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Notes
- 1.
http://youtu.be/mYIgSq-ZWE0. See also Billy Beane and Moneyball at http://youtu.be/-4QPVo0UIzc.
- 2.
The reference price is how much consumers expect to pay for a product in relation to other competitors and the previously advertised price.
When making buying decisions, especially when considering a replacement or substitute for their usual alternative, consumers assess value by comparing the price of the good with an “internal reference price”: namely, the price that they would usually expect to pay or what they think the product is “worth,” using all previous data.
Much research and analysis has been done to understand how the reference price is established by the buyer, with the best estimate being a narrow range of prices around a perceived median price. Everything with a cost higher than the reference price is perceived to be relatively high priced (expensive), and everything below the reference price is perceived to be relatively low-priced (inexpensive). The reference price for different individuals may be different depending on their awareness of alternatives and how frequently they buy goods in a particular category.
The reference price, how it is established, and how the consumer perceives value, quality, ease-of-use, and various other attributes are critical to establishing price for a disruptive innovation, so we will address this concept in much more detail in the pricing chapter of this book.
- 3.
This book can’t do justice to the brilliance of Steve Jobs’ product positioning and his skill in first establishing what competition he wants you to compare his products to, and then showing his pricing strategy most effectively. We recommend readers view the keynote address where Jobs introduced the iPod (http://youtu.be/Mc_FiHTITHE), and in fact, all the keynote addresses where Jobs introduced new Apple products. The iPad introduction begins at approximately 11:30 of this video clip, and the price positioning begins at approximately 13:18.
- 4.
This “report card” summary for the iPod is for illustrative purposes only. A more rigorous approach that assesses the influence each factor has on the probability of disruption is taken by Innovative Disruption’s Disruption Grader tool described later in this chapter.
- 5.
Visit http://www.innovativedisruption.com/disruption-grader/ to run Disruption Grader. It is a free tool, but it requires a valid email address to receive a full report.
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© 2014 Paul Paetz
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Paetz, P. (2014). Does Your Idea Have Disruptive Potential?. In: Disruption by Design. Apress, Berkeley, CA. https://doi.org/10.1007/978-1-4302-4633-6_3
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DOI: https://doi.org/10.1007/978-1-4302-4633-6_3
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