Products come in several forms. Consumer products can be categorized as convenience goods, for which consumers are willing to invest very limited shopping efforts. Thus, it is essential to have these products readily available and have the brand name well known. Shopping goods, in contrast, are goods in which the consumer is willing to invest a great deal of time and effort. For example, consumers will spend a great deal of time looking for a new car or a medical procedure. Specialty goods are those that are of interest only to a narrow segment of the population—e.g., drilling machines. Industrial goods can also be broken down into subgroups, depending on their uses. It should also be noted that, within the context of marketing decisions, the term product refers to more than tangible goods—a service can be a product, too.

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A number of issues come up in the area of product design, introduction, redesign, and branding.

For those wondering about the graphic here, the point is rather abstract: Two numbers multiplied together are known as a “product.”

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As reminder, we are now building on the idea of positioning, using the marketing mix to implement our strategy to serve our chosen market segment or segments.

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Some seemingly simply products and actually be very difficult to make to the standards demanded by consumers in today’s markets.

Normally, we do not think of French fries as a “high tech” product. In fact, In ‘n’ Out Burgers makes fries the old fashioned way, beating the other chains on taste. However, in restaurants where there is not the same willingness to start from scratch and wait for your order to be prepared, technological challenges become significant. The longer fries can be kept under a heat lamp without having to be discarded, the more efficiently the process can be run. Subject to this constraint, a great deal of science goes into optimizing the taste of the fries. Very large amounts of money goes into creating the optimal taste in a way that can be reliably done in different settings.

Razors seem like simple devices, and metallurgy has been done since the Middle Ages. However, Gillette still does extensive research and development. Each morning, number of men show up unshaven to try new innovations. Razors actually have do a very difficult task: To shave off something that, relative to its thickness, is as tough as copper while minimizing discomfort and injury done to the skin. The razor should also be as efficient as possible. Ideally, it should remove the hair with just a single pass over an area.

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A firm’s product line or lines refers to the assortment of similar things that the firm holds. Brother, for example, has both a line of laser printers and one of typewriters. In contrast, the firm’s product mix describes the combination of different product lines that the firm holds. Boeing, for example, has both a commercial aircraft and a defense line of products that each take advantage of some of the same core competencies and technologies of the firm. Some firms have one very focused or narrow product line (e.g., KFC does only chicken right) while others maintain numerous lines that hopefully all have some common theme. This represents a wide product mix 3M, for example, makes a large assortment of goods that are thought to be related in the sense that they use the firm’s ability to bond surfaces together. Depth refers to the variety that is offered within each product line. Maybelline offers a great deal of depth in lipsticks with subtle differences in shades while Morton Salt offers few varieties of its product.

Today, the same firm may own several different brands, and efforts may be made to clearly differentiate the different brands of the same company. Procter & Gamble owns a number of brands in the same product category. They own a number of laundry detergent brands, including Tide, Bold, and Gain in addition to a number of brands used in different regions of the world. Managers at these brands are expected to aggressively compete against each other. The historical philosophy held by P&G is that a weak product should not be allowed to “drag” the overall brand down. Thus, each separate brand has to make it on its own.

Sometimes, a brand may be involved in different product lines and, occasionally, some product lines may be sold off. The Virgin Group is best known for air travel, but they also own hotels and a number of other business units using its same. Occasionally, divisions—such as cellular phones—may be sold off but may still be allowed to keep the original Virgin brand name.

Different firms own the trademark on “Kit Kat” for candy bars in different parts of the world. This can cause problems in trying to maintain a consistent brand image.

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Some people insist on drawing a rigid distinction between tangible goods and services. In practice, this is not useful. Most products contain at least some element of both. It is more useful to examine where, on the continuum from a pure tangible good to a pure service a given offering lies. A computer, for example, is a tangible product, but it often comes with a warranty and software updates. Although surgery is primarily a service, it involves pain medication and sutures.

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It should be noted that the product-service continuum is understood in terms of what the customer receives. A washing machine is mostly a tangible good (although it may include a warranty and delivery). The fact that the customer might be able to use this to offer a service to others is not relevant here.

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Products often go through a life cycle. If a product is successful after its launch, it will generally reach greater acceptance over time, and sales volumes will go up. At some point, a saturation point may be reached where there is no further growth, and the product category may eventually be replaced, over time, by another a later innovation. For example, horse driven wagons were eventually replaced by automobiles and other vehicles.

A number of factors will change throughout the product life cycle.

