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Introduction
The drone industry has emerged as a game-changer in recent years, transforming a wide range of industries through its versatility and ease of use. The global market is divided into various segments, including consumer, commercial, and military drones, with each offering unique benefits and opportunities. Till now, airborne drones have been used by hobbyists and the military for years all over the world. Drones are now expected to be used by a wide range of businesses. Compact drones with cameras are being sent to review oil rigs, monitor agricultural fields and mines, and keep an eye on telecom towers.
In order to scan hundreds of miles of pipeline, deliver packages, or support search-and-rescue operations, industrial drones of the next generation will be dispatched to fly beyond the visual line of sight. The possibility that full-size, pilot-optional cargo and passenger planes will eventually join the fleet of airborne drones has significant repercussions for aerospace companies working on products for the next generation ((BCG, drones go to work 2017).
The use of drones in agriculture has become increasingly popular in recent years, providing farmers with an efficient and cost-effective way to monitor their crops and optimize their yields. The commercial drone industry has witnessed significant growth in the agriculture sector, with a projected CAGR of 30.5% between 2021 and 2028, indicating substantial opportunities for drone manufacturers and service providers (PwC).
Avemoy, an Austria-based young start-up, is such a drone service provider that is planning to enter this sprawling market by focusing on the agriculture sector. This report presents a comprehensive analysis of the commercial drone industry for Avemoy. This report's goals are to offer a thorough assessment of the market conditions and competition in the commercial drone sector, as well as to suggest workable pricing strategies. The research is organized to first give an overview of the market potential, segmentation, and developments in the commercial drone market. Several sources, including market research,
industry reports and company homepages, are used in our analysis. We have identified significant trends and aspects that are essential for creating winning strategies in the commercial drone market by using a content analysis-driven approach. The report is based on content analysis from secondary data (i.e., market research reports, industry reports and company homepages) to provide insights into current market trends, competitor analysis, customer analysis and future growth opportunities.
Furthermore, pricing strategies employed by the market players are discussed and then we will offer a set of suggestions that Avemoy may employ to take advantage of this sprawling drone market. Our recommendations are made expressly with Avemoy's needs and objectives in mind and are supported by a thorough grasp of the market and the competitive landscape.
Collectively, we think that our research and suggestions will be helpful to Avemoy in developing market strategies that would promote growth and achievement in the dynamic and cutthroat commercial drone business.
Market Overview
Over the past ten years, the drone business has experienced substantial expansion and is now employed for a wide range of activities. Due to their adaptability and capacity to reach locations that are difficult to reach, drones are becoming more and more popular. With a wide range of applications, including but not limited to aerial photography, videography, surveying, mapping, delivery, agriculture, inspection, and surveillance, the drone industry can be divided into many categories based on size, range, and usage.
A high rate of growth in the worldwide drone market is anticipated, driven by rising demand from numerous industries. By 2027, the market for drones is anticipated to reach $129.23 billion, expanding at a CAGR of 53.5% (Grand View Research, 2020). According to a forecast from BCG, there will be more than a million industrial drones in use in Europe and the US by the year 2050 (BCG, drones go to work 2017).
According to usage, size, and range, the market can be divided into consumer, commercial, and military drones. Due to the rising demand for drones across a variety of industries, the commercial drone market is anticipated to experience the highest growth during the projected period. By 2025, the commercial drone industry is projected to increase at a CAGR of 25.4%, bringing the overall drone market to $42.8 billion. The forecasts for the drone market are upbeat, and it is anticipated that the sector will expand over the next few years.
Given its quick growth and wide range of potential uses, the drone industry provides start-ups with a huge opportunity. The global market for drone-powered solutions is predicted to reach $127.3 billion by 2020, with great room for further expansion, according to a PwC analysis. The infrastructure, agricultural, transportation, and security sectors are among those predicted to adopt drone technology the most, according to the survey by PwC.
Drone start-ups have a lot of opportunities in the infrastructure sector since drones can be used to inspect, survey, and maintain infrastructure, including bridges, roads, and buildings. The construction sector alone has an $11.1 billion opportunity for drone technology, according to a study by Goldman Sachs.
A big market for drone startups is the agriculture sector, where drones may be utilized for pesticide application, yield optimization, and crop monitoring. The global market for agricultural drones is anticipated to expand at a CAGR of 30.21% from 2020 to 2025, according to research by ResearchAndMarkets.
Literature review
In this literature review section, we will discuss various factors to consider during the market analysis process based on the market research reports and industrial reports published by experts in the field. Further, this literature review helped us to define codes and identify themes for our content analysis to meet the objectives of the study.
