GoPro Inc (NASDAQ: GPRO) is trying to find a way to boost sales, improve user experience, and upgrade more customers to its cloud service by introducing a new trade-up program. On Tuesday, the company announced customers can trade in any old GoPro camera for a new Hero5 Black or Hero5 Session. This could help drive a wave of camera upgrades for consumers who have been loyal to GoPro for years.
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Keeping customers engaged
The upgrade program will allow customers to trade in old GoPro cameras for $100 off the Hero5 Black or $50 off the Hero5 Session, in a consumer space where it's difficult to justify spending $300 or $400 on a new camera that may only be used sporadically throughout the year. A smartphone is easy to justify, but for most users, it's harder to rationalize a new GoPro.
The Hero5 lineup from GoPro. Image source: GoPro.
Making it even a little bit easier for customers to upgrade to the best GoPro products will be a good thing. Getting new devices in the hands of millions of existing customers and getting old products out of circulation will improve the GoPro experience overall.
This could also help sales of new accessories and of the $4.99-per-month GoPro Plus subscription. Both will ease some of the cost of the program, which may not be as much of a financial negative as you might think.
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Why this won't hurt GoPro's finances
One of GoPro's challenges long-term is where to sell its products. GoPro sells direct to customers through its website, but it also sells at retailers and through distribution channels. To keep selling prices the same, GoPro has to sell to retailers at a discount so they can take a profit. So, a GoPro Hero5 Black that may be worth $399 in a direct sale on GoPro.com may only be revenue of $299 for GoPro through a retail channel.
Despite the lower effective sale price, the exchange program will likely be about the same margin as a sale through retail, so it won't be damaging financially. And if a few customers upgrade to GoPro Plus or buy some accessories along with their purchase, all the better.
It's also possible this will improve GoPro's direct relationship with customers. Direct sales would have higher margin and carry less inventory risk, and GoPro would learn more about what customers are looking for in their products.
A risk worth taking
If GoPro can make this program attractive enough to get customers to upgrade more often, it may be a great long-term strategy, beyond the limited-time offer of the program announced today. And the cost may not be detrimental to the company's finances at all. In fact, if it brings in a few more sales from accessories, services, or even Karma, it could be a hit.
No single product or announcement will turn GoPro around, but I think the new products and services it's announcing are a step in the right direction. And if GoPro can get products right it should be able to return to profitability again, which would obviously help the stock price. Right now, small steps like this trade-in program are taking GoPro in the right direction.
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Travis Hoium owns shares of GoPro. The Motley Fool owns shares of and recommends GoPro. The Motley Fool has the following options: short January 2019 $12 calls on GoPro and long January 2019 $12 puts on GoPro. The Motley Fool has a disclosure policy.