For years, consumer electronics companies have competed primarily through technology, by cramming ever more features into products in a race to offer consumers the latest and greatest. But this approach can be fruitless. Even in the best of times, many manufacturers struggle to make money: despite falling component costs, intense competition can restrain price increases, and rapid obsolescence often makes it necessary to discount all but the very newest products. The result? An industry-wide average profit margin in the low single digits at best and negative at worst.

There may be a better way to grow: by looking beyond cutting-edge products. Through two surveys spanning nearly 2,500 people and in-depth interviews with electronics purchasers in the United States, we found that almost two-thirds of consumers were more interested in core benefits and attractive prices than in often-unused bells and whistles (Exhibit 1). While there will always be high-end buyers willing to pay premium prices, we identified an attractive emerging market for easy-to-use consumer electronics products, with features that reflect user demand, priced 30 to 50 percent lower than standard offerings.

These new products shouldn’t be confused...