A Strategy for opening a new market and encroaching on the lower end of the existing market

and Encroaching on the Lower End of the Existing Market We build on the frameworks of Schmidt and Porteus (2000) and Schmidt and Druehl (2005), which describe alternate ways in which a new product might open a new market and ultimately encroach on an existing market. In the current paper we identify and analyze the scenario where a firm first opens up what we call a “detached ” market, by offering a new product that meets a customer need that is very different from (i.e., detached from) the need met by the old established product. For example, cell phones opened up a new market by meeting the customer need for mobility; a need very different from the traditional attribute of reception quality. By meeting an important detached need, a new product can sell at a high price, even though it might be woefully deficient with regard to the traditional performance dimension (the reception / coverage of early cell phones was sorely lacking). A person who is a high-end customer for the old product initially despises the new product as a replacement for the old one, but might simultaneously be one of the first customers for the new product because it fills the detached-market need. Over time, the new product improves along the traditional dimension (e.g., cell-phone reception / coverage has dramatically improved) and eventually it becomes a replacement for the old product, but encroaches from the lower end upward (the first customers to drop their land lines have been lower-en