of product demand in the next 6 years.
The report finds the prospects of Philips Inc. are very promising. Philips Hue is a portion
of the LED lighting market, which market penetration has been increasing significantly
from 0.3% in 2010 to 65-80% in 2020. As the leader of the new technology, Philips has
the technological advantages with its innovative staff, its own reputation, and well-known
distribution channels worldwide.
Company Overview
In 1891, Gerard Philips and his father Frederik Philips established Philips & Co. in
Eindhoven, the Netherlands. In 1895, Anton Phillips, Gerards brother, reinforced the
adolescent company with his excellent marketing and commercial talent, which led
Phillips Co. to be the largest producer of light bulbs in the world. Philips first research
laboratory was established in 1914 and the company started introducing its first
innovations in the x-ray and radio technology. From this point on, Phillips has continued
to grow and improving peoples lives through many innovative products in lighting,
healthcare and consumer products.
Phillips Mission Statement
Improve peoples lives through meaningful innovation.

Values
Philips has valued and positioned R&D and innovation at the nucleus of its strategies,
generating numerous breakthrough discoveries, such as the Compact Cassette and the
CD. The navy Philips word and the company shield logo have developed into an essential
part of the Philips brand, recognized all over the globe. These values continue to
strengthen its global vision,
At Philips, we strive to make the world healthier and more sustainable through
innovation. Our goal is to improve the lives of 3 billion people a year by 2025. We
will be the best place to work for people who share our passion. Together we will
deliver superior value for our customers and shareholders.
Brand Behaviors
Phillips strives through its vision by three core behaviors the company and shareholders
promise. Phillips promises being eager to win, take ownership, and team up to excel.
Their products overlap in three sectors healthcare, lighting, and consumer lifestyle.
Phillips will strive to create, designed, and effectively execute meaningful technology and
applications that improve people lives.
Phillips Hue Light Bulb

In 2012, Phillips expanded its first product, the light bulb, into an innovated, smart, and
multi-colored product that is controlled by a smartphone or tablet. The Phillip Hue is
personalized wireless lighting system that allows you to control at your fingertips. It is
the worlds smartest web-enabled LED lighting system. Philips Hue is more than just a
connected bulb. It can become an integral part of your day-to-day living.
4

Philips Hue is currently available in four formats: E26, E27, GU10, and BR30. There are
three components that are needed: the light bulb, the bridge, and the app (Android,
Kindle, iOS, and Windows Phones). Simple steps to get Hue started: 1. Screw in. 2. Plug
in. 3. Connect
Figure 1: Philips Hue Products

The Bulb
E26
E27
GU10
BR30

Function
600 lumens
600 lumens
300 lumens
600 lumens

The Starter Kit

1 Bridge & 3 Bulbs
The App
iOS & Androids

Function

Retail
$ 59.95
$ 59.95
$ 59.95
$ 59.95

Energy
80% less power
80% less power
Uses 5 times less energy
80% less power

Retail

Bridge communicate
between light bulb
and smart devices

$ 199.99

Software

Free

Attributes and Features

These bulbs are LED, making them bright, cool to touch, and are compatible with most
sockets. The Hue lights can tell you when you receive an important email on your device
or any significant weather changes. The Hue Application allows the user to change their
light bulbs to any color on your devices screen by simply touch that color point.
The Philips Hue is compatible with IFFF (if this then that), which is a service that allow
developers to create wireless connections between your Hue lights and many web
applications. For example, if you are tag on Facebook, then your Hue lights will notify
you. The other connection can be with weather, news, daily tasks, people, animals, sport,
activities, technology, home ware, and entertainment. The Hue light has also been used
for personal and home security. If youre not home, the lights can make it seem like
youre still home. The application can set rooms to light up at different times.
Target Market
The main things that consumer needs to operate Philip Hue light bulb are a smart phone,
the apps, and the bridge. Anyone with a smart phone can use this product easily and
effectively. The target markets for Philips Hue are homeowners and business owners. The
amounts that Philips Hue can do for homeowners and business owners are infinite.
Distribution Channels
5

