Why Do Companies Pre-Announce Products?

Dave Zatz —  February 17, 2011 — 17 Comments

Jeremy Toeman suggests one cannot beat Apple’s iPad by building an iPad clone. And, generally speaking, that’s probably a fair observation. Yet you can still grab market share and generate revenue, especially if manage to undercut the competition on price. Unfortunately, the once pricey Apple is now affordable thanks to a shift in revenue model — not only do they sell razors (iOS devices), they’re also offering razor blades (apps) these days to the tune of 30% commission. But what really caught my eye in Jeremy’s article was his pre-announcement stanza:

There is almost no upside to announcing products that are not complete. All you wind up doing is telegraphing your punches and revealing your plans to the industry at large. And, as if that wasn’t bad enough, these other companies have announced their unreleased tablets prior to the iPad 2 shipping. Has no one read The Art of War? “The spot where we intend to fight must not be made known.”

For smaller companies, there’s rarely a compelling reason to pre-announce. In fact, there’s several good reasons to avoid it. The little guys get far fewer shots at press coverage and if folks can’t buy when they’ve got our attention, well… they may have lost their one opportunity. However, for larger companies like Motorola (Android Xoom), RIM (Blackberry PlayBook), and HP (webOS TouchPad) I see a few reasons to pre-announce… even though it’s somewhat maddening as a blogger and a consumer.

1) HP, RIMM, MMI are publicly traded companies. They’re communicating to their investors that they intend to be players in this new tablet arena.

2) As Apple has shown, rich third party software offerings are critical to success in the mobile space. By pre-announcing, HP, RIM, and Moto hope to excite potential partner developers and provide them time to prepare apps that line up with the ultimate product launch.

3) Lastly, these companies are also speaking to us, the potential customers: “Save your pennies.” Very few will buy multiple tablet products this year, so they hope to encourage us to hold out until release.

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17 responses to Why Do Companies Pre-Announce Products?

  1. Agreed.
    Agreed.
    Agreed.

    I would also add that I think some companies pre-announce pretty darn far out in the prodev pipeline and actually are doing a bit of crowd sourcing about features, possible pricing, etc. Today they get a TREMENDOUS amount of immediate feedback from users and tech reviewers for free. That all can go into refining the product mix prior to release

  2. I would love to have a company announce a product at one of these large events, then at the end give a price and a URL where you can buy it now, ships tomorrow. With brick and mortar next week. That would just be awesome.

    Apple comes the closest to that dream I think. Yes, and I know it is a dream because of the FCC and what not putting things out there before products get released. But one can dream right?

  3. “Agreed.
    Agreed.
    Agreed.”

    Yup.

    Apple has a monopoly in the space as of the moment, and the competition is letting everyone know that they don’t have to go along with Their Satanic Majesties Request if they are willing to keep their powder dry for a bit.

  4. xdreamwalker, good point on the FCC filings… which have enough public bits to potentially spoil a product launch. It’s why blogs like Engadget and I trawl that database somewhat regularly. :)

    tivoboy, perhaps I’m just pessimistic, but I’m not sure these large companies are progressive enough to crowd source pre-release feedback.

  5. I agree with Dave on this.

    Look at the Zune. Many weren’t certain about Microsoft’s approach with making the Zune in 2006 ( http://www.zatznotfunny.com/2006-11/does-the-zune-matter/ ), but it did have sales and offer the marketplace a competitor. Current profitability unknown. Sales data: http://en.wikipedia.org/wiki/Zune#Sales

    Microsoft announced it Sept 28, 2006, released it Nov. 14, 2006. ( http://www.microsoft.com/presspass/press/2006/sep06/09-28ZunePricingAvailabilityPR.mspx ) 2 month gap.

    I think now, manufacturers are announcing even earlier then actual release if there is a developer community in play, though I’m aware the iPad was announced on January 27, 2010, went on sale in the United States on April 3, 2010. (~2 month gap). I think Apple was keeping this one close to the vest on purpose and is likely an exception rather then the trend going forward these days.

