Product strategists struggle with the issue of value all the time: What constitutes a revenue-maximizing price for my product, given the audience I’m targeting, the competition I’m trying to beat, the channel for purchase, and the product’s overall value proposition?
There are tools like conjoint analysis that can help product strategists test price directly via consumer research. However, there’s a bigger strategic question in the background: How can companies create and sustain consistently higher prices than their key competitors over the long term?
The Mac represents a good case study for this business problem. Macs have long earned a premium over comparable Windows PCs. Though prices for Macs have come down over time, they remain relatively more expensive, on average, than Windows-based PCs. In fact, they’ve successfully cornered the market on higher-end PCs: According to companies that track the supply side, perhaps 90% of PCs that sold for over $1,000 in Q4, 2009 were Macs.
Macs share common characteristics with Windows PCs on the hardware front – ever since Apple switched to Intel processors about four years ago, they’ve had comparable physical elements. But the relative pricing for Macs has remained advantageous to Apple. At the same time, the Mac has gained market share and is bringing new consumers into the Mac family – for example, about half of consumers who bought their Mac in an Apple Store in Q1, 2010 were new to the Mac platform. So Apple is doing something right here – providing value to consumers to make them willing to pay more.
Building off of Tom Grant's post about Google Buzz earlier today, Google Buzz is an interesting case study about how winning market share is not just about having the first or the best product. It is often about having a product (including marketing and sales) that does the best job at getting users to use it and getting developers to create quality content.
Google knows this better than anyone, and which is why they just released a product that they hope will be easier to adopt than Twitter or Facebook. Google Buzz is not fully baked and its privacy settings are badly broken; however its intended audience already uses Gmail and just had this new tool literally dropped into their inboxes. Google is probably hoping to replicate its successful introduction of GChat, an instant messaging client that was substantially worse than any other when it was introduced in late 2005 but today enjoys widespread adoption because it is on by default for anyone logged into Gmail and was gradually improved.
Non-social products can survive with gradually declining market share for a number of years, and then potentially come back if users become convinced that their offering is superior. However a social media product without users is a ghost town, a phenomena that MySpace knows well as their CEO leaves today.
This is not a battle over who has the neatest features; it's a battle over who will be the most successful at capturing user time, an increasingly limited resource.
Therefore: Do you think the technical problems with Google Buzz, both privacy and other, are enough to stop it from gaining broad adoption, at least among existing Gmail users?