James Surowiecki, who writes The Financial Page for The New Yorker, marks the occasion of Apple’s impending release of its iPad–which, even priced more modestly than many had expected, is still significantly more expensive than its putative competitors–by examining the company’s strategy of producing only high-end products. Let’s hear from Mr. Surowiecki:
For Apple, which has enjoyed enormous success in recent years, “build it and they will pay” is business as usual. But it’s not a universal business truth. On the contrary, companies like Ikea, H. & M., and the makers of the Flip video camera are flourishing not by selling products or services that are “far better” than anyone else’s but by selling things that aren’t bad and cost a lot less. These products are much better than the cheap stuff you used to buy at Woolworth, and they tend to be appealingly styled, but, unlike Apple, the companies aren’t trying to build the best mousetrap out there. Instead, they’re engaged in what Wired recently christened the “good-enough revolution.” For them, the key to success isn’t excellence. It’s well-priced adequacy.
These two strategies may look completely different, but they have one crucial thing in common: they don’t target the amorphous blob of consumers who make up the middle of the market. Paradoxically, ignoring these people has turned out to be a great way of getting lots of customers, because, in many businesses, high- and low-end producers are taking more and more of the market. In fashion, both H. & M. and Hermès have prospered during the recession. In the auto industry, luxury-car sales, though initially hurt by the downturn, are reemerging as one of the most profitable segments of the market, even as small cars like the Ford Focus are luring consumers into showrooms. And, in the computer business, the Taiwanese company Acer has become a dominant player by making cheap, reasonably good laptops—the reverse of Apple’s premium-price approach.
While the high and low ends are thriving, the middle of the market is in trouble. Previously, successful companies tended to gravitate toward what historians of retail have called the Big Middle, because that’s where most of the customers were. These days, the Big Middle is looking more like “the mushy middle” (in the formulation of the consultants Al and Laura Ries). The companies there—Sony, Dell, General Motors, and the like—find themselves squeezed from both sides (just as, in a way, middle-class workers do in a time of growing income inequality). The products made by midrange companies are neither exceptional enough to justify premium prices nor cheap enough to win over value-conscious consumers.
However, Google Voice is just the beginning. Once a business tastes the benefits of enhanced telephone applications they rapidly want more. That’s where companies like Ifbyphone come in. Google has demonstrated proficiency in deploying applications such as search and email where customer service and a consultative relationship are not required. Businesses requiring and willing to pay for a more direct partnership will find the Google approach unacceptable for critical business telephone services. Put more simply, businesses want the ability to pick up their telephone and talk to someone about their telephone application needs.
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In conclusion, I believe Google Voice will rapidly become the wave that floats all of the Voice 2.0 boats. While Google does the heavy lifting of educating businesses about the power of utilizing multiple telephone solution vendors for your business, Ifbyphone will focus on the delivery of innovation IVR based solutions that begin where the Google Voice technologies end.
Shapiro here demonstrates that the same mushy middle principles which Surowiecki has noticed at play in the product sector are no less relevant to any number of services. Google Voice, which still hasn’t yet made major inroads with average American consumers, is set to occupy the affordable rung of the telephony ladder. But there’s still plenty of room for a higher-scale company to find a niche, so long as it’s measurably better than the cheap (or free) alternative.
What niche is your business filling? Is it good enough? High-end? Somewhere in the middle?
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