Competitor Identification & Analysis
Any firm should consider its competitors and drone startups are no different. When performing an analysis for a drone startup, there are a number of factors to consider. The competitive landscape should be taken into account as one of the first factors when performing a competitor analysis for a drone startup. This entails identifying the major players in the market, their advantages and disadvantages, and any risks or opportunities they could pose. According to a Nielsen (2018) study, DJI, Parrot, and 3D Robotics are among the leading companies that control the drone industry. It is challenging for new competitors to compete since these businesses have a sizable market share and are well-established.
Market segmentation should be taken into account while doing a competitive analysis for a drone startup. This entails figuring out the various market segments that already exist and selecting which areas the startup should concentrate on. Drones have various diverse commercial niches, including agriculture, construction, and surveying, according to 2017 research by Bambach et al. It is crucial for the start-up to comprehend these and adjust its services in accordance with the specific wants and requirements that each market sector has.
A SWOT analysis should be carried out by the drone start-up in addition to analyzing the competitive environment and market segmentation. Finding the start-up's advantages, disadvantages, opportunities, and risks falls under this category. According to research by Suominen et al. (2019), a SWOT analysis can help startups pinpoint markets where they can successfully compete and those where they need to make improvements.
The regulatory environment is a crucial factor to take into account while performing a competitor analysis for a drone startup. This entails being aware of the laws that control drone use as well as the operator training standards. It is crucial to comprehend the regulatory environment and any potential changes since, according to research by Leasure et al. (2018), regulatory ambiguity can be a substantial barrier to entry for drone start-ups.
Finally, when performing a competitor's analysis for a drone start-up, it's critical to take the technical landscape into account. This entails being aware of the many drone types that are available as well as the technology that is employed to control and fly them. Technology advancements are fueling innovation in the drone market, according to research by Li et al. (2021), so it's critical for start-ups to stay up-to-date with these innovations and incorporate them into their services.
Customer Identification, Segmentation, and Targeting
Deloitte (2017) projects that the commercial drone industry will expand significantly over the next several years, with drones being utilized in a range of sectors, including insurance, construction, and agriculture. For commercial drone start-ups, this growth brings both possibilities and problems, especially when it comes to locating and targeting their target market.
In the marketing process for new businesses using commercial drones, customer identification is a critical phase. Mishra and Ojha (2017) discovered that customer segments may be divided depending on the kind of service provided and the industry in which the drone is employed in their case study on customer segmentation in the drone business. Customers in the construction sector may need drones that can do site inspections and give in-depth 3D models, while customers in the agriculture sector may need drones that are fitted with specific sensors for crop monitoring.
Creating a tailored marketing strategy is the next step after identifying consumer categories. A thorough grasp of client demands and preferences is necessary for effective targeting. In order to be successful in the drone industry, Rashid and Azam (2020) stress the need to comprehend client wants and preferences as well as employ successful marketing methods. According to their research, successful commercial drone start-ups are those that are able to provide novel solutions that cater to their target consumers' demands.
In the literature, effective marketing tactics for commercial drone startups have also been examined. In order to determine the efficacy of drone marketing, Yang and Huang (2021) performed a case study. They discovered that leveraging social media platforms, collaborating with influential people in the business, and producing interesting and educational material may all be efficient methods for connecting with and interacting with target audiences. They also emphasized the significance of developing trust through good communication and of giving clients clear and straightforward information about the characteristics and capabilities of their drones.
Research has demonstrated that effective sales techniques need a thorough comprehension of consumer demands and preferences (Kotler & Armstrong, 2016). This entails gaining a thorough understanding of the target market, determining the particular requirements and preferences of the target market, and customizing sales messages and techniques to address those requirements.
Utilizing efficient sales channels is a key component of every successful sales plan. According to research, businesses that use several sales channels, such as direct sales and online marketplaces, may increase their sales volume and income (Porter & Heppelmann, 2014). This is so that customers have more purchase alternatives and the corporation may reach a larger audience by utilizing a variety of sales channels.
Pricing Strategy
The success of a commercial drone start-up can be significantly impacted by pricing strategy, which is a crucial part of the marketing mix. Start-up businesses need to comprehend the market demand, competitive environment, and cost structure of their industry in order to set prices for their goods and services that will be profitable.
The cost structure of the drone firm is a key element that affects pricing strategy. According to research, businesses with reduced cost structures may afford to charge lower prices while still turning a profit (Hitt & Hoskisson, 2018). This is due to the fact that decreased expenses may provide the firm with a pricing edge over its competitors, which may help it draw in and keep consumers.