The curve will look different for each product. Above is an example of a “classic” curve where a product goes through a number of different stages.

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Note that you can think of product categories either widely or narrowly. You can, for example, think of TV, which has evolved from black and white format to high definition, digital technology. Alternatively, you can think of black and white TV as a product category that was eventually supplanted by color TV, which, in turn, was supplanted by digital TV. Although the timings will be different, the general phenomenon will be similar.

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Initially, a product is introduced. At this stage, the product category is typically not well known and is usually expensive (e.g., as microwave ovens were in the late 1970s). In addition, products are often less reliable and clumsier than they are likely to be once production and design are improved, and features offered tend to be limited. Because the product is less well developed, it may also be more difficult to use. At this point, the interest is generally more in creating product category awareness than in brand awareness. Although prices tend to be high, expenses are also high and unit sales tend to be low, typically resulting in low profit levels (and often involve a negative cash flow as heavy investments in research, design, and production are needed.)

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Eventually, however, many products reach a growth phase—sales increase dramatically. More firms enter with their models of the product. Because the market is growing so rapidly, the level of competitive intensity has usually not reached the highest intensity yet, but brand awareness and differentiation are becoming more important. Because of high sales volumes and moderate competition, profitability can be high at this stage. However, as markets become increasingly competitive, many are now pricing aggressively even at this stage.

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As more and more potential customers have bought the product, it will tend to reach a maturity stage where little growth will be seen. This can happen either as most consumers have now bought a durable product—e.g., a microwave oven, leaving (domestically, at least) mostly a replacement market where consumers buy new items to replace those worn out or to start new households. For non-durable goods, customers may continue to buy the product, but sales will have nearly peaked since the supply of new potential customers is limited, with existing customers not increasing their frequency of purchase. This means that it is difficult to reinvest profits in growth (i.e., in increasing manufacturing capacity) since any increased quantity produced will largely have to be sold at the expense of a competitor’s products. Thus, competition is likely to increase. This will often result both in decreased prices (at least when adjusted for inflation) and a race to offer more features and other benefits. Although costs of production may be at their lowest point (again, adjusted for inflation at this point), lower prices will tend to decrease profitability from its peak experienced at the growth stage.

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Some products may also reach a decline stage, usually because the product category is being replaced by something better. For example, typewriters experienced declining sales as more consumers switched to computers or other word processing equipment. Many producers will be driven out of the business. Those who survive may focus on specialty markets (e.g., business users who need typewriters to fill out “legacy” carbon copy forms).

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In some cases, a product category may reach a plateau. Here, the product may not be replaced by another product—at least for quite some time—but it may reach a point where everyone who would like this product has one. Today, microwave ovens are relatively inexpensive. There may be some gourmet chefs who resist microwave ovens a matter of principle, most other households have them. However, at this point, the market will consist mostly of replacements and new households. Any growth will be very limited.

In some cases, a product category that has reached maturity or even decline may experience revitalization as a new use of, or other source of interest in, the product emerges. For example, consumption of cranberry juice increased dramatically once research showed that drinking this beverage could help combat urinary tract infections. Similarly, although an increasing number of car manufacturers had stopped including cigarette lighters in their cars as a standard feature (with a declining percentage of smokers in the population), these became more popular as technology that needed to be recharged (e.g., MP3 players and cell phones) took off.

Some innovations may become brief fads which end early as most people stop finding them useful.

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The product life cycle is tied to the phenomenon of diffusion of innovation. When a new product comes out, it is likely to first be adopted by consumers who are more innovative than others—they are willing to pay a premium price for the new product and take a risk on unproven technology. It is important to be on the good side of innovators since many other later adopters will tend to rely for advice on the innovators who are thought to be more knowledgeable about new products for advice.

The Product Life Cycle (PLC) impacts a number of strategic issues. As a market matures, firms will generally face more competition. Since the growth of the market is limited, they cannot grow much unless they do so by taking market share away from competitors. Therefore, firms will find it more difficult to reinvest profits in growth. There will generally be a strong downward pressure on prices. In addition, competition is likely to grow in terms or features and quality. The product category will also likely compete with an increasing number of other product categories to satisfy similar customer needs.

At later phases of the PLC, the firm may need to modify its market strategy. For example, facing a saturated market for baking soda in its traditional use, Arm & Hammer launched a major campaign to get consumers to use the product to deodorize refrigerators. Deodorizing powders to be used before vacuuming were also created.

