McKinsey published a study this week that asked 2 500 people on consumer electronics. They found:
«[...] less than a third of the respondents actually used all of the advanced features that manufacturers pile into their televisions, video cameras, mobile phones, and other products. What’s more, less than half of the respondents even knew these features existed.»
That means: Vast amounts of money lost for these companies. Invested in R&D, production and marketing for unused features. Companies are so busy fighting each other that they ignore who’s paying their bills: the customers.
Consumer electronics of course is a great industry to show that competing on features in saturated markets is non-sense. Just two days ago I wrote about Apple’s astonishingly good results.
However, other markets have been walking down the same street. Take the life insurance industry for example. Product features that protect even the most unusual personal circumstances are still seen as necessary to compete. Or look at structured products: I wonder how many investors (or relationship managers) understand what a «Barrier Range Reverse Convertible» is.
Good enough is great
Scott D. Anthony advocates «loving the low end» in his book «The Silver Lining». He concludes that knowing what’s important for customers and what not will allow you to find disruptive competitive advantages. Further more: Determining the “Good Enough” threshold will prevent you from over-serving customers.
Three examples:
- The Flip video camera. Pure Digital entered the market with a simple to use, no-frills video-camera with minimum resolution. Within two years they left Sony behind in this market. (Read Bernhard Schindlholzers blogpost for more.)
- Commerce Bank. They reduced their product range and simplified their account. The result: Awarded «Most convenient bank of America», quadrupling their client base in 5 years. (More in this HBR article)
- Swatch. Offering wrist watches of Swiss precision without the expensive precious metals propelled them to be one of the leading watchmakers worldwide.
The take away
In order to smartly compete in saturated markets do the following:
- Understand your customers and find out what they really need – and how much of it
- Configure your products to meet these core needs
- Leave away the rest
And all of a sudden you will not only leave your competitors behind but also be loved by your customers.
Do you agree? Or not? Looking forward to your comments.
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