Glamor Economics

Chapter 44

Chapter 6 Section 7 Why Camera Drives Film Consumption—Complementary Goods
In the early 20s, Kodak wanted to open up the film market, but they were not in a hurry because they knew that it would not be easy to make the newly developed film stand out in the market.So they adopted the method of developing complementary products, developed a popular camera in 60, and announced that other manufacturers could imitate it, and there was a boom in automatic cameras for a while.The rapid increase of cameras has brought a broad market for film, and Kodak took the opportunity to quickly launch film, which was sold all over the world for a while.

In order to establish the dominance of DOS and WINDOWS in computer operating systems, Bill?Gates encouraged other manufacturers to develop applications on DOS and WINDOWS.Gates' decision made DOS and WINDOWS more competitive than other operating systems, and the balance of user choice eventually fell to Microsoft.End users and information system managers choose WINDOWS because they want to use 29997 other applications, many of which do not have versions for Macintosh, OS/2, or UNIX.Application software is a complementary product of the operating system. By encouraging other application software manufacturers to develop programs based on this platform, Microsoft has vigorously developed complementary products to DOS and WINDOWS—application software compatible with DOS and WINDOWS.As the number of such applications increases, so does the value of Microsoft's operating system to customers.This is the complement strategy adopted by Microsoft to achieve great success in the operating system.

Complementary goods refer to the existence of a certain consumption dependence relationship between two commodities, that is, the consumption of one commodity must be matched with the consumption of the other commodity.Generally speaking, an increase in the price of a commodity complement will lead to a decrease in the demand for the commodity due to a decrease in the demand for the complement.

If a product and its complementary products are in a mature market, the complementary effect produced by the complementary product may not be so obvious.As we all know, for laundry people, washing machine and washing powder are typical complementary products.Today's consumers tend to make independent purchase decisions for both, and they have their own independent brand preferences for washing machines and detergents.At this time, the combination of brand A washing machine and brand B washing powder recommended by the manufacturer may not be effective.In an immature market, consumers who know little about product information account for the vast majority.Enterprises strengthen consumers' subjective perception of the relationship between complementary products through advertising and other means, and may establish the strategic importance of complementary products, as evidenced by the complementary strategy launched by Microsoft.Conversely, in a mature market where consumers with sufficient product information account for the vast majority, it is difficult to establish a close relationship between complementary products.

Generally speaking, as a complementary product, there are the following modes of operation:
1.bundled operation
Bundle a group of different but complementary products together at a single price and sell only that group at the same time.For example, IBM once bundled computer hardware, software and service support together for operation, and Microsoft operated the OFFICE series and IE explorer on the WINDOWS operating system.Tying is widespread in business, but people don't always recognize it.For example, a car as a means of transportation and its audio-visual equipment form a complementary product relationship, but consumers often regard them as a whole.

2.cross subsidy

By consciously selling a product at a preferential or even loss-making price, it is possible to promote the sale of more profitable complementary products in order to obtain the maximum profit.Such a strategy is used in the "razors and razor blades" strategy involving complementary products.Selling razors at or near cost price is intended to induce customers to purchase more, more profitable replacement blades in the future.

3.Provide customer solutions

Starting from the actual needs of customers, by reducing customer costs, such as time, money, energy, etc., increasing the value customers get from consumption, combining a group of complementary products to provide customers with product "packages", so as to achieve attraction Customers, the purpose of increasing profits.

4.system lock

The essence of implementing the system lock-in strategy is how to lock in customers together with complementary product manufacturers and keep competitors out of the door, so as to finally achieve the highest level of controlling industry standards.Microsoft is the most typical example. 80% to 90% of PC software vendors are based on Microsoft's operating system (such as WINDOWS series), as a customer, if you want to use most of the application software, you have to buy Microsoft products.

[links to related words]

Complementary goods In the eyes of consumers, goods that appear together and are used together are complementary goods, such as players and records, film and cameras are complementary goods.

(End of this chapter)