In order to “break even”—that is, to at least not lose any money—on a new product introduction, a minimum of a certain quantity will need to be sold. If less than that quantity is sold, there will be a loss on the new product; if a larger quantity is sold, profits begin to accumulate. This break-even point is reached when

Total Revenue = Total Cost

It is assumed that all the product is sold at a constant price, meaning that the total revenue is equal to the price times the quantity sold.

Costs include both fixed costs (those that stay constant regardless of the quantity sold—e.g., costs of research and development) and variable costs incurred for each unit produced (e.g., labor and materials). Thus, we have that

Total Cost = Fixed Costs + Quantity * Variable Costs

The amount by which the selling price exceeds the cost of production is known as the “contribution by unit”—i.e., CPU= Price – Variable costs.

To obtain the break-even quantity, we divide fixed costs by the contribution per unit—i.e.,

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Breakeven = Fixed Costs/Contribution per unit.

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A spreadsheet available on the course web site demonstrates these relationships. We can calculate the break-even point directly and compare this with cost and revenue figures at various quantities. We can then graph these figures and note the point at which the total cost and total revenue curves intersect.

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As a check on our calculations, we notice that, in this example, the profit level is 0 at the break-even quantity of 3,000, the same volume that we calculated as a break-even point:

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Break-even analysis is a highly simplified method that makes a number of rather unreasonable assumptions—in particular that:

• No additional manufacturing capacity will be needed to make any of the quantities considered• All customers pay the same price• No discounting on future cash flow from made after the initial period• No periodic fixed effects• Marginal costs of resources remain constant• No quantity discounts• No increase in costs due to limited market supply

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A more sophisticated approach involves treating a new product introduction as an investment. The details of this approach are beyond the scope of this course, but are covered in an introductory finance course. Some issues that are addressed in the investment approach are that:

• There are certain fixed and start-up costs in introducing a product. If you do not sell a sufficient volume, you will lose money.

• Demand is uncertain and there is risk is involved. The greater the risk, the greater the expected return will be needed to be to justify going ahead.

• Expenditures and revenues occur at various times. Many expenses are incurred before the first revenues.

• Money made in the future is worth less (“discounting”).

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Two-sided platforms involve services connect two parties without providing the direct service themselves. For example, Uber connects passengers looking for a ride with drivers offering these. Although Uber does some additional work—e.g., screening potential drivers and collecting credit card payments—Uber’s function is mostly as an intermediary that connects the two parties efficiently. Other examples of two-sided platforms include eBay (matching buyers and sellers), Airbnb, and OpenMenu—an online platform that allows diners to make reservations with a number of different restaurants depending on availability. Retailers—including online ones such as Amazon—which do a lot of the work of distribution are intermediaries that connect buyers and sellers, but they are not considered two-sided platforms since they do more substantive work (e.g., operating a retail store, keeping inventory, or shipping goods to customers.

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A potential “chicken-and-egg” problem may exist when it is necessary to have two conditions—each of which depends on the other—met before a product or exchange is possible. These problems come in a variety of forms:

• Investment in required infrastructure requires demand. (1) Consumers are reluctant to buy electric vehicles before charging stations are available at hotels and other parking facilities but (2) hotels and operators of parking facilities are unwilling to invest in putting in charging stations until enough consumers drive electric cars.

• Need for critical mass: Social media sites tend to require a certain “critical mass” before they can attract users. (1) You will not be particularly interested in joining a new social media site before your friends do, but (2) your friends will have limited interest in joining before you do. Similarly, (1) for a potential competitor to Netflix to attract customers, it must offer a strong recommendation database but (2) developing the recommendation database requires input from a large number of customers.

• Two parties must join, each of which requires the other to join first. A new online auction site will have difficulty attracting (1) potential buyers until sellers list their offerings, but (2) sellers will have limit interest in listing—especially if they have to pay—until there are sufficient numbers of potential buyers.

• A product needs third party accessories and/or support. If a new cell phone operating system (OS) is introduced to compete with the iPhone iOS, Android, or Windows, (1) customers will have limited interest in adopting until there is a sufficient number of apps available but (2)

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software developers will have limited interest in investing in creating apps for the OS until there are sufficient numbers of users to provide a profitable market.

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Sometimes, concentrated interests may see an opportunity to invest in new technology that would become profitable. For example, when CD players were introduced, the record companies saw an opportunity to make large profits selling a new recording of what customers already owned on a new medium, so they readily cooperated in immediately making a great deal of content available on CD. The introduction of the DVD player also presented this type of opportunity. Similarly, when ATM machines were introduced, the banks realized that customers could be attracted shortly after the machines became available.

