The question of parity
The question of innovation often arises, and so does the buzzword ‘disruption’. Both of these are linked to a state of parity between brands, products or services.
On an international level, the Apple brand has announced its new iPhone. This comes with one minor change, some water resistance, which is standard to may phones. A brighter screen seems somewhat cosmetic. The idea of headphones without jacks can be classified as disruption, though it may seem disruptive to consumers who have spent money on headphones with jacks. Apple is trying to address parity in the mobile device market, where the offering is becoming commoditised, in other words each product can be replaced with another product, without major loss of convenience.
Closer to home the situation is illustrated well by the ladies who sell vegetables under the trees down the road. There are three stands, each operated by a different lady. Two of them are placed right next to one another. The third is some meters off. All the ladies sell the same goods: tomatoes, onions, potatoes, bananas, spinach, apples and paprika. The two that are next to one another socialise. In order to counter the close proximity they share business. When I go they routinely tell me to buy a few packets from the other, effectively sharing my wallet between them. Switching between the two is mildly inconvenient as I have to get change from the first lady, then carry on shopping with the second lady.
In the case of the ladies, their proximity to one another reduces their individual profits.
Yet a certain amount of parity works in the market. By observing products and services, a minimum benchmark is established. If one comes up with something new, everyone else follows and the competitiveness of every entity in the market is preserved. This may be useful where the market operates as a social collective where the survival of all is valued, but as I said, it reduces profits to individual entities.
The result is a situation where an opportunity to break out of the parity generally only leads to short term gains. On the other side of the coin, there is the damaging prospect of price and value wars. If the consumer demands a discount, or better value in the form of product or service features, the entire market has to shift that way, as is the case with the iPhone’s water resistance?
Water resistance? How many people use their phones underwater, or in the shower? If it’s raining, get out of the rain and use the phone somewhere dry.
There are two core questions: how to break the parity, and how to preserve loyalty when parity creates commoditised offerings.
To break parity, the obvious thing is to look at the causes of parity. In the case of the ladies who sell vegetables under trees, the immediate solution is to consider the effect of location. With a bit of thought about traffic in the neighbourhood, a new location could probably be identified which offers better traffic.
Another method to break parity might be to offer additional products. Obviously this might be copied, but it provides a temporary boost to business. One of the interesting things is that one of the ladies sells kapana spice on a variable schedule, and this ttracts traffic to her stand. Not only does she make add turnover through the product, but she also attracts buyers to her side of the stand. It’s the germ of a standard retail strategy.
The point though is that she adds value, but in a way which is profitable, unlike a value add which is just there to support the core range at no additional profit.
In order to retain loyalty, she is friendly and chats about the neighbourhood. This is the crux of a strong brand, which is more than just a product, but also n active relationship. Apple’s iPhones have done the same by proxy, by creating a community of product users that share a commonality.
There is far more to parity than this, but these are the two principles that lie at the core of the matter.