Marketers looking for a strong upward spike in their sales charts will claim that once a price drops to a certain level, such as the magical $500 price point for consumer electronics like CD players, the mass market will rush to buy their product. But falling prices aren't the key factor, argue Rajshree Agarwal, assistant professor of strategic management at the University of Illinois at Urbana-Champaign, and Barry L. Bayus, professor of marketing at the University of North Carolina's Kenan-Flagler Business School. “Price itself is unimportant in causing sales in the market to take off,” says Agarwal. She and Bayus provide evidence that the entry of competitors is the real cause.In “The Market Evolution and Sales Take-Off of Product Innovations,” published in the August 2002 issue of Management Science, the authors describe their analysis of 30 consumer and industrial product innovations that resulted in successful and entirely new product markets over the past 150 years. In the evolution of every market, from sewing machines and CD players to heat pumps and antibiotics, a surge in industry sales growth was preceded by an uptick in the number of competing firms.T
