GoPro Inc (NASDAQ:GPRO) is being generous in trying to calm disappointed customers who bought its drone Karma. The company is refunding the customers and on top of that it is giving them a free Hero5 Black camera, just for a selling them a drone that didn’t meet their expectations.
2,500 Karmas recalled
GoPro recalled all the 2,500 Karma drones it had sold before it discovered the product had a problem that caused it to fall from the sky. The 2,500 units of Karma were sold in just two weeks, a sign that GoPro had started on a positive footing in the drone business.
But the company has now been forced to pull the drone from the market. The problem with Karma was that vigorous vibration in some parts caused the battery to detach, leading to power loss that caused the drone to collapse midair.
The problem with Karma couldn’t have come at a more difficult time for GoPro. The company was looking forward to strong holiday sales to try to turn around its dwindling fortunes and it put much hope on Karma success. GoPro sold the Karma unit alone for $800, but a bundles package including a camera started at a little over $1,000. The bundled package would have boosted GoPro’s camera uptake.
GoPro is already battling shrinking revenue and a deteriorating bottom line. The company posted EPS loss of $0.60 on revenue of $240.6 million in 3Q16. Both EPS and revenue decreased from a similar quarter last year and missed the consensus estimate that called for EPS loss of $0.36 on revenue of $315.9 million.
Buying customer loyalty
While the free Hero5 Black camera that GoPro is giving away to customers who bought the disappointing Karma may buy their loyalty, giving 2,500 cameras free of charge is a major financial loss for the company and an expensive price to pay for customer loyalty. But for a company that has not given up on its drone business, the move makes sense because it would want those customers to come back again and buy its improved Karma drone.
In the drone business, GoPro is battling for market share against DJI, which is now expected to reap from the Karma crisis. GoPro’s camera rivals include Sony Corp (NYSE:SNE), Nikon and Canon Inc (NYSE:CAJ).
