Should a new product or service start at the high end of the market and then move downward? Or is it wiser to launch a new offering at the low end, and then move up?
In truth, there’s no one-size-fits-all approach for how new products enter the market. That’s why we and our colleague Joseph Van Orden have developed a framework to help you choose an approach. There are two key questions to ask: (1) Is the basic functionality of our new offering better or worse than that of existing competitive products? (2) How groundbreaking are the novel attributes of the new product?
Consider the Nintendo Wii and the Tesla Roadster. One is a video game console that was introduced at $250. The other is an electric car introduced at $109,000. Each illustrates a different approach to positioning a new product.
The Wii attracted a new type of customer to the video game market; Nintendo decided not to compete head-on with Microsoft’s high-performance Xbox 360 and Sony’s high-performance PlayStation 3. Both of these competitors had much faster processing power and high-end graphics, traditionally the “core attributes” of product performance in the video game industry. Instead of competing on those core attributes, where the Wii offered less functionality, the Wii instead included a somewhat novel “new attribute” — its easy-to-use motion-sensitive controller, dubbed the “Wii-mote.”
Like the Wii, the Tesla Roadster offered a novel attribute — in this case, electric propulsion. But unlike the Wii, the Roadster did not make sacrifices to the “core attributes” of product performance in its industry. Instead, the Roadster closely matched the acceleration and ride of high-performance cars such as the Porsche 911.
Hardcore gamers never viewed the Wii as a replacement for the Xbox 360 or PlayStation 3, and the Wii was never marketed that way. By contrast, performance-oriented drivers took the Roadster seriously. The Roadster was marketed head-to-head against other high-performance vehicles, as something drivers could buy if they wanted the “new attribute” — electric propulsion — without sacrificing performance.