The perceived value of the drone product is a key element that affects price strategy. Customers are prepared to pay more for items that offer special features or advantages that are not offered by rivals, according to research (Aaker, 2013). Longer flying periods, greater cargo capacities, and sophisticated sensors, for example, can provide commercial drones with a competitive edge in terms of perceived value. Value-based pricing is one pricing method that is frequently employed in the drone business. With this strategy, prices are determined according to the perceived value of the goods or services to the client rather than the cost of production or the level of competition. Value-based pricing is the most popular pricing approach in the drone sector, according to Grand View Research (2021), as it enables start-ups to distinguish themselves based on the features and quality of their products.
Penetration pricing is an additional pricing method that several commercial drone start-ups have employed. In order to acquire market share and draw clients, this requires lowering prices relative to the competitors. This strategy, though, carries some risk since it can be challenging to raise rates once clients have become accustomed to paying less (Kern, S., & Jäger, J. (2020). The use of penetration pricing in the commercial drone industry. International Journal of Aviation Management and Economics, 7(1), 1-14.)
Some commercial drone start-ups have looked into skimming pricing as a third pricing tactic. Setting high pricing for cutting-edge goods or services with no direct rivals falls under this category. This tactic is frequently employed when a start-up has to swiftly recover the expenses of significant R&D investments. This strategy, nevertheless, carries some risk because it could not be long-lasting if rivals enter the market (Liu, Y., & Wang, Y. (2019). Pricing strategies of drone startups: Evidence from China. Business Strategy and Development, 2(3), 199-209. .
Start-ups can also employ bundle pricing or dynamic pricing, which includes changing rates in real-time based on supply and demand, or they can provide a combination of products or services at a discounted cost (Wang, D., Li, X., & Ye, Q. (2018). Dynamic pricing in the drone industry: A feasibility analysis. Journal of Business Research, 84, 24-33.
According to research, the pricing approach used by commercial drone start-ups might significantly affect their success. Research by Yang and Huang (2021), for instance, discovered that DJI Technology Co., Ltd., a top maker of drones, employs a value-based pricing approach to successfully compete in the market. Rashid and Azam (2020) observed in another piece of research that start-ups in the drone business need to think carefully about their pricing strategy since it may either be a vital engine of growth or a barrier to access.
Methodology
Research Approach
Our examination approach is qualitative by nature. By definition, qualitative research is “the study of research problems inquiring into the meaning individuals or groups ascribe to a social or human problem” (Creswell 2007, 37). In any case, Denzin and Lin-coln (2005, 2-10) bring up that any meaning of such research presents explicit issues, attributable to the tremendousness of the related disciplines it crosses, alongside the various ideas that it envelops, and on the grounds that it has no particular hypothesis or worldview of its own. Connecting with these troubles, Alasuutari (1995, 7-8) proposes that the central issue of differentiating qualitative analysis from quantitative analysis might be the idea of qualitative analysis. Basically, the qualitative research process is a way to deal with a request that is portrayed by arising questions and methods of activity, gathering information in its regular setting, inductive data analysis that forms general examples or topics (see figure XXX) and includes a reflexive researcher who is focused on deriving significance and understandings from the information (Creswell 2007, 37).
Figure XXX
A qualitative approach can furnish any given company with viable devices for research in subjects relating to business and management (Gummesson 2000, 1). Creswell (2007, 39-41) elaborates that qualitative research is led when an issue or issue should be investigated. This report includes some exploratory elements: a review of relevant literature and market reports by experts in the field.
In conclusion, our study is cross-sectional by nature, suggesting the assessment of peculiarities at a set point in time. Our research is time-constrained because of the construction of the course module, which directs that we lack the capacity to deal with a longitudinal study. Likewise, this study is just at the course level, implying that investing a lot of energy in longitudinal research would be unfortunate according to our perspective. (Saunders et. al. 2009, 155.)
Data Collection
The commercial UAS industry is mechanically exceptionally serious, implying that its encouragement is firmly connected to the outcome of innovative work endeavours. Attributable to this thought, organizations working in the market are cautious about the data they deliver to the general population. On top of this, the industry is still in its development stage where effective methods of doing business and driving firms are not yet settled on the lookout. Hence, gathering data about organizations ends up being hard, which is the reason this study is confined to gathering secondary data about competitors from the web. The data about competitors was gathered through the web. The data sources comprised the organizations' homepages, related public statements, and market reports.
Data Analysis
While discussing data analysis one ought to remember that it doesn't advance in distance steps, but rather a spiral of analysis where various steps might happen even at the same time and in an unconventional order varying based on what was initially anticipated (Creswell 2007, 150). Subsequently, this report pretty much followed the below-mentioned process of analyzing data.
