From The Editor's Desk

Understanding Product Continuation

I received a great lesson in product continuation when my iPhone 5 slipped out of my shirt pocket last week, hit the ground, and the impact caused a spider web crack across the screen. Surprisingly, Apple Stores caters to repairing cracked screens at their Genius Bar, but it can also create the impression that the focus will be on selling new cell phones to customers. This is why entrepreneurs in every city are starting iPhone screen repair shops. The business that I took my cracked-screen iPhone charged me $67 for a 30-minute repair which is much more reasonable than a new $599 replacement.

So, why isn’t Apple, the largest company in the world, not legally trying to stop all of these smaller businesses from existing? If Apple held a sports sales mentality, it would justify that the entrepreneur was making money off of their product, as well as costing them revenue from preventing the need for customers to purchase brand new products. Apple is in direct competition for their iPhone product with several smaller competitors, yet isn’t creating out.

But Apple isn’t doing that. Even though the small business owner that I took my iPhone 5 to said that he handles about 7-to-10 cracked screens per day. Another 3-to-5 are iPads. I asked the iPhone repair shop owner why he thought it was a good thing that he was in business, instead of Apple handling all of their customer’s cracked screens internally.

Product Continuation 101

His reasoning was actually pretty sound: Because Apple isn’t the primary seller of most of the iPhones. It’s the wireless companies. Those are the ones with the biggest relationship between the customer and the phone. When the customer selected the iPhone, it may have been the newest model on the market. But now, if they have to replace an entirely new cell phone, there might be a competitor’s product brand new to marketplace, like the Samsung Galaxy 5. By his business catering to customers with cracked screens, they end up staying with Apple long-term for a cheaper price, continuing a relationship until they decide, for themselves at phone replacement. In essence, the iPhone repair shop helps foster a product continuation between Apple and the customer that may otherwise be severed if the iPhone repair shop did not exist.

Now consider this mentality for the secondary ticket market: What the broker is doing may be helping the franchise itself. Not only does it allow the franchise to make front-end money on the initial sale of the product, but the secondary market broker may be attracting a whole new customer that the franchise doesn’t know about, especially through digital streams. Sure, the customer may want to have a relationship with baseball, but that doesn’t mean that just because they are in Milwaukee, it has to be with the Brewers. There may be other minor league options out there. It is the broker who creates the avenue for a relationship based on optimum location and price for any team to hold fans, who otherwise may seek an entertainment product out there.

The goal of utilizing the secondary market is to sell the experience. It is to encapsulate customers who otherwise would find a good entertainment product elsewhere, such as a movie theater or bowling alley. Those are the real competitors to the franchise, not secondary market agents who are working on margins, using an already sold product to target customers that the franchise likely doesn’t know about or actively sell to.

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