No Frills Economy
More and more companies are starting to position their products and services with consumer affordability in mind. Innovating with price as the starting point, more companies are stripping out the undesired frills – sacrificing indiscernible differences in quality, features and standards – for portability, ease of use and most importantly, significantly lower price than the next best substitute. Think of $400 netbooks, $2,500 cars, $40 cellphones, etc.
Known as the theory of disruptive innovation by Clayton Christensen, new entrants often enter at the bottom of the market, where they are ignored by established incumbents. These products then grow by taking away significant market share to the point where they eclipse the old product. MP3 music technology, Internet long distance phone calls all entered their respective markets that way. Offering flexibility, convenience over features and sound/voice quality. Consumers want quick and dirty over slow and polished. Having it here and now is more important than having it perfect. “High-quality” or what we think of as a “better product” has a different meaning in today’s world. Suddenly what seemed perfect is anything but, and products that appear mediocre at first glance are often the perfect fit. Here’s an excellent article in last month’s Wired on The Good Enough Revolution: When Cheap and Simple Is Just Fine.
One common thread among the companies that have profited from “going no frills” and selling to the Good Enough market, is in crafting the perfect concoction of price/quality/feature tradeoffs that appeal to their new customers. Can your firm innovate to the extent that it is five times cheaper and trade down on features whose perceived value is less than five times the price? In a way, it’s simply Blue Ocean strategy with the emphasis on affordability.
Here are some ideas I’ve posted on slideshare. Enjoy!