Mixed Method Content analysis was chosen as the data analysis technique based on the research problem and objectives, meaning analysis has both elements (i.e. quantitative and qualitative analysis). The data analysis focused on various variables derived from the theoretical frameworks (based on the literature review) to meet Avemoy’s objectives.
After collecting data related to our study and objectives, first, we prepared and organized the data. The data collected from the internet was saved in Excel files. The original headings of the web data were preserved in order to broadly define the topics of documents, which subsequently eased the process of coding the data. The gathered reports (data) were perused thoroughly to understand the full meaning of the data. Next, the text was coded based on themes derived from literature based on the commercial drone business.
According to Gibbs (2007, 38), “coding is how you define what the data you are analyzing are about.” So practically, when a phrase of text explicitly or implicitly referred to one of the codes (category), it was coded in a document using the corresponding tag. This process made the next stop of analysis easier where these coded documents were then grouped under refined themes (based on literature). The themes were refined as per the requirement of the objectives. Figure XXX shows examples of codes (categories) and derived themes for respective objectives. Inferences were drawn on the basis of the resulting information from these themes. Finally, the resulting information was visualized in the table and associated figures, and conclusions were made on When, Why, How, Where and With what pricing strategy Avemoy should enter the market.
Results & Discussion (I have cleaned and polished texts till here and will work more on this in the morning, signing OUT….Parth)
Market Potential & Size Estimation
We have performed a market analysis to gather all the relevant information about the drone industry to get a bigger picture of the industry globally and regionally. In this section, we have highlighted the tremendous growth potential of the drone industry in various sectors. We observed that drones are becoming increasingly popular due to their adaptability, versatility, and capacity to reach difficult locations. After a detailed analysis of various research papers, articles, and news stories, we found that the drone industry is divided into different categories based on size, range, and usage, including consumer, commercial, and military drones. Out of these, the commercial drone market is expected to experience the highest growth, driven by rising demand from various industries, with an estimated CAGR of 7.8% by 2030. When separately talking about the European market, is expected to reach approximately $13.4 billion by 2030 with CAGR 8.85%.
In the global commercial drone market, the top 3 industry vertices which generate the highest revenue are Energy ($4.28 bn, 14 %), Construction ($3.67 bn, 12%), and Agriculture ($2.75 bn, 9%). These sectors have prominent growth opportunities in upcoming years as drones have been making processes cost-efficient. So, more and more companies in these three sectors are adopting drones to make their process cost-effective and structured. Our collected data suggested that between 2020 and 2026, these sectors (Energy, Construction and Agriculture) can experience a growth at a CAGR of 35.7%, 37% & 30% respectively. Therefore, young start-ups or small companies can introduce themselves in these three sectors to take advantage of this growth. The below figure shows TAM, SAM, and SOM focusing on the Agriculture sector.
Competitor Identification & Analysis
Competitive landscape
In this report, 50 drone companies are compared, and their analysis is presented through a ranking model. Figure XXX shows the performance (p) scale based on the ranking model. This figure shows the competitive landscape among those companies on a scale of 1 to 10 (i.e., weak to strong performance). As per our ranking, companies below p<5 are market niche players. We have observed that these niche players have an above-average score in R&D and Technology over market challengers & followers (5<8) which makes them flexible to secure a specific small portion of the overall market.
However, their score of Revenue & Funding is below average which makes their performance below average in our performance scale. Companies in the category of market challengers & followers are well-established financially as well as socially. These companies have above-average scores in Revenue & Funding and Image & Positioning. Their major focus is not just on a single segment of the market but rather diversified due to their strong product portfolio. Companies on a scale of are market leaders due to their strong financial condition, R&D and Technology, image, and positioning.
It can also be inferred that most of the companies are either market niches or market challengers & followers, which indicates that the commercial drone market is very fragmented. Yet, there is no clear dominance in terms of competitive advantage by any company in the commercial drone market. In this phase, start-ups and small companies can easily enter this competitive environment and secure enough market share by focusing on specific customer segments.
Comparing Unique Selling Points (USPs)
Table XXX visualises the comparison of USPs of all those 55 drone companies along with their competitive nature as per performance scale. As per our analysis, two most important factors affecting USPs are 1) Cost & weight of the drone and 2) Modularity of its platform. It is observed through the latest reports and case studies that customers are looking towards more & more autonomy which drives them to customize their drone service as per their purpose of use. So, modularity to different platforms is an advantage for any company to have as USP. Also, having low-weight sensors and high payload capacity can also be advantageous but that can be very subjective towards the purpose of use.
