March 10, 2005

High-end Vs. Low-end

Take a look at a market over time. Any market. Now look at who has the bigger marketshare: The players in the high-end or low-end of the market. In the beginning it will typically be the high-end market that dominates the market. Primarily because the market is new, the technology is hard, the idea is novel, or simply because customers are willing to pay a high price for a new commodity. Inevitably, at some point low-end players will enter the market, and start selling cheaper products. Over time, the low-end players will want to increase their marketshare and the only way to do this is by cutting into the high-end market. Usually by offering better and cheaper products than the players in the high-end market. The high-end players don't have the option of going into the low-end market because they will cannibalise their high-end market. You can't all of a sudden start to sell your highly priced product at a fraction of the price and expect to retain your current business.

The graphs shows how a market will develop.

So the players in the low-end market squeeze the players in the high-end market against the ceiling. Sun did it to mainframes, Intel did it to Sun, Apple is doing it to Avid, and Henry Ford did it to the high-end carmakers of his day.

So aim for the low end of the market, and rest assured that the rest will come to you over time if your product is any good.

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