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To test the likelihood of a potential chicken-and-egg problem, you may think of these questions:

• Does the innovation or offering require a large number of others to be involved before it is useful for the first adopters? In the case of ATM machines, the answer was no since the system was useful as soon as the customer got his or her card. On the other hand, social networking sites are attractive only once friends or other interesting people have joined.

• Does the innovation or offering require investments by third parties that are unlikely to occur until a sufficient number of customers already own/use the innovation? For example, for customers to pay extra for a laptop offering a new and faster wi-fi technology, there must be routers and wi-fi systems supporting this technology, but wi-fi operators may not be willing to invest in the required technology until sufficient numbers of people have computers and devices that can take advantage.

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It is sometimes possible to “jump start” an innovation facing a chicken-and-egg problem. For example, manufacturers of electric cars and/or the government can pay part of the cost for one hotel chain to install charging stations. Although there may not be a lot of guests arriving in electric cars immediately, the hotel chain gets “bragging rights” of being the first to offer this. It is now more attractive for consumers to buy electric cars, and as the number of owners increases, more and more facilities find it worthwhile to join in the offering of charging stations.

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Different firms have different policies on the branding on their products. On a continuum, different brands cover varying degrees of breadth:• Single product category brands. Some brands cover only a single product category. Procter &

Gamble (P&G) even goes as far as maintaining different brands of laundry detergent which actively compete against each other (e.g., Tide, Ariel, Bold, Era). The philosophy here typically is that one less well regarded product should not drag the whole brand own with it.

• Brands covering a broader scope. Disney uses its brands for amusement parks, movies, TV programming, and a cruise line. Although the brands cover a broader scope, there is usually a clear reason why the different products belong under the same brand name. In the Disney case, for example, the different offerings each make use of the Disney image and borrow characters other creations across the offerings.

• “Umbrella” brands. Some brands cover a very vast scope. Although there may be good reasons why the respective offerings are presented under a common brand, these may not be readily evident to customers. 3M, for example, focuses on different types of products that involve bonding materials to surfaces in some way—thus, we have glue, tape, and recordable DVDs (where a metal disk is coated with iron oxide).

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Some brands derive a great deal of their value, prestige, and mystique from their global status. It is often necessary to make modest adaptations to the products across countries. For example, the artificial sweeteners permitted will often vary across countries. Sizing may also be made to conform with local standards. For example, in the U.S., a can of soda is usually twelve ounces; in Europe, a size of 250 milliliters is more common. These adaptations, however, are not advertised.

Note that some of the classic advertising of Coca Cola has emphasized the international reach of this product. For example, the ad series “I’d Like to Buy the World a Coke” featured people of many different ethnicities and nationalities.

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In many markets, brands of different strength compete against each other. At the top level are national or international brands. A large investment has usually been put into extensive brand building—including advertising, distribution and, if needed, infrastructure support. Although some national brands are better regarded than others—e.g., Dell has a better reputation than e-Machines—the national brands usually sell at higher prices than to regional and store brands

Regional brands, as the name suggests, are typically sold only in one area. In some cases, regional distribution is all that firms can initially accomplish with the investment capital and other resources that they have. This means that advertising is usually done at the regional level. This limits the advertising opportunities and thus the effect of advertising. In some cases, regional brands may eventually grow into national ones. For example, Snapple® was a regional beverage. While a regional beverage, itbecame so successful that it was able to attract investments to allow a national launch. In a similar manner, some brands often start in a narrow niche—either nationally or regionally—and may eventually work their way up to a more inclusive national brand. For example, Mars was originally a small brand that focused on liquor filled chocolate candy. Eventually, the firm was able to expand.

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Store, or private label brands are, as the name suggests, brands that are owned by retail store chains or consortia thereof. (For example, Vons and Safeway have the same corporate parent and both carry the “Select” brand). Typically, store brands sell at lower prices than do national brands. However, because the chains do not have the external brand building costs, the margins on the store brands are often higher. Retailers have a great deal of power because they control the placement of products within the store. Many place the store brand right next to the national brand and place a sign highlighting the cost savings on the store brand.

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A number of “lower tier” products exist across various categories. Although these are often sold nationally, less has been spent on building these brands. The owners of some of these brands may also have access to less research and development funds, so the products may be—but are not always—of lower quality.