It can be observed that Avemoy has a competitive advantage in terms of both factors associated with USPs over most of the companies (i.e., low cost & high modularity of platform). Also, these companies are either market niches or market challengers & followers which makes a friendly competitive environment. Therefore, it can be concluded from the matrix that all the companies are either selling lower or similar end-of-service/products compared to Avemoy across various industry verticals.
The innovation in drone technology, especially sensor and camera technology, is making this competitive environment friendly. Giants like DJI & Parrot Bluegrass are focusing more on the development of their sensor & camera technology to give their customers the best possible data collection experience rather than focusing on revenue generation which makes other companies follow in their footsteps. It can also be observed that companies are trying to find their position in the competitive environment which they can also sustain. So, these conditions are favourable for any new start-up or small company to enter this environment. However, they may need strong USPs to survive in this environment.
Nature of Competitors
Till now, we have compared drone companies on the basis of similar company capabilities. Now we will also add one more comparison factor i.e., similar market/customer which is an external factor. Table XXX shows that comparison along with companies colour coded as per performance scale. This comparison was made assuming that Avemoy wants to focus in the agriculture sector. This table gives a clear picture of Direct, Indirect, Potential competition and Non-competitor for Avemoy.
It can be observed that Avemoy has heavy Direct competition in the agriculture sector. Most of the companies are of the category market challengers & followers with an average score on Revenue & Funding scale. However, start-ups and small companies like Avemoy with strong USPs (i.e., low-cost and highly modular service package) can enter the competitive environment smoothly. Also, there is huge potential competition for these start-ups or small companies who want to expand their business across other industry verticals. Since the demand for drones across industries is rising and the market is also very fragmented in terms of revenue generation, these start-ups and companies can obtain satisfactory market share.
SWOT Analysis for Avemoy
SWOT analysis for any company helps to understand strengths, weaknesses, opportunities and threats associated with its current resources in hand. Considering Avemoy a young start-up that has not yet entered this commercial drone market. Therefore, it has a weak financial condition as well as market image & positioning when compared to other established companies in the market. Also, they are currently in a case study phase for the use of drones in agriculture applications. However, Avemoy’s USPs are something which can help them make their position in this environment. Considering its low-cost package and highly modular platform as a strength, Avemoy can successfully introduce itself in the market. Due to their highly modular platform, there will be opportunities to collaborate with non-competitors on various projects to increase market intelligence and build image. Since the market is fragmented in terms of revenue generation due to various purposes of use across various industries, Avemoy can easily focus on expanding its service to other industry verticals like energy and construction. Same to Avemoy, potential competitor can enter the agriculture market and becomes a threat to Avemoy. So this fragmented market has both positive as well as negative impacts on the entry strategy of Avemoy.
PESTEL Analysis
Figure XXX represents a PESTEL analysis of the commercial drone market. This type of analysis is used to study external factors affecting business or industry. Governments all over the world have set regulations for the commercial use of drones. The development, sale, and use of drone services/products may be impacted by national regulations that can be extremely diverse. The market can also be affected by government policies that protect intellectual property, cybersecurity, and data privacy. For example, the Federation Aviation Agency (FAA) in the US and the European Union Aviation Safety Agency (EASA) in the European Union limits the use of drones for commercial applications. It was observed from the market reports and reviews that companies who have obtained FAA certificates or similar have an advantage in securing high-end customers.
The commercial drone market is intensely impacted by economic factors like the cost of production, supply and demand, and economic growth. The market is likewise subject to financing and venture from private financial backers and state-run administrations. These economic conditions make it difficult to operate for young start-ups and small companies.
However, the demand for drones is expected to grow rapidly in the coming years, which could create new opportunities for these young start-ups and small companies.
According to our analysis, sociocultural factors like public perception, social acceptance, and cultural norms influence the adoption of drones for commercial use. There may be concerns regarding the impact that drones will have on security, safety, and privacy as they become more prevalent. Young start-ups and small companies should work to inform the general public about the advantages of drones and the preventative safety measures in place. These steps can help them build a successful image and attract customers.
Research & development is the highest influencing factor for the commercial drone market as new technologies like artificial intelligence, machine learning, and computer vision have a significant impact on the use of drones in various applications. Drone demand could rise as a result of the adoption of these technologies, which have the potential to significantly enhance their capabilities and functionality. These technologies allow drones to perform more complex tasks and operate autonomously in remote conditions by providing customers with cost-efficient solutions.