Philips Hue has a very wide distribution channel ranging from popular online and/or store
retailers such as Amazon.com, Home Depot, Best Buy, and Verizon in the US. It also has
a strong distribution channel in many countries such as Ireland, UK, Turkey, and the
Asian Pacific area through the local retailers.
Recently, Hue light bulb was added to Bulbs.com, the largest online distributor of
replacement lighting. This is a very promising opportunity for Philips Hue as its
reputation and customer awareness will increase significantly.
Promotion
The Philips Hue has started to build up its reputation in a broad range. In the summer of
2014, SkyMall Magazine had a multi-colored smart lights presented on the front cover.
The lights advertised were not Phillips, but an off brand Ilumi. This is a lucid indication
that additional competitors are entering the market creating more competition and ways
to promote. The SkyMall magazine describes the lights as, ability to paint amazing
atmosphere color from bright white to rich color. Wirelessly control your lights from
anywhere in your home (SkyMall, page 89). Ilumi brand offers only two sizes of bulbs
and their promotion through SkyMall magazine. This is a way to gain distribution and
increase consumer knowledge.
SWOT Analysis
Figure 2 is a SWOT Analysis for Philips Hue. This SWOT Analysis highlights the
strengths, weaknesses, opportunities, and threats of the Philips Hue product in the current
market. This SWOT Analysis provides valuable information for the company to see
where the product has been recently, where it is now, and where it is heading in the
market. This allows the company to develop an effective marketing plan to achieve its
mission and objectives.
Figure 2. SWOT Analysis for Philips Hue Lights

-Well-known brand
-Wireless lighting System
-Energy efcient light bulbs
-Apps & open API (iOS & Android)

Strengths

-Expensive
-Wireless network required
-Limited promotion
-Selective distribution channels
(Apple, Best Buy, Home Depot,
Verizon, Amazon.com)

SWOT
Analysi
s

-Growing market
-Advancing technology
-Increasing smart phone users
-More distribution channels
(Bulbs.com)

-Increasing competition
-Shift in consumer taste
-New regulation
-Potential security valunerablity

Opportunities

Weaknesses

Threats
Strengths
Philips is a well-known technology company that has a mission to improve and make a
difference in peoples lives through innovating products. The company focuses on
delivering innovation that matters to its customers. As a well-known company, Philips
brand illuminates across the globe and attracts billions of customers. When Phillips
launched the Philips Hue in 2012, the product has brand equity attached to it because
Philips takes the multiproduct branding approach. The companys brand gives the new
product a competitive advantage. Furthermore, the Philip Hue is not just an ordinary light
bulb and lighting system; it has revolutionized the lighting and home industry with its
unlimited possibilities.
The Philips Hue is a web-enabled light bulb that allows customer to control the light bulb
from anywhere in the world and from any smart devices. This is one of the strengths of
the product because the customers have full control over its functionality to meet their
needs. For example, a user can walk into a room and the light can turn on automatically
without having to use the light switch. This concept is called geo-location, whereby your
smart device communicates to the Hue lighting systems your location and triggers the
command that you set as you enter a designated location in your house, which gives users
the ability to improve their lifestyle.
Another strength the Philips Hue has is that the light bulbs are made out of LEDs. As
many Americans desire to preserve the environment, the Philips Hue light bulb addresses
those needs because it is built to be more energy efficient and environmental friendly.
LEDs are a new generation that Philips is betting will affect not just people's homes, but
agriculture, health care, and urban safety. It has the potential to reduce the amount of
electricity used in the U.S. by 50%, saving $250 billion (Gertner, 2014). This is a

societal marketing concept where it is a win-win situation for both the company and
consumers.
The Philip Hue has an app that is available for free via iOS and Android. The Hue light
bulb is an average light bulb if it were not for the app, but with the app comes the
smartness of the light bulb. The app allows users to personalize their settings and
configurations. Philips has offered an open source platform known as API for third-party
developers to build new apps for the lights. The developers are exploring and unleashing
more possibilities to experience and interact with light to enhance peoples lives. One
example is flashing the light red when the smoke alarm detects a fire. As more and more
apps are showing up in market to support Hue, it makes the product more valuable.
Weaknesses
A major weakness of Hue is its high-end price. From $59.99 for a single light bulb to
$199.99 for a starter kit that consists of three light bulbs, one Ethernet network cable, one
power adapter, and one bridge. The high price is due to the quality of the product. It is
considered a shopping product because customers need much more time to compare
price, quality, or style of the product with other alternatives that serve the same purpose.
The product may attract early adopters, but for the most part the cost has put it out of
reach for a wide number of customers.
The wireless lighting system is the nuts and bolts of the product, but it may become an
issue if customers do not have a wireless connection on their smart devices or in their
home. This poses a weakness because customers will need to purchase a wireless network
in order to utilize the full functionalities of the Philips Hue.
Philips has not been focusing on advertising the Hue. For the most part, it is promoted
through word of mouth, online product reviews, and videos via YouTube. Even though,
the Philip Hue has managed to achieve a high level of awareness, the price is still the
biggest barrier for entry. If Philips lowers its price, more people will buy it. Philips needs
to persuade more people to purchase the product by highlighting its strengths compare to
its competitors. Therefore, the product promotion is weak causing the demand is not as
strong.
When Philips Hue first came out, it was exclusively distributed to Apple stores
worldwide and on Apple.com. Philipss partnership with Apple was to give Hue a
spotlight with one of the worlds most popular brands in Apple. It's unclear why Philips
has chosen to sell the bulbs exclusively through Apple, but the company clearly believes
Apple's audience would be more likely to purchase this kind of product from the outset
than the owners of other devices (Cheng, 2012). It can be assumed that Philips chose to
sell through Apple because of a similar mission, values, and vision. Both companies can
relate to innovation, high quality, and making a difference in peoples lives. Philips has
learned to adopt to a selective distribution approach where not only Apple carries the
product, but now you can find it at Best Buy, Home Deport, Verizon, and Amazon.com

