The Fidelity Trap

iPhone has  less than 3% of the market share of the total mobile phone market but is the reason for the higher churn among mobile subscribers. None really lived up to their title. Verizon Wireless saw its new subscribers additions shrink past quarter compared to past year numbers. Customers either chose AT&T for its iPhone 3GS or T-Mobile for it low prices. Verizon is fighting back with two marketing campaigns:

  1. There is a Map for that! – This is in the same class as their “Can you hear me now?” campaign, highlighting their network coverage, except it also shows the lack of national 3G coverage in AT&T. The veracity of the claims are under debate and is beyond the scope of this article. The core message is – our competitors may have cool phone with thousands of App but it is all useless if the network is bad. Verizon had always claimed it had the best in class network, and yet it was not enough to stop the churn. Will the new message succeed?
  2. Everything iCan’t Droid Does: This campaign is for the new Droid smart phone positioned against iPhone. Verizon Ad highlights what iPhone cannot do – like taking pictures in the dark of 5 Mega pixel camera. Since Apple introduced iPhone there has been several iPhone killers. Will Droid be able to take on iPhone?

Take the case of Blu-ray players. Sony won the hard fought format battle against HD and yet the winner has not found firm foothold in the market. With the Beta Max memories still fresh in their minds, Sony did everything right this time – building a coalition, marketing, and most significantly lining up content. According to Nielsen, Blu-ray sales remain a small fraction of the market.

Why did Verizon lose subscribers despite their best coverage?

Why did iPhone succeed?

Why do the Blu-Ray makers cur prices drastically or include capability for on-demand video in order to sell the players despite the promise of high quality video playback?

Why some innovations catch on while others fail?

Does the failure or success of a product in the market depend singularly with the firm’s ability to innovate,  build and dominate the ecosystem, its quality of products and its marketing prowess?

In the book Trade-Off: Why Some Things Catch On, and Others Don’t,  Kevin Maney offers an explanation based on fidelity vs. convenience offered by the products. In their model, there is a Fidelity-convenience frontier (Maney  calls it the Fidelity Belly) and customers make trade offs between the two.  Fidelity refers to richness of features and quality and convenience is how easy it s to get what you want.

I agree with the trade off argument but I hypothesize this choice is not static. Market preference switches back and forth between the need for fidelity and the need for convenience. Fidelity - Convenience ShiftOver time, as the customer needs evolve and usage scenarios change their preference for fidelity vs convenience changes as well. The reasons for these shifts are exogenous to the product – disruptions and lifestyle changes introduced by other products even from those unrelated to the product in question. Take the case of Blu-Ray, despite the high fidelity, it has not gained firm foothold because of the market’s shift towards on-demand video.

This means whether a product will succeed in the market place or not iThe Fidelity Traps determined not by the trade off made by the customer but by the congruence between the market needs and the product purpose (fidelity vs. convenience) at the time of product introduction.

Take a look at the 2X2 matrix. Products that fall into the lower left and upper right quadrants are in congruence with market needs and most probably will catch-on. However, on the top left and bottom right are the traps. Fidelity trap is when the firm’s innovation, product strategy and marketing are all aligned with delivering high fidelity products but the market needs convenience. Convenience trap is the opposite.

Products do not stay in Congruence or Traps over their entire life cycle. A firm that found success with  a convenience (or fidelity) product may not continue to succeed with its next version if the market shifts. A prime example is Motorola’s RAZR. On the same note, a firm stuck in the traps has the opportunity to achieve congruence in the next cycle.

This is not to say marketing strategy, innovation and product quality are not important but to highlight the need for congruence between the product and the market needs. A failure will lead to unsuccessful products that are are stuck in one of the two traps.

Disclaimer: This is a work in progress. I need to provide you more theoretical framework and data for the Fidelity trap hypothesis. This inspiration for this concept came from Modularity trap theory put forth by  Henry Chesbrough, author of Open Innovation. If you peel the layers, the core concept is segmentation and targeting – ultimately there is nothing new under the sun.