193-Convenience and Reliability Innovations in a Fast Growing Market

In a rapidly growing market, one growing faster than 15% a year in units, Function innovations tend to dominate market share movement. That is, Function innovations move more market share, on average, than do innovations in Reliability and Convenience. Often, the second major driver of market share movement in a fast-growing market is Price. Low prices and low-end competition often expand the market and cause significant market share shifts at the same time.

That is not to say that there aren’t Reliability and Convenience innovations. There are. The electronic reader market offers illustrations of these innovations. Barnes & Noble has an electronic reader called the Nook. This electronic reader is lagging in the market today, especially against the Amazon Kindle and the Apple iPad. To build awareness for its Nook product, Barnes & Noble has returned to T.V. advertising for the first time in several years. It wants to distinguish itself in the babble of noise from the many emerging eReaders and Tablets.

Advertising is both a Convenience and a Reliability innovation. It’s a Convenience innovation in that it helps the customer think of the product and know where to look for it. (See “Audio Tip #92: How Do We Add Knowledge to the Customer?” on StrategyStreet.com.) Advertising is also often a Reliability innovation because advertised products have stronger brand names and the aura of Reliability among consumers in a market. So advertising for Barnes & Noble should help the Nook gain some traction in the market. Will it be enough to overcome its laggard status? Probably not, due to its limited Function benefits in the form of attractive book titles. (See “Audio Tip #64: The Objectives of a Performance Improvement Program” on StrategyStreet.com.)

The leader in the market, Amazon’s Kindle, is also innovating its product in the form of Convenience. In the past, Amazon sold the Kindle only through its Amazon.com web site. This policy was in keeping with Amazon’s effort to get consumers of all products to purchase online, rather than through bricks-and-mortar retailers. Amazon has thought the better of this policy, though, with the advent of the Apple iPad. In part as a response to the availability of the iPad in Apple’s stores, Amazon has allowed Target to begin offering the Kindle at Target stores. Offering the product at Target is primarily a Convenience innovation. A customer can pick up the product faster at a Target store than by ordering online. In some ways, it is also a Reliability innovation. The customers can hold the product in their hands and see how the product works. Primarily, though, this is a Convenience innovation. Its main benefit for Amazon will be to prevent some loss of customer market share to a more Convenient iPad product. (See “Audio Tip #93: How Do We Reduce the Resources Used With Our Product?” on StrategyStreet.com.)

Posted 5/24/10

Update:

The Nook product is an afterthought in the e-reader market. It has little future.  It began life two years after Amazon introduced the Kindle. For several years, the prices for its books were higher than those for the Kindle, a Leaders Trap by a follower in the industry. The product never got traction and has an even less promising future as the ereader market itself shrinks.

The market growth for dedicated ereaders has fallen to about 3% a year. Consumers over the last few years have increasingly chosen to read e-books on tablets or smart phones, where Amazon is less strong than some of its larger competitors. In 2022, Amazon was the number three competitor in the worldwide tablet market. The leader was Apple with a 32% share, followed by Samsung at 21%, then by Amazon at 10%. However, in the dedicated ereader market, Amazon was the dominant leader with 84% of the market. Kobo was a distant follower at 13%.

Both ereaders and iphones are Next Leader products, Transformers. The Kindle certainly impacted the book market but it was superseded by another Transformer product, the smart phone. See HERE and HERE for an explanation of the two types of Next Leader products.

9/22

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