Drones can potentially reduce carbon emissions by supplanting customary transportation techniques, like trucks and planes. Similarly, drones can be used to monitor and protect natural resources, such as forests and wildlife. However, this demand for drones in the inspection, transportation and logistics sectors could be driven by environmental issues like climate change. Drone manufacturing and operation may contribute to the emission of greenhouse gases and other forms of pollutants. Therefore, sustainable and energy-efficient drone technologies should be used by drone manufacturers and service providers to reduce their carbon footprint.
Legal factors, such as patent and copyright laws, can impact the development and sale of drone-based services and products. The market is also influenced by international trade regulations, which can impact the ability of companies to sell drone services/products globally.
Summing up, a variety of constantly shifting factors shape the commercial drone market. To remain competitive and adapt to shifting market conditions, businesses in this market must closely monitor these external factors.
Customer Identification, Segmentation & Targeting
A framework has been developed on how to identify and segment customers starting from the purpose of use, to the industry verticals and finally narrowing down to the agricultural sector since that is of interest for Avemoy primarily. Drones are being used for various purposes across industry verticals and segmentation based on purpose of use can help companies identify which drones are most suitable for specific applications of interest like mapping, inspection and surveying in each industrial sector. The energy, construction and agricultural sector have been considered majorly focusing on the above mentioned applications since they have the highest operating revenue amongst other industry vertices.
Different crops have different requirements, and drone technology can be customized to meet these requirements. Farm size can impact the choice of drone for agricultural use. Small-scale farmers may have different requirements compared to large-scale commercial farmers. The type of crops grown and the climate of the region can also impact the choice of drone for agricultural use. This can help identify and target specific regions where demand for agricultural drones is high. So in this research crop type, farm size and geographical locations are the three factors considered to segment customers after narrowing down to the agricultural sector finally.
The following image is a visualization of the above mentioned framework.
Some of the methods drone companies can use to identify potential customers and figure out their preferences are discussed now. Researching industry publications and associations provide valuable information on the latest trends and technologies in the agricultural sector. Market research through papers, journals to gather data and also conducting surveys, interviews, and focus groups to understand the needs and preferences of potential customers in the agricultural sector. Partnering with industrial equipment dealers, since they often have established relationships with customers and can provide valuable insights into their needs and preferences. Attending trade shows and events can provide opportunities to network with potential customers and showcase drone products and services. By using these methods, Avemoy can identify potential customers in these sectors and develop customized solutions that meet their specific needs and preferences. For this research, the second method of market research has been focused on and the inferences have been presented on who their potential customers can be and how they can segment their customer base.
Purpose of Use
Segmentation of customers in the drone market can be done based on the purpose of use across all industries. Here are some possible segments: Agriculture includes farmers, agronomists, and agricultural businesses that use drones for crop monitoring, precision agriculture, and crop spraying. The Construction and Engineering segment includes architects, surveyors, and civil engineers who use drones for site inspections, surveying, and mapping. Energy segment includes oil and gas companies, power generation companies, and renewable energy companies that use drones for inspecting pipelines, power lines, wind turbines, and solar panels. Film and Photography segment includes professional photographers, videographers, and filmmakers who use drones for aerial photography and videography. Public Safety Includes law enforcement agencies, fire departments, and search and rescue teams that use drones for surveillance, monitoring, and disaster response. The real estate segment includes real estate agents and property developers who use drones for property inspections, site surveys, and marketing purposes. Transportation and Logistics segment includes delivery companies, warehouses, and transportation providers that use drones for package delivery, inventory management, and supply chain monitoring. Some other segments also include mining & minerals, wildlife & environmental conservation, military & defense to name a few.
Industry Vertical.
Firstly, segmentation of customers has been done based on the purpose of use across all industries to get an overview of the different applications that exist that might be of interest to Avemoy in the future if they want to expand their user base. Further focusing on applications such as mapping, inspection, and surveying the three industry verticals of interest have been segmented here. The construction and Engineering sector can be segmented into construction companies, engineering and consulting firms, inspection service providers, architects, and real estate companies who use drones for site inspections, surveying, and mapping. The energy sector includes segments such as oil and gas companies, power generation companies, renewable energy companies, engineering and consulting firms, inspection service providers, and government agencies that use drones for inspecting pipelines, power lines, wind turbines, and solar panels.
The customers for the drone market in the agricultural sector for mapping, inspection, and surveying are discussed in detail next. Farmers and agronomists have been identified as the primary customers for drone technology in the agricultural sector. They use drones to survey their fields and crops, monitor crop health, and assess crop yields. For such applications, drones equipped with specialized sensors and cameras to provide farmers with detailed information on crop growth and plant health, allowing them to make more informed decisions about fertilizer and water usage, as well as crop management strategies. This is on par with the product portfolio of Avemoy. Next are agricultural service providers which are companies that provide services to farmers, including crop monitoring, fertilization, and pest control. Agricultural insurance companies and Government agencies, such as the United States Department of Agriculture (USDA), can also be taken into consideration.
