Differentiation Fail

When you study management strategy (not that I am for one moment suggesting that anyone ought to study management strategy), you quickly learn that all of the articles suggesting that there are dozens or hundreds of different strategies are mostly crap; just as there are really only three kinds of story (comedy, tragedy and history), so to there are really only three kinds of business strategy: low-cost, differentiation, and specialization. Every so often somebody claims to have come up with a completely new approach – usually for the purpose of trying to convince everyone to pay $30 for their new book – but these three categories hold up surprisingly well. What most people fail to grasp is that any of the types require parity in the other two dimensions to be effective in the first place; otherwise all you’ve created is an elaborate way to waste money…

Low-cost strategy is the easiest to understand; your logic is simply “buy our product because it costs the least!” But if your product is so shoddy as to be completely useless there will be no market – or niche – for it, and if your product is identical to every other product on the market – if it isn’t differentiated in any way – there will be no real reason for customers to select your offerings over the competition. By the same token, if your product is completely new, innovative and distinctive but costs 50 times what the competition’s equivalent does, it’s not likely to sell well unless it can deliver 50 times the value – which is generally hard to do. This isn’t usually a problem, since very few companies deliberately market a product that costs even ten times what the competition is charging, but as far as I can tell from the chatter online, somebody should have explained this to the Dyson people before they launched their new "air multiplier" product…

As the linked Consumer Reports article notes, the new Dyson product does, as advertised, produce a smooth, powerful current of air, ideal for improving the circulation in your room. It’s just that the basic model costs $300 and doesn’t do anything that a $10 box fan can’t do; the claim that conventional fans produce a “choppy” air current does not appear to hold up under testing. Even if it did, most of the comments I’ve seen online so far suggest that there’s no way anybody is going to pay 30 times the price for this thing. Sure, the “Air Multiplier” is a cool-looking gizmo, and the fact that it doesn’t have any exposed fan blades might appeal to anyone who lives with an entity stupid enough to try sticking random body parts into a fan, but it doesn’t seem to be worth the price…

What makes this all the more puzzling, in my opinion, is that the company has generally demonstrated a better grasp of pricing strategy in the past. The basic Dyson vacuum cleaner (which we’ve had for two years now and swear by) is an excellent piece of engineering, and only about 50% more expensive than the equivalent competitor. I had no problem paying $300 for it instead of the $200 competitive equivalent, but there’s no way I would have paid $6,000 for it or any other vacuum cleaner; even a Roomba robotic vacuum cleaner, which actually vacuums the room without a human operator, isn’t more than twice the cost of a conventional vacuum, and some of them are even cheaper than the Dyson…

I have no idea what possessed the Dyson people to set the price on this product as high as they did; all I know is that they aren’t likely to sell a lot of them. The store around the corner from us has had a display of these things up for the last month, and they don’t appear to be moving, while the same store has sold out of box fans at least twice since last summer. Unless Dyson can somehow add value, lower the price, or find a niche market for these devices (people with a morbid and crippling fear of moving fan blades, perhaps?) they will have failed to market this product – because differentiation by itself does not appear to have been enough…