One or more companies have introduced a better product at a lower price

Symptom: Competitors are quickly gaining share by offering a product which has higher performance than the standard product, at a lower price.

Implications for the market:

  • The ability to offer such a product may be based on a labor advantage (e.g., lower labor costs in Korea), on the unbundling and rebundling of benefits (e.g., Domino Pizza's removal of restaurant seating in exchange for fast home delivery) or on a new technology (e.g., fax transmission rather than air express services).

  • In any event, share will move quickly because the product is extremely attractive to a segment of customers, which gains either higher performance without a commensurate price premium or a lower-priced product without any sacrifice of benefits.

  • As this product becomes more accepted and established, the industry will experience a radical shakeup. Existing competitors need to adopt a new approach to counter this threat.

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Perspectives: Conclusions we have reached as a result of our long-term study and observations.