Crop Types
In the forthcoming discussions, three factors are mainly being considered for customer segmentation in the agricultural sector. Firstly, the agricultural sector has been segmented based on crop types and this might allow Avemoy to offer targeted solutions and services that cater to the unique needs of each crop type for both outdoor and indoor farms. Data regarding this has been consolidated only for the region of Europe since that is of main interest to Avemoy.
When a certain activity accounts for at least two-thirds of an agricultural holding's production or business size, the farm is regarded as specialized. By 2020, crop specialist farms will account for nearly 60% of all farms in the EU. A third of the farms were focused on field cropping, a fifth were focused on permanent crops, and about 3% of farms were focused on horticulture. General field cropping farms in this cluster of crop experts specialized in root crops including potatoes and sugar beet. Specialized farms for grains, oilseeds, and protein crop came next.
Farm Size
Next, customers have been segmented on the basis of their farm size. There are three main size categories for farms in Europe: (i) semi-subsistence farms, where a substantial amount of the crops are grown to feed the farmers and their families (ii) small and medium-sized farms, which are typically operated by families; and (ii) large agricultural enterprises, which are more likely to have a legal structure or be cooperatives.
By examining farms in terms of their economic size, these distinctions become more obvious. Only 3% of the 9.1 million farms in the EU produced less than EUR 2000 annually on average, accounting for less than 1% of the EU's entire agricultural economic output. These very small farms, which are at the (semi-)subsistence end of the farming spectrum, consumed more than half of their output in 2016. Furthermore, 2.5 million farms that are small to medium sized produced between 2000 and 8000 euros annually in terms of economic productivity. In Europe in 2020, these very small and small farms made up 63.7% of all farms. In comparison, 299 000 farms, or approximately 3.3% of the total number of farms in the EU, produced an average of at least EUR 250 000 annually; these farms may be classified as big agricultural operations.
Location
By segmenting customers based on geographic location location-specific environmental factors, crop varieties, and market demands can be assessed. In the EU, farms controlled 157.4 million hectares, or 40% of the total land area, as utilized agricultural area (UAA), along with 5.9% as forested areas and 2.2% as other farmland not used for agriculture. In a few Member States, agricultural landscapes predominated the countryside; in Denmark, this percentage was notably high (62.6%). The greatest used agricultural lands in Europe in 2020 were in France (27.4 million ha) and Spain (23.9 million ha), accounting for 17.4% and 15.2%, respectively, of the EU's total. Additionally, there were more than 10 million hectares of UAA in Germany (16.6 million ha, or 10.5% of the total EU), Poland (14.8 million ha, or 9.4% of the total EU), Romania (12.8 million ha, or 8.1%), and Italy (12.5 million ha, or 8.0%). Additionally, Avemoy can use this segmentation to identify trends and patterns across different regions and develop strategies to expand its market reach and increase its profitability.
There are also certain additional factors that can be considered in addition to these. Customers can be segmented based on the demands of the market they serve, such as those growing crops for export or those serving the local market. Customers can also be segmented based on the environmental factors that impact their farming operations, such as soil type, altitude, and climate.
Pricing Strategy
The pricing strategy that a company adopts can have a significant impact on its profitability, market share, and customer base. Thus, it is essential for businesses to carefully consider and choose the appropriate pricing strategy that suits their specific needs. This report aims to provide an overview of different pricing strategies that Avemoy can adopt to set their prices. The information presented in this report has been consolidated from various reputable sources. The report will cover several common pricing strategies used by businesses, including cost-plus pricing, value-based pricing, skimming pricing, and penetration pricing keeping their product portfolio in mind and taking into consideration that they are a start-up in the drone industry. Additionally, this report will explore which pricing strategies can be implemented and adjusted over time to reflect changes in the market and competitive landscape.
