New product development in demand shaping
Traditional demand shaping techniques of price discounts may increase sales volume and take business away from competitors but effectively they can also lead to decreased profitability. There are other techniques that can help manage demand as new product developments, extended warranty services, trade marketing, advertising and coupons/trials. These techniques have the potential to change demand and put it in line with the business strategy. Take new product development for example. Introducing a new product is often a source of sustained competitive advantage and for many companies it has worked turnaround. Apple’s ipod and iphone have created a trend where it always bring new products and sway the market to its side. We are yet to assess the impact ipad would make which is by the way held high in analyst’s forecasts. I am sure this technique has a huge impact and other industries outside the electronics/high tech products can also implement this as intelligently to manage the competition and succeed.
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Sunil – “Traditional demand shaping techniques of price discounts may increase sales volume and take business away from competitors but effectively they can also lead to decreased profitability.”
Personally, I love that Apple establishes its price for the Iphone and Ipad and offers no discounts. They have clearly established the value (perceived or real) in the marketplace and do not waiver. This doesn’t work for every company, but Apple has it figured out. All great companies should strive for this same strategy.
Ryan Adams
Portland, ME
Apple seem to have have the psychology cornered when it comes to driving the consumers thought process in terms of what they want to buy. We now buy things we don’t need and Apple is a prime example. Sure they have some amazing products but the “Selling The Sizzle not the steak” approach is what garners the sales. They now have percieved value as someone else has mentioned and this takes years to create.
I’m not sure I understand you. So let me reel back what i believe your saying.
An established brand can create demand by creating a new product; and this demand stems from the brand association rather than the need of the end product. eh correct?
Sunil, I partially agree with you, Apple have managed to create a monopoly like situation with their phones and potentially the ipads, as did Sony with some of their products. However, many manufacters, such as Proctor and Gamble, are still mired in the demand shaping game in many product categories.
It just shows the value of the economic rents that can be earned from first mover advantage and categories where there is a desire / me too element in the buying process.
Ryan – “Personally, I love that Apple establishes its price for the Iphone and Ipad and offers no discounts. They have clearly established the value (perceived or real) in the marketplace and do not waiver. This doesn’t work for every company, but Apple has it figured out. All great companies should strive for this same strategy.”
Yes they figured it out. But about what you say that companies should strive for the same business strategy, I don’t think others would do that. The thing was just like this; You go out of a market and find out that everyone around you wears the same jeans, shirts, etc.
Get it?
Having same strategy is a gamble. The best or better strategy is to knock off the existing one.