The trade off of fidelity and convenience in marketing, and how it doomed my favorite company

I’m reading a book called Trade-Off, by former USA Today technology columnist Kevin Maney. It’s primarily a marketing book.

Maney argues that all products are a balance of fidelity and convenience, and highly favor one or the other. He additionally argues that failed products fail because they attempted to achieve both, or failed to focus on either one.

An example of a convenient product is an economy car. They’re inexpensive to buy and inexpensive to keep fueled up, but don’t have much glitz and you probably won’t fall in love with it. A high-end sports car or luxury car is a lot less practical, but you’re a lot more likely to fall in love with it, and gain prestige by driving around town in it.
An example Maney cites is Amazon’s Kindle. Initially priced at $399, it was a fidelity item, but the Kindle generally lacks the aura of hardcover books. He argued that the Kindle’s future was as a convenience item, a low-cost device that could display inexpensive books delivered instantly. Indeed, now that the price has come down, the Kindle is successful.

Having read this, I understand the success and failure of a couple of products that are near and dear to me.

Commodore’s VIC-20 was all convenience. All convenience. It was a low-priced color computer aimed at a market starved for such a thing. It was the best-selling machine of 1982, but sales quickly fell off a cliff, because of its limited capabilities–five stingy kilobytes of RAM, a 22-column screen, very limited graphics capabilities, and simple sound capabilities. It was the perfect machine for its time, but times were changing fast. The more important thing it did was set the table for its successor.

That successor followed fast. Released in 1982 when the VIC-20 was still having its best year, the legendary Commodore 64 cost $595 and delivered a stunning 64K of RAM, color, and sound at that price. The price dropped quickly to $299, then by $50 increments until it reached $99, and it delivered just enough fidelity at every price point it landed to survive 10 years on the market. The computer was cheap, the peripherals were cheap, and the software was cheap and plentiful. Its closest competitor was the Apple II, and it outsold the entire Apple II line 3 to 1. Ultimately it sold 20 million machines, which isn’t much by today’s standards, but in the 1980s it was staggering. The only consumer electronics that outsold the 64 were the Atari 2600 (30 million units) and the Nintendo NES (61 million units).

The 64’s heir apparent was called Amiga. Its various models sold a total of 3 million units between 1985 and 1994, so few people consider it a failure, but compared to the 64, it was a flop. After all, the 64 sold close to 3 million units per year in 1983, 1984, and 1985. Its management never settled on a marketing strategy for it, so they flailed around. In one desperate move, they discontinued the most successful iteration of it to replace it with a model that looked an awful lot like a 64, thinking that might help sales. It didn’t, of course.

The machine was revolutionary, and expensive to make, so someone was always going to undercut it in price. They needed to go all-in for fidelity and aura.

And it had aura, especially at first. It had real, pre-emptive multitasking, like Windows and Mac OS X do today, but it had it in 1985. The only other machines with real, pre-emptive multitasking at the time were Unix workstations that cost $10,000. It had a graphical interface with a mouse like a Macintosh, but it had color. Unprecedented color–it could display up to 4,096 colors at a time when being able to display 16 colors was a big deal. It had 4-channel stereo sound at a time when 2- or 3-channel sound was relatively rare.

At its introduction, they sat artist Andy Warhol down in front of one to demonstrate its capabilities. He painted a picture of Blondie lead singer Debbie Harry. They conspicuously left the Commodore name off the case, simply calling the machine “Amiga.” The price was $1,395, which was high, but it undercut the price of the Mac and the IBM PC/AT by $500 or more, even though neither of those machines were in the same universe as this machine.

In retrospect, they could have kept the price relatively high, shown Andy Warhol a Mac and ask him how to make the Amiga user interface look better than the Mac’s–the Mac user interface looked like it was drawn by a commercial artist, while the Amiga interface looked like it was drawn by a math teacher–and paid him to slap “designed by Andy Warhol” on the box. They could have taken the Debbie Harry angle a bit further by paying Blondie to use an Amiga as an instrument on one of their records and place it–and some of its graphical effects–in their music videos. In 1985, catering to creative professionals hadn’t occurred to Apple just yet, so Commodore could have beaten Apple to that punch. They were close, but they didn’t stick with it. Andy Warhol actually requested that Commodore make some changes to the machine, including a light pen or a pen-like mouse. They never did. When they needed to be seeking Warhol’s advice, they ignored him.

The producers of Star Trek IV wanted to use an Amiga in the movie. Commodore agreed–if they’d buy one. Apple agreed to loan them a Mac for free, so the movie featured a Mac instead. Another missed opportunity. Potentially a huge missed opportunity. Imagine getting science fiction fans interested in a computer that, compared to everything else on the market at the time, was science fiction. It could have been bigger than the opportunity they missed with Andy Warhol.

After 18 months or so of beating aura away with a stick, they slashed prices, plastered the Commodore name and logo all over it and tried to go on value. That increased sales for about three years, but then Radio Shack started selling PC/AT clones for less than $1,000. Radio Shack’s PCs were just as cheap, and you could buy one in any town. Even if you wanted to buy an Amiga, finding a place to buy one took a concerted effort. And by stagnating, the fidelity fell behind. Macs got color and sound and PC sound and graphics got better, whittling away at the Amiga’s fidelity, and due to the thin profit margins, Commodore didn’t have the funding to sink into R&D to keep enhancing the Amiga’s capabilities so it could stay ahead or at least keep up.

So they chased convenience but did a bad job of it, let the fidelity stagnate, and went out of business with barely a whimper in 1994. Only a few thousand rabid zealots like me even noticed.

Commodore made other mistakes too, like ignoring their own engineers like they ignored Andy Warhol, but seeing just how close they came to stumbling onto a marketing triumph makes their demise all the more sad.

Having convenience in one product line and fidelity in another is unusual, but not unheard of. Maney points out that Apple is in that category. Apple’s MP3 players sell on convenience, while its phones and computers (and tablets, not yet released when this book came out) sell on aura. And, notably, by making their MP3 players easy to use and the music easy to buy, they can still price the hardware itself a bit higher than its competitors, so the MP3 players aren’t a total value play. Convenience doesn’t have to strictly equal a low price.

Of course, outside of technology some companies do it all the time. Chevrolet dealers sell an economy car with the Chevy nameplate on it. They also sell the Camaro and Corvette with a Chevy badge.

Trade-Off is a good book. It’s a few years old, but definitely worth a read.

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