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Generics are products where no brand name is readily visible. These often sell for the very lowest prices. Sometimes, these are actually made by the same firms that make major brands, but the quality tends to vary considerably.

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Genericide refers to a situation where a brand name, in the informal day-to-day speech of consumers, comes to be synonymous with the product category. Many people, for example, refer to a “Xerox” without meaning to specify that the copier would necessarily be made manufactured by Xerox. It is common to refer to a “Kleenex” even though one would be just as happy with a “facial” tissue made by another manufacturer. People have even gone so far as to turn some brand names into verbs. People may, for example, promise to “Fed Ex” something to someone who needs the delivery the next day without meaning to promise that this exact shipper will be used. Because Google has an overwhelming market share today, someone who refers go “Googling” someone or something probably intends to use the search engine implied, but other search engines were to gain significant market share in the future, it is not clear that the recently invented verb would exclusive to the search engine from which it is named.

Although having a brand name used to describe the product category might seem like a blessing at first, the catch is that a trademark may be lost if the general population begins to use the term indiscriminately to refer to the product category regardless of the actual brand. U.S. trademark law requires registrants of trademarks to “vigorously defend” these trademarks. Therefore, for example, Coca Cola® may send representatives to warn restaurants that serve Pepsi® that they will be sued if a customer who asks for “Coke®” is served Pepsi® without being told that the drink actually available is Pepsi®. So long as brands actively protect their trademarks, loss of trademark protection is, in practice, quite rare.

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Brands may consist of both a main brand (e.g., Apple) and a subbrand (iPhone). In the beginning, the main brand often adds considerable value. In practice, the product may be referred to simply by its subbrand. In some cases, the subbrand may become deemphasized. For example, today many people refer simply to Apple computers rather than Apple Macintosh.

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Some corporations do not find value in associating their corporate brands with more specific brands. In some cases, these companies own an assortment of brands that may have been built by a variety of other firms and are then acquired. Promoting the corporate name and its products to investors may be important, but the original brands tend to convey more value to consumers.

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An essential issue in product management is branding. Brand equity refers to the effective value of a brand. This value—often resulting from a history of advertising and a reputation for quality that a manufacturer has established among consumers over time—results from the increased profits that can be made by selling products and/or services under the brand name over and above what could be obtained by selling a generic, un-branded product. In practice, increased profits might result from both a higher price that can be charged and the greater volume that can be sold with the brand name. In some countries, accountings standards allow firms to maintain brand equity on their balance sheets as an asset. In the United States, generally accepted accounting principles generally provide that advertising expenses must be “expensed” in the period in which they are made. However, if one firm acquires another and/or buys a brand from another firm, the “good will” component of the purchase price can be depreciated over time.

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Co-branding involves firms using two or more brands together to maximize appeal to consumers. Some ice cream makers, for example, use their own brand name in addition to naming the brands of ingredients contained. Sometimes, this strategy may help one brand at the expense of the other. It is widely believed, for example, that the “Intel inside” messages, which Intel paid computer makers to put on their products and packaging, reduced the value of the computer makers’ brand names because the emphasis was now put on the Intel component.

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In some cases, brand extensions may allow a firm to use an existing brand for a product category that is new to the firm. For example, although Apple had originally focused on computers, its brand name was also used when MP3 players, smart phones, and tablet computers were offered. Using an existing brand name can save a great deal of money on brand building, and also allows the firm to “hit the ground running” by using an existing, strong brand name that would otherwise take time to develop regardless of the resources available.

There may be concerns about the propriety of a particular brand extension. A poorly received product from the firm could damage a strong brand name extended, and a new offering from a brand that customers would not find suitable as the maker of a product would tend to be less successful. Coca Cola for many years resisted putting its coveted brand name on a diet soft drink. In the old days, available sweeteners such as saccharin added an undesirable aftertaste, implying a clear sacrifice in taste for the reduction in calories. Thus, to avoid damaging the brand name Coca Cola, Coke instead named its diet cola Tab. Only after NutraSweet was introduced was the brand extension allowed. Research shows that consumers are more receptive to brand extensions when (1) the company appears to have the expertise to make the product [McDonald’s was not thought as credible as a photo-finishing service], (2) the products are congruent (compatible), and (3) the brand extension is not seen as being exploitative of a high quality brand name [e.g., one should not use a premium brand name like Heineken to make a trivially easy product like popcorn].

