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Garmin Needs to Keep Things Simple

Analysts say the company is hurting itself by offering too many versions of the same GPS device.




, the message is clear: Keep it simple.

Most experts say the maker of GPS-based navigation systems has been confusing customers, lowering buyer satisfaction and taxing the company's operations by offering 30 models of its "Nuvi" car navigation systems that range from $200 to $1,000 in price.

"I believe 30 (models) is too much," says Russell Winer, a professor of marketing at the Stern School of Business. "There's a lot of academic research that shows consumers get overwhelmed by a product having too many attributes and variations."

Garmin needs to streamline its offerings, cut down on the number of models and build in greater differentiation between the different variants, say company watchers.

"I think what they have is too much," adds George McAuliffe, portfolio manager with Tocqueville Asset Management, which holds shares of Garmin in some of its funds. "I don't understand the higher-end devices and think some of them are just too complicated."

Garmin's many offerings are far more than its largest rival,


, which lists about 12 models. Its smaller competitor


has 11 models of its car navigation systems.

Garmin spokesperson Carly Baltes, though, says the company wants to offer numerous variants in a bid to help customers choose the one that's best for them.

"A buyer can almost customize the device they want," she says. "It is important that we offer as many SKUs (stock-keeping unit) as we can, all the way from the low end to the high end so customers can tailor the device to their preferences."

But having so many variants of the GPS device can also leave some customers who have already bought the product dissatisfied, says Gloria Barczak, professor of marketing at Northeastern University, as they could be left wondering if they bought the right model for their needs. Too much choice also leads to too much complexity in decision-making, she adds.

Even Garmin's Web site lets users compare only five of the 30 flavors it has available.

Winer acknowledges there are some advantages to having multiple variations of a single product. Customers can have a greater choice and it helps in a fast growing market to offer a product that can satisfy every segment.

And in the early years of the products, it may have been the right strategy. "The early ideal then is to fill the channel, get as many shelf spaces as you can in retail and build demand for the product," he says.

But experts say Garmin may have to reconsider its strategy with increasing competition and growing pressure on pricing and margins.

There is no ideal number of variations that a company can offer customers but there is a risk to offering too many. "The downside is confusion and lack of differentiation among the products," says Barczak.

Garmin could learn a lesson or two from other successful consumer electronics players, say experts.




. which reinvented the MP3 player genre with the iPod.

In addition to the device's minimalist style, the company kept it simple with just four distinct product lines: the iPod Classic, Nano, Shuffle and Touch. In each line, the company offers a maximum of two choices.

"Apple does a great job of not overloading the iPod with features and not offering too many SKUs," says Winer.

Or consider the popular Flip camcorder from

Pure Digital

. The pocket-sized camera, which has caught on among consumers for its ease of use, comes in just three flavors: Flip Video, smaller Flip Mino and Flip Ultra.

"That helps keep their costs down and hit a sweet spot of people who want a good device but not have too many choices," says Winer.

Winer points to the 20%-80% rule in consumer electronics. About 80% of sales are generated from 20% of the products, and that's likely to hold true even among Garmin's vast portfolio, he says.

With so many models, Garmin risks not achieving economies of scale, says Barczak.

"Every additional feature or SKU is some additional cost in terms of manufacturing or operations, and, however small, it leads to some inefficiency," she says.

It won't be too long before Garmin is forced to streamline its portfolio, Winer says. And the pressure to do it is likely to come from retail giants such as

Best Buy



Circuit City


that carry Garmin's products.

"Retailers only want to carry products that have velocity," says Winer. "And as competition increases, the retailers will force Garmin to offer fewer products at better prices."

"A good strategy for Garmin now would be to take a look at all its SKUs and pick the main five or six with features that most customers want and offer those," he says.

Shares of Garmin were up 42 cents, or 1.2%, to $34.09 in recent trading. The company's stock has fallen more than 45% since the beginning of the year and is trading near its 52-week low.

Last week Garmin

missed analysts' estimates

for the second quarter and warned for the fiscal year. Revenue for the second quarter grew 23% to $912 million, which was short of Wall Street's estimates of $956.4 million.

For the year, Garmin said it expects EPS, excluding items, of $3.86 on revenue of $3.9 billion. Analysts were looking for earnings of $4 a share on revenue of $4.12 billion.

Analysts fear GPS-based navigation systems are becoming a commodity as consumers have a number of choices, not just among device makers but also among cell-phone service providers such as



that offer turn-by-turn directions on the phone for a monthly fee.

Tocqueville Asset Management's McAuliffe says the sentiment on Garmin's stock has been overly negative. "Fundamentally their design is good, and they remain strong in segments such as aviation and marine," he says.