LOW-END AND HIGH-END ENCROACHMENT STRATEGIES FOR NEW PRODUCTS

Abstract

Successful new products typically encroach in some fashion on an existing market, impacting prices, sales, and profits for the old product(s). We present a framework in which encroachment takes one of two forms, either high-end or low-end. High-end encroachment is exemplified by Intel's Pentium III, which encroached on the Pentium II by first catering to high-end customers before diffusing to the low end to fully displace the Pentium II. Low-end encroachment is illustrated by disk drives with smaller form factors, which first catered to low-end customers desiring lower-cost, but eventually diffused upward to the high end. Our low-end encroachment framework may help clarify how a disruptive innovation impacts the market, in terms of sales prices, volumes, and profits. Similarly, our high-end encroachment results may lend insight into the market impact of a sustaining technology.