Opportunities
The Home Automation Market was valued at USD 3.6 billion in 2012 and is expected to
reach USD 16.4 billion by 2019, growing at a CAGR of 24.6% from 2013 to 2019
(Digital Journal, 2014). As our society is starting to depend upon automation in our home
and life, we depend on products that promote automation and increase our well-being.
The Philip Hue existed to target this segment of the market and it will continue to thrive
with new innovations. For example, Google is working with Philips to integrate Hue with
Nest, a Google-owned smart thermostat. The idea is to use the Hue lights to indicate
smoke or carbon monoxide that is present in the room. This function can potentially save
many lives as well as securing a safe environment with these products.
Everyday technology is getting better, regardless if it is hardware or software. The Philips
Hue light utilizes both hardware (phone, light bulb, & bridge) and software (apps) to
create value for its ultimate consumers. The Philips Hue light bulb is classified as both a
consumer and business product. Light bulbs are continuously being use daily in our home
and businesses to promote productivity. As technology continues to improve, it allows for
an opportunity to deliver better value to customers.
While approximately 25 percent of the worlds population has access to and uses the
Internet, more than 65 percent use mobile phones. Of the 331 million mobile phone users
in the United States, approximately 45 percent use smartphones (Kerin, Hartley,
Rudelius, 325). This opportunity indicates that cell phone and Internet users are
becoming a huge margin. Generation Y, which are known as the Millennial Generation,
are a tech savvy generation. They have grown up with technology and it has become a
significant part of their day-to-day life. The opportunity to target to this market of
smartphone and tablet users will increase sales, profit, and brand equity.
Philips has recently announced its partnership with Bulb. Com, which Bulb.com is
adding the Philips Hue lighting system to its LED product assortment. This is a great
opportunity for Philips Hue because it is exposure beyond the Apple stores and into the
mass market.
Threats
One of the threats for the Philips Hue is its increasing competition. Philips Hue is a leader
in smart lights, but many competitors such as LG and Samsung are entering into the
market. Philips has to continue to stay on top of its competitors in order to hold its title as
the leader in smart LED lights.
Another threat is shift in consumer taste. The ability to have your light bulb change colors
is interesting now, but in the future there maybe better alternative to what the Philips Hue
can provide. For example, with the introduction of smart wearable such as smart watch a
smoke alarm can vibrate your wrist rather than flicker the lights.

One of the environmental forces that affect businesses is regulation. Federal regulation on
the Philips Hue can cause potential challenges for the company to be innovative.
However, it is also true the other way around. For example, the Department of Energy
issued energy efficiency standards for light bulbs, which required the use of more
efficient light bulbs. Philips Hue met the standard, but any future standards, laws, or
restrictions placed on the business can be a threat.
The latest threat to connected homes has emerged: a popular brand of connected LED
lightbulbs can be hacked to change the lighting, and worse, to reveal the homeowners
Wi-Fi Internet password (King, 2014). Philips Hue is subject to security issues.
Anything connected to the Internet or wirelessly is a target for potential hacking. The idea
of having an intruder turn off your lights at any moment can cause even the most techno
loving consumer to stay away.
Competitors Analysis
Figure 3 is a Competitors Analysis of the Philips Hue LED smart light bulb. It illustrates
the main difference between Philips Hue and some of its competitors products and
marketing mix.
Philips Hue is in the growth stage of its product life cycle, its important to communicate
the points of differences to consumers because it helps them distinguish the products. The
points of differences are characteristics of a product that make it superior to competitive
substitutes.
In summary, the Philip Hue has been in the market for longer and its more established
than its competitors. Two years from its release, Hue had expanded to some retail and
online stores to make it more available. Even though, its price has not change. It has
recently added new a member to its product line called Philips Lux. The Philips Lux is
cheaper, but cannot change colors. However, the new product has a new hub called the
Tap, which is powered by kinetic energy from ones touch. In comparison to its
competitors, many provide the same value to consumers. The main points of difference
between Hue and its competitors are that they are eliminating a hub, utilizing a Bluetooth
connection, and allowing more bulbs to be control by the smart devices.
Figure 3. Competitors Analysis

