The Whole Product Example - VHS versus BetaMax

"The whole product" model also provided a convincing explanation of why VHS had thrashed Betamax. VHS offered a bigger choice of hardware at lower cost, the tapes were cheaper and more easily available, there were a lot more movies to rent, and so on. That is they had a better whole product offering.

If you were to take yourself out on the high street to pursue the latest video you would see VHS recorders more readily available to rent, while the video shop would have three walls of VHS movies and only one for Betamax.

Indeed, the main thing that didn't fit was the idea was that Betamax was "technically superior". SLooking at the two,there was absolutely no visible difference in picture quality, and some reviews had found that VHS's quality was superior.

Many "knew" Betamax was superior -- that was the received wisdom, even at the time - and maybe it was, in a lab. But no one was buying a lab test rig. In terms of "the whole product", VHS was clearly superior, so that's the way the customer went. Along with everybody else.

Betamax had owned the market, but lost it because Sony got one simple decision wrong. It chose to make smaller, neater tapes that lasted for an hour, whereas the VHS manufacturers used basically the same technology with a bulkier tape that lasted two hours (What do you think the customer wanted?). Instead of poring over the sound and picture quality, reviewers could simply have taken the systems home. Their spouses/children/grandparents and everybody else would quickly have told them the truth. "We're going out tonight and I want to record a movie. That Betamax tape is useless: it isn't long enough. Get rid of it."

Betamax was the first successful consumer video format, and at one time it had close to 100% of the market. All of the video machines in use and all of the pre-recorded movies were Betamax. It had a de facto monopoly, and an element of lock-in (because of tape incompatibilities). It lost because, at the time, it could not do what consumers wanted: record a whole movie unattended. And although Betamax playing times were extended, they never caught up with VHS.

Other elements of the oft-repeated Betamax story are also wrong. For example, while Sony was certainly slow to bring in other manufacturers, it had tried to license it to rivals such as JVC before VHS was even launched. Betamax was not generally more expensive: Sony had to slash its original high prices but generally it was competitive. Indeed, after it had lost the market, Betamax machines were often cheaper than VHS ones.

And at the beginning, there was no comparative shortage of Betamax movies to rent: actually, they were all Betamax.

Even if Betamax had been "technically superior", it wouldn't have mattered. VHS users have long had the chance to upgrade to the compatible SuperVHS format with superior picture quality. But rather than demanding better pictures for today's TV sets, consumers have shown more interest in LP (Long Play) modes that reduce the picture quality to provide longer recording times.

VHS won because "the whole product" did what people wanted at a price they were willing to pay. And when people use the VHS v Beta analogy, they are not indicating a market failure but their own ignorance.

While being technologically driven is essential, managers must remember whose perceptions of superiority ultimately lead to product success. It is imperative that the customer deems the product "superior".