However, if you can make it "As Good" but cheaper, then you have a very good chance of unseating the incumbent.
I think the point of the story was that in many cases, you don't have a particularly good chance of unseating an incumbent with a similar level of product just because you're cheaper. Often you have to be much cheaper, or people who have already bought into the other brand are unlikely to move. There are a variety of reasons for this, from the practical cost (time and effort to migrate may not be trivial, depending on the nature of the service) to the psychological (brand loyalty 101: having chosen a brand, people want to believe they made the right choice, so they have a tendency to defend their decision to others and rationalize away any competing alternatives as inferior choices until the difference is wide enough that they can no longer bring themselves to believe it; see also: it's easier to retain existing customers than to attract new ones).
The thing with "As Good" and "X times better" is they are subjective terms. In the PC vs Mac debate, "As Good" can vary greatly from individual to individual, which means pricing is really a moot point. However, in the case of Dropbox, I really don't think "As Good" is all that subjective. And the reason for this is, its really a behind the scenes product. In this space, the only driving factors that I can think of are "Trust, Accessibility and Price".
Do I trust company X to safely store my files. Microsoft, Google and Apple can compete on this.
Can I access my files from X. Google is probably the only one right now that can compete with Dropbox.
And what does it cost. Since Dropbox's biggest user base is Free, you can't go lower than free. But if you are a paying customer, I can't see brand loyalty having any affect because I can't see such a bond forming. It's a behind the scenes solution and if done well, should be invisible.
If "As Good" can be commonly defined among a large user base and if you are "As Good", you can unseat an incumbent with price. And the price difference doesn't have to be too significant as academic studies have shown.
Coke is able to fend off cheap generic brands because no matter how low they go, they know they can't match them on taste. And that's due to decades of cleaver advertising to introduce that psychological barrier. So no generic brand can ever say they are "As Good" with people believing them.
For the space that Dropbox is competing in, I really don't see any other defining variables, other than "Trust, Access, and Price". And these are all pretty tangible points with the vaguely subjective one being "Trust". And it's the reason why they are in such a precarious situation that they are in.
Comments
However, if you can make it "As Good" but cheaper, then you have a very good chance of unseating the incumbent.
I think the point of the story was that in many cases, you don't have a particularly good chance of unseating an incumbent with a similar level of product just because you're cheaper. Often you have to be much cheaper, or people who have already bought into the other brand are unlikely to move. There are a variety of reasons for this, from the practical cost (time and effort to migrate may not be trivial, depending on the nature of the service) to the psychological (brand loyalty 101: having chosen a brand, people want to believe they made the right choice, so they have a tendency to defend their decision to others and rationalize away any competing alternatives as inferior choices until the difference is wide enough that they can no longer bring themselves to believe it; see also: it's easier to retain existing customers than to attract new ones).
The thing with "As Good" and "X times better" is they are subjective terms. In the PC vs Mac debate, "As Good" can vary greatly from individual to individual, which means pricing is really a moot point. However, in the case of Dropbox, I really don't think "As Good" is all that subjective. And the reason for this is, its really a behind the scenes product. In this space, the only driving factors that I can think of are "Trust, Accessibility and Price".
Do I trust company X to safely store my files. Microsoft, Google and Apple can compete on this.
Can I access my files from X. Google is probably the only one right now that can compete with Dropbox.
And what does it cost. Since Dropbox's biggest user base is Free, you can't go lower than free. But if you are a paying customer, I can't see brand loyalty having any affect because I can't see such a bond forming. It's a behind the scenes solution and if done well, should be invisible.
If "As Good" can be commonly defined among a large user base and if you are "As Good", you can unseat an incumbent with price. And the price difference doesn't have to be too significant as academic studies have shown.
Coke is able to fend off cheap generic brands because no matter how low they go, they know they can't match them on taste. And that's due to decades of cleaver advertising to introduce that psychological barrier. So no generic brand can ever say they are "As Good" with people believing them.
For the space that Dropbox is competing in, I really don't see any other defining variables, other than "Trust, Access, and Price". And these are all pretty tangible points with the vaguely subjective one being "Trust". And it's the reason why they are in such a precarious situation that they are in.