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Innovations can be classified into several different types, although lines may somewhat be a bit blurred.

The continuous innovation implies the inclusion of some new technology or ideas without any fundamental way in the way the product, idea, or service, is used. For example, although there are great technological differences between the electric typewriter, with its many moving parts, and the electronic typewriter based more on circuits, the two products may work very similarly. Whether a car has a carburetor or fuel injection, again, may not constitute a highly visible difference for the consumer, with established methods of operation left unchanged.

Dynamically continuous innovations involve some degree of change for the consumer, although such changes do not completely change existing ways of product usage. For example, digital watches, although different from electronic ones, basically serve the same purpose. The ball point pen, although somewhat more convenient, did not change the fundamental way people wrote.

A discontinuous innovation, on the other hand, fundamentally changes the way things are done. For example, many consumers had difficulty understanding the concept of a microwave oven when this device first came out.

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The use of ride-share services became increasingly popular as smart phones became more widespread. Uber and Lyft logos on cars have increased awareness. The social proof of the sheer number of people using these services has caused more people to try.

Although only some food is consumed in public, word has spread extensively on diet innovations such as the Paleo diet. Many of its adherents are glad to talk, with great conviction, about is principles. Such a diet is readily trialable. You can stop any time.

Although the Apple iPod today has been largely supplanted by smart phones that now integrate this function, MP3 players started to spread rapidly with the advent of the Apple iPod. Although MP3 players had been available before, these were usually quite big and bulky. The iPhone, in contrast, was much handier. The iPod featured white earbuds, in contrast to most other audio devices which, at the time, mostly came in black. Thus, even if the user kept the iPad in a pocket, the earbuds alone turned the user into a walking advertisement.

In the early days, GPS systems were expensive. However, users could try these out when renting cars, and thus the risk was greatly reduced.

Not all innovations involve high technology. Fashions are often quite arbitrary, and sometimes cyclical. At various times, faded and torn jeans have come into fashion. It is actually not easy to artificially wear out jeans, so used ones have often been resold.

A number of factors affect the likelihood that an innovation will spread successfully.

Observability involves the extent to which an innovation can be readily observed in public. iPhones were readily observable as were Uber and Lyft cars and riders. In contrast, nutritional supplements are often consumed in private and are thus not as visible. To the extent that new fashions can be seen readily on Instagram and other social media, they may catch the attention of more and more people.

Imitation refers to the extent to which people who see other people using an innovation will eventually follow. Given the cost involved, many people might have hesitated to “take the plunge” to get a smart phone. However, as people notice more and more others using these phones, they become increasingly well assured that these devices are useful and manageable.

We have previously discussed chicken-and-egg problems. Some innovations require two things to happen, each of which in turn requires the other, to take off. For example, for electric cars to be widely adopted, charging stations need to be conveniently available. However, hotel and parking facility operators may be unwilling to invest in these until a sufficient number of potential customers have these. In such cases, it may be necessary to “jump start” the innovation. For example, car makers might subsidize the cost for one hotel chain to put these in so that it will now be possible to recharge at most destinations.

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Trialability refers to the extent to which a consumer can try out a new innovation with committing to a large expenditure or extensive efforts to learn to use the innovation. Although automobile GPS systems were quite expensive when they were first introduced, those renting cars often got a chance to try out the device and realize its usefulness. One can easily try new foods and beverages and discontinue these if they are not satisfactory. However, a solar panel for one’s home cannot be readily tried.

Network economies involve essentially the inverse of the chicken-and-egg problem: Some innovations will be more valuable to a potential adopter the more others have adopted the innovation. This is particularly the case for innovations that involve communication, distribution, or certain other types of contact. Contrary to what one might have expected, there was no real chicken-and-egg problem with the fax machine. Large businesses immediately found it useful to have at least one fax machine in each building, thus allowing these organizations to fax each other. This, in turn, made it attractive for major suppliers and customers to acquire their own fax machines, a cycle that then continued to the next “generation” of firms:

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In some cases, new product categories or practices diffuse as innovation make these cost effective.

For example, many more people today take photographs than was the case in the old days when film based cameras were used. There is no real cost in taking a photo and there is no need to go through the hassle of having it developed. The fact that smart phones today allow users to take high quality pictures also means that there is no need to carry a separate camera.

With the spread of smart phones, e-payments have become more common across the world. China, in fact, runs ahead of the U.S. in this regard as an increasing number of street merchants now accept electronic payments.

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