10

Company:

Name:

Date:

1. Philips

Philips Hue

Oct.
2012

Philips Lux

Mar.
2014

Product
:
LED

LED

Price:

Place:

$59.99
(bulb
cost)

Selectiv
e Retails
and

online.

$199.9
9 (kit
cost)
$40
(bulb
cost)

Selectiv
e Retails
and

online.

$100
(kit
cost)
2. Lifx

Lifx

Nov.
2012

LED

$99.00
(bulb
cost)
$380
(kit
cost)

3. TCP

Connected

2013

LED

$ 30
(bulb
cost)
$169
(kit
cost)

4. Belkin

5. Samsung

Belkin
WeMo

Smart
Bulbs

Jan.
2014

Mar.
2014

LED

LED

$39
(bulb
cost)
$129
(kit
cost)
$32
(single)

Point of Difference:

Selectiv
e Retails
and

online

Exclusiv
e Retail
stores
and
online
(Home
Depot)

Exclusiv
e Retail
stores

and

online
(Home
Depot)
Retail

stores

Zigbee
Bridge (Hub)
50 bulbs can connect
to the Bridge
600 lumens of light
Zigbee
White-light only bulbs
Tap (Wireless wall
switch powered by
kinetic energy)
50 bulbs can connect
to the Tap
Zigbee
No hub required
1000 lumen of light
17 watts of power
Bigger & heavier
(10.4 ounces)
No IFTTT
compatibility
JenNet-IP protocol
White-light
Comes with a remote
No IFTTT
compatibility
800 lumens of light
11 watts of power
Robber light
Control 250 bulbs
Zigbee
800 lumen of light
60 watts of power
Kindle
IFTT compatibility
White-light
Bluetooth

11

6. GE

Link

July
2014

LED

$30
(bulb)
$70
(Wink
Hub)

and
online.

No hub
64 bulbs can connect
to mobile app

Exclusiv
e retails
and
online
(Home
Depot)

White-light
Bluetooth
No hub required
800 lumens of light
12 watts of power
50 bulbs can be
supported

Market Demand Estimate

To estimate the demand for smart lights, we need to look at the market pattern for LED
light bulbs because LED is the core of smart lights. The market pattern of smart lights
will likely be aligned with the growth of the LED light bulbs.
LED light bulbs are also in growth stage of its life cycle with the expected market
penetration as described in the following graph provided by Statista.com:
Figure 4: Estimated LED Penetration of the Global Lighting Market from 2010 to 2020

70
61

60
53

50
44

40
Penetration rate in %

35
30
26
20

18
11

10
6

2
1
0.3
0
2010 2011 2012 2013

2014

2015

2016

2017

2018

2019

2020

According to former CEO of Philips, LED lighting would even reach 80% market share
of the global light bulb industry in 2020 (Lacey, 2013).
According to Forbes.com, LED light bulbs currently account for 18% of the global light
bulb market, which is 360 million LED bulbs sold each year (based on the 2 billion
global annual sales of light bulbs according to Charles Fishman). For simplicity, we will

12

assume this 360 million LED bulbs include the smart lights. We could not prove this
point but we can reasonable assume it because none of the light manufacturers separate
the number of LED light bulbs and smart lights in their financial reporting.
Based on our assumption, we will estimate the demand for smart lights according to the
percentage of the early adopters in the market. According to Henry Blodget (2012), the
buyers of new technology products will fall under 5 segments:
-

Innovators (2.5% of market)

Early Adopters (13.5% of market)
Early Majority (34% of market)
Late Majority (34% of market)
Laggards (16% of market)

With the current price of the smart lights, we determine that the early adopters will
most likely purchase the products. Based on our estimate of 360 million LED bulbs sold
each year, the market demand for smart lights would be 13.5% of 360 millions, which is
about 48.6 million bulbs. This number will be attainable and reasonable since smart lights
have wide and popular distribution channels in the world. Information about distribution
channels was discussed in the earlier section.
We expect the annual demand of 48.6 million bulbs will be stable for the next 3 years. As
more competitors are entering the smart light market, we expect a significant price
reduction for this product starting in 2018. This predicted price reduction would increase
significantly based on the annual growth in sales of LED bulbs and as the early
majority class starts to purchase smart lights.
Another factor that would likely boost the sales of smart lights is the popular of smart
lights complementary products such as smartphones and tablets.

