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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Good marketing practises

I find it interesting that Google has become a global brand in less than 6 years (see earlier post) and that they have done so without much marketing, if any at all. How do they do it ? Well of course they are the best of breed in their category, delivering a service that outpaces all the competitors. But then again, BetaMax was a better technology than VHS so technical superiority doesn't seem to be quite enough.

I believe that much of their succes lies in their integrity. I trust Google. I believe them when they tell me something. I give them my e-mail address, because I know they won't abuse it. And I endorse their product, and tell my friends about their great service. So they don't have to market their product.

So how did they gain that integrity.

Well for one, they give me a simple and understandable service. Their main page contains 35 words and one graphic. That's it !!! (Yahoo has 478 words, and 20 graphics) They don't show off, try to push stuff down my throat I don't want, or give me irrelevant information. I get exactly what I want.

But more importantly, they have a strong culture, that they stick to. You can make money without being evil is one of the ten philosophies at Google. These are not just words on a webpage. They live by it. For example: Recently they have removed one of their own webpages from their search engine, becuse it uses cloaking, a controversial technology used to get better ranking in search engines. They have, in other words, taken the unusual step of severely penalising themselves, because they do not live up to their own high standards. And this is not a unique example.

This is worth taking note of because it goes against much conventional wisdom. It doesn't do any good for the immediate bottomline, it doesn't make the next quarterly report look good, and it doesn't push their service to the customer.

Yet Google is not only one a global brand, but they make heeps of money. And they do so, not by constantly pushing services we don't really want, but by being honest, trustworthy and having integrity. And for these reasons they also attract the very best engineers in the world.

And they seem to be having a lot of fun too !!!

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March 04, 2005


I just saw that Intel shows off a Mac mini knock-off and tries to get on the heels of Apple in the market for designer computers. No doubt that there is a huge market for designer PC's, hell I wouldn't mind paying a 30% premium if I could get a PC that was as cool as a Mac mini. But it seems to me that Intel has missed the point of a designer computer. If you want to get a share of the market it is not enought to do a cheap rip-off of somebody elses work. (It doesn't look half as cool as the Mac mini) I don't pay a premium for a rip-off of a Louis Vuitton bag either, I get the original. And if I do get a cheap rip-off I get it from a secondrate supplier in a shady corner store that I don't trust. Probably not exactly what Intel wants to be associated with.

The point being that if you want to be in the market for design products there are certain minimum criteria you have to live up to, such as for instance having your own design line. It is not a coincidence that Gucci doesn't produce Louis Vuitton bags and brand them as their own....

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