Startups require a pricing strategy that can help them gain a foothold in the market and attract customers while also ensuring profitability. This report will focus on the pricing strategies commonly used by startups, with an emphasis on their advantages and disadvantages. The pricing strategies that will be discussed include value-based pricing, skimming pricing, penetration pricing, and freemium pricing. Value-based pricing is an approach that involves setting prices based on the perceived value of the product or service being offered, rather than on the cost of production. The advantage of value-based pricing is that it allows startups to charge a premium price for a product or service that is perceived as valuable by the customer, resulting in higher profit margins. Additionally, this pricing strategy can help startups differentiate themselves from competitors and build a strong brand identity. Startups often have limited resources and face stiff competition in their early stages. Penetration pricing can help them gain market share by offering their products or services at a lower price than competitors. This can help attract price-sensitive customers and build a loyal customer base. Skimming pricing strategy when startups want to capture revenue from early adopters who are willing to pay a premium price for a new product. Freemium pricing is another strategy that is popular with startups offering software as a service (SaaS) products. This approach involves offering a basic version of the product for free, while charging for premium features or services. The advantage of freemium pricing is that it can help startups attract a large customer base, as customers are more likely to try a product if it is offered for free. However, startups must carefully balance the free and premium features to ensure that customers are willing to pay for the premium version.
Drone companies offering software as a service (SaaS) products require a pricing strategy that is suited to the unique characteristics of their products and services. In addition to the pricing strategies commonly used by startups, such as value-based pricing and freemium pricing, Avemoy can also consider other pricing strategies. One such strategy is usage-based pricing, which involves charging customers based on the number of times they use the product or service. This can be a good option especially when offering services such as aerial surveying or mapping, where customers may only need to use the service periodically. The advantage of usage-based pricing is that it allows customers to pay only for what they need, while also providing the company with a predictable revenue stream.
Another pricing strategy that can be used is tiered pricing, which involves offering different levels of service at different price points. This approach can be a good option when offering different services where customers may have varying needs and budgets, in case Avemoy decides to expand its customer base in the future.
Subscription pricing is another strategy that is commonly used by drone companies offering SaaS products. This approach involves charging customers a recurring fee for access to a product or service over a specified period of time. The advantage of subscription pricing is that it provides a predictable revenue stream for the company, while also ensuring that customers have ongoing access to the product or service. Dynamic pricing is advantageous for drone businesses in sectors that have fluctuating demand, like construction or agriculture. By adjusting prices in real-time based on market conditions, they can maximize revenue and optimize their operations. It's worth noting that these pricing strategies are not mutually exclusive and can be combined or adjusted based on the specific needs of the business and its customers.
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Time-based pricing
- This pricing model charges customers based on the amount of time the drone is used. This is commonly used for services such as aerial photography, surveying, or inspection, where the customer needs the drone for a specific period of time.
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Project-based pricing
- This pricing model charges customers based on the scope and complexity of the project. This is often used for larger projects such as construction site monitoring or infrastructure inspection.
- Subscription-based pricing: This pricing model charges customers a recurring fee for ongoing access to drone services or software. This is commonly used for companies that need regular drone services for things like site monitoring or security.
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Value-based pricing
- This pricing model charges customers based on the perceived value of the service being provided. This is often used for services that offer significant cost savings or other benefits, such as precision agriculture or industrial inspection.
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Tiered pricing
- This strategy involves offering multiple levels of service with different features or benefits at different price points. This can help companies attract a range of customers with different budgets and needs.
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Dynamic pricing
- This strategy involves adjusting prices in real-time based on market demand or other factors. For example, a company may charge more for drone services during peak demand periods or for urgent requests.
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Freemium
- This strategy involves offering a basic version of a product or service for free, while charging for premium features or upgrades. This can be a good way to attract new customers and upsell them on additional services.
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Take Away & Future scope
- potential market for avemoy - 3 sectors with figures
- market size estimation with focus on agri
- favourable conditions for avemoy to enter the market
- niche market, fragmented market
HOW
- competitive landscape, USP
- competitors, direct/indirect/potential and opportunity
- internal and external factors
WHERE
- industry verticals to focus on for esp agri
- application / purpose of use
- segments for expansion
PRICING
- which suits best for avemoy as a start up, as a drone company, for SaaS
- long and short term perspective
- with what pricing strategy they should enter the market
FUTURESCOPE
- limitations of report and analysis
- improve this report for future analysis
- pricing strategies suggested for the long term
- expansion of customer base in the future
References
For pricing strategies for startups
- Entrepreneur. (2017). 5 Pricing Strategies for Startups.
- HubSpot. (n.d.). Pricing Strategies for Startups: How to Determine Your Ideal Price.
- Inc. (2019). 7 Pricing Strategies for Startups to Win Customers.
For pricing strategies for drone companies:
- Dronethusiast. (n.d.). The Drone Business: Cost-Plus Pricing and Pricing Strategies.
- Drone Industry Insights. (2019). Pricing Strategies for Drones: How to Determine Your Ideal Price.
- Skyward. (n.d.). Pricing Strategies for Drone Services.
Pricing strategies for drone companies offering software as a service (SaaS):
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