Thursday, 12 March 2009

Jack of All Trades or Master of One?

A very interesting note by a marketing professor at Kellogg (click on title to read), Prof Alexander Chernev talks of the Performance perceptions of multi-feature products.

If a product has multiple functions, what does its price vis-a vis another single purpose product denote about it?

Eg: do consumers find a multi purpose product less efficient compared to a "single benefit" product at the same price? How does it change if the multi product has a higher price?

We have written on this blog that miniaturisation of technology will not only bring more "multi purpose" device into the market, but like the iPhone ensure that it performs very well on each parameter.

The research suggests a toothpast with anti bacterial and tooth whitening should be priced higher than a pure play tooth whitening cream.

We think this may be the case since you cannot actually determine quantitatively tooth whitening. Hence pricing (with the correct communication) may signal that the multi purpose toothpaste does both functions equally well, and very well. So consumer pays for the benefit of two functionalities.

What happens when an iPhone is competing with a Canon? How can consumers compare these 2 goods?

We think:
1. a consumer that a multi purpose device should be priced in such a way that each of its functionalities is more expensive than a comparable pure play device.
That is, if an Iphone is at 250 USD and has a 3 megapixel camera, it should be more expensive than a 3 mega pixel camara. (by how much, we cannot say off hand).

2. However, if the Iphone has a 3 megapixel camera and the Canon is a 10 megapixel offer, then the basket of goods is not longer comparable.

Interesting topic. Makes you wonder what actually is the pricing / profitability benefit of converging so many goods into one?

Ritu and Venkat

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