Figure 5: Global Device Penetration Per Capita

13

According to the chart above from John Heggestuen, tablets and smartphones are
penetrating the market at an incredible rate: 22% for smartphones and 6% for tablets
(Business Insider). These penetrations mean that every 4 people in the world, one of them
owns a smartphone and every 17 people, one of them owns a table. With the strong
growth of the complementary products, we believe smart light market penetration will
increase rapidly in the near future.
Conclusion
In conclusion, the Phillips Hue is a well-established product and its ahead of its
competitors. The benefits that Philips Hue has to offers its consumers are beyond reach.
Theres no doubt that Philips Hue will continue to improve and impact consumers. No
one has ever thought about how a simple product such as the light bulb can be a game
changer. The demands for this product will continues to grow along with the Internet of
Things that makes a difference in peoples lives. The next brightest opportunity for
Philips Hue will be in its app. The possibilities are unlimited.

References

14

Blodget, H. (2012, September 13). Actually, The US Smartphone Revolution Has Entered
The Late Innings. Business Insider. Retrieved July 22, 2014, from
http://www.businessinsider.com/us-smartphone-market-2012-9
Cheng, J. (2012, October 29). Philips selling colorful Wi-Fi lightbulbs exclusively
through Apple. Ars Technica. Retrieved July 17, 2014, from
http://arstechnica.com/gadgets/2012/10/philips-selling-colorful-wi-fi-lightbulbsexclusively-through-apple/
Dhanjani, N. (2013, August 13). Hacking Lightbulbs. 'Nitesh Dhanjani'. Retrieved July
17, 2014, from http://www.dhanjani.com/blog/2013/08/hacking-lightbulbs.html
Estimated LED Penetration of the Global Lighting Market from 2010 to 2020. Retrieved
July 22, 2014 from http://www.statista.com/statistics/246030/estimated-led-penetrationof-the-global-lighting-market/
Fishman, C. (2006, September 1). How Many Lightbulbs Does it Take to Change the
World? One. And You're Looking At It.. Fast Company. Retrieved July 22, 2014, from
http://www.fastcompany.com/57676/how-many-lightbulbs-does-it-take-change-worldone-and-youre-looking-it
Gernter, J. (2014, February 10). Philips. Fast Company. Retrieved July 17, 2014, from
http://www.fastcompany.com/most-innovative-companies/2014/philips
Heggestuen, J. (2013, December 15). One In Every 5 People In The World Own A
Smartphone, One In Every 17 Own A Tablet [CHART]. Business Insider. Retrieved July
22, 2014, from http://www.businessinsider.com/smartphone-and-tablet-penetration-201310
Home Automation Market: An Overview of Growth Factors and Future Prospects 20132019. (n.d.). Press Release. Retrieved July 17, 2014, from
http://www.digitaljournal.com/pr/2007528
Kerin, R. A., Hartley, S. W., & Rudelius, W. (2013). Marketing : The Core, 5th ed (5th
ed.). New York: McGraw-Hill.
Lacey, S. (2013, April 30). The Path to 80 Percent Market Share for LED Lights. The
Path to 80 Percent Market Share for LED Lights : Greentech Media. Retrieved July 22,
2014, from http://www.greentechmedia.com/articles/read/The-Path-to-an-80-PercentMarket-Share-for-LED-Lights
Mood, B. (2012, November 7). Philips' Hue: A Bright Idea for Tech Investors |
InvestorPlace. InvestorPlace . Retrieved July 17, 2014, from
http://investorplace.com/2012/11/philips-hue-a-bright-idea-andinvestment/#.U8gFoGYwz9s

15

New! Color you world with ilumi tunable LED Lights. (Summer 2014). SkyMall. Pg. 89.
Philips Lighting B.V. (Philips), High Tech Campus 45, 5656 AE, Eindhoven, The
Netherlands ("Philips"). Retrieved July 15, 2014, from http://meethue.com/en-US
Trefis Team. (2013, June 11). GE Lighting Sees Brighter Future With LED
Growth. Forbes. Retrieved July 22, 2014, from
http://www.forbes.com/sites/greatspeculations/2013/06/11/ge-lighting-sees-brighterfuture-with-led-growth/
Youtube. Phillips HuePersonal Wireless Lighting. Online Video Clip. YouTube, 16
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