  6. All good points. I’d throw into additional contemplation “Why do we let these companies whip us into a lather every time they want to announce a shiny new bobble? We should make them work harder to earn our eyeballs.”

  7. 4) You can manipulate the bloggers/press by releasing a few details at a time. (in their mind) It is better to have 1 story a week for 5 weeks each with a new bit of info vs. just having 1 story at launch with everything. They think it makes the product seem desired before it is launched.

    PS I’m glad to see that ZNF doesn’t fall for this trap, often.

  8. The stretching out of information is absolutely required to create a sensation around a product. It’s the same a limiting supply of a product to create a frenzy. If you can’t have it (or have it yet) and it’s desirable, you can get a ton of free press around it. It has to be the right product to pre-announce. Clearly Apple doesn’t do this when there’s a cpu bump on their laptops (available today). Also, companies pre-announce to line up with big press events. There can be the chance for stories through many outlets at CES that a small company wouldn’t have the budget to pursue (or draw) otherwise. What was that super mini laptop that CNET was gushing about? Agree with everything else you said.

  9. Jeremy… Yeah, annual trade shows are typically sensible venues to launch products. On the other hand, there’s a lot of noise and many choose to no longer announce there for fear of being lost of overshadowed. TiVo is one example, another is HP who announced their webOS tablet a month after CES. Also worth reiterating – many companies don’t get the periodic press hits as they trickle out info.

  10. It’s not quite the razor and blade story… while Apple’s gross margins are down slightly due to competitive iPad pricing, they still make a LARGE gross margin on iPad, iPhone and iPod sales. In fact, while they do well on apps, the original offering (iTunes Music Store) was a break even product offering to drive sales of iPods, almost a blade and razor model, rather than a razor and then blades model. :)

  11. But I suspect it’s not the same sort of gross margin seen on a MacBook Pro. iPads are extremely competitive in terms of pricing. Also, remember the original iPhone launched at $600 and now the 3GS runs a mere $50. Granted, there’s a subsidy in there somewhere… :)

  12. “Also, remember the original iPhone launched at $600 and now the 3GS runs a mere $50. Granted, there’s a subsidy in there somewhere”

    Yeah. Don’t forget the TiVo Premiere is “free”.

    Gotta go by ASP, or there is too much noise to signal. Apple is still selling iPhones for $600…

  13. a significant reason missing from your list is to prevent deter new entrants from the market.

    for example, if oracle announces it’s going to enter the nosql market, it will prevent lessor competitors/startups from entering the market. it doesn’t even have to deliver a product — it’s not illegal to announce and never deliver.

  14. Not to impressed by the original article. You can’t do well cloning an Apple product? Tell that to Android.

    But to the point of this post, the whole pre-announcing thing, I think its a little ridiculous actually. Remember what a big splash the original Pre made? And then all those months went by and when it finally came out everybody had sort of forgotten about it. Then take note that the announcement of the new Pre 3 has about the same timing and think about whether that’s a good idea or not. Again, there will be a new iPhone sucking all the air out of the room at around the time it finally comes out.

    As for the HP TouchPad, seriously? I mean its not coming out until the SUMMER. The iPad 2 will be out. Updates to the Samsung Galaxy Tab. The Motorola Xoom will come out. And and and… By the time it actually comes out it will likely be a very crowded field. Now that is just a bad situation, but pre-announcing this far ahead and taking most of the interest away from when it really does ship doesn’t seem like a good idea to me.

    And as to the whole developer argument–Apple has the same problem, or at least they did when the iPad came out for example. Yet they STILL didn’t announce the damn thing six months ahead.

  15. Oh, and Apple’s margins, while they’ve slipped a bit with the shift to iPhones and iPads, are still over 36%, better by quite a bit than most of the companies competing in this space, so they’re making money on all those $499 iPads even as it appears that nobody else can even build a smaller tablet for the same price…

  16. How about when a company announces a product and then they bury it and never release it.

  17. I’m with Glenn — Palm/HP’s pre-announcements have been quite puzzling & disappointing. Especially, given promises from HP that [some of] products announced at the most recent release would be available within weeks. Turns out, it’s Verizon’s Pre2 that will be released in that timeframe :(

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