How ‘good enough’ products are disrupting premium pricing

Strategy textbooks taught us that sustainable competitive advantage that commanded premium prices was best protected by powerful barriers to entry. Build a moat, create switching costs, leverage access to high costs of entry, own distribution channels, and it would be difficult for startups to compete for your markets. But the forces of disruption operate by different rules, systematically destroying the very foundations of pricing power by making the previously difficult and expensive suddenly easy and cheap. The basis of competition changes, from excellence along well understood dimensions of merit to “good enough.”

The ‘good enough’ revolution in pricing

I have sympathy for incumbents. They’re accustomed to working really hard to deliver on demanding criteria for quality, reliability, and excellence, only to find that fickle customers are spending their money on “good enough” that do just fine. Consider some examples:

“Peak book” and the advent of e-readers. E-readers lack the tactile satisfaction of turning pages, the smell of paper, and the aesthetic appeal of a beautifully bound book, not to mention the satisfaction of having an author personally sign your copy (if the latter doesn’t matter to you, please don’t break my heart and tell me). Yet e-books offer instant delivery, the ability to carry thousands of books in one device, adjustable fonts, built-in dictionaries, and search functionality. For many readers, that’s good enough.  Further, Amazon can sell bestsellers for $9.99 because the marginal cost is near zero, undermining hardcover pricing power. And we’re now in a world where AI makes it easy for anybody to author a book, commoditizing the authority that being a book author used to convey.

Digital Board Games vs. Physical Board Games. Electronic games lack the social ritual of gathering around a table, handling physical pieces, and reading opponents’ body language. But they enable play with friends anywhere in the world, handle all rules automatically, provide instant matchmaking with strangers, and eliminate setup/cleanup time. A $40 board game becomes a $5 app. Of course, there is a big debate about whether becoming subservient to the companies that want you to rent, rather than own, is a good thing or not. 

Streaming Fitness vs. Gym Memberships. Peloton, Apple Fitness+, and YouTube workouts can’t replicate the full equipment range of a commercial gym, the fine-tuning of a professional coach, or the energy of in-person classes. But they eliminate commute time, remove scheduling constraints, offer unlimited class variety, and provide privacy for self-conscious exercisers. A $30/month digital subscription undermines $150/month premium gym memberships for many users.

In the industrial age, you could count on scarcity. It was hard to manufacture with quality at scale. It was hard to do advanced engineering. It was hard to source and assemble materials. For many of us, disruptors change the basis of competition entirely by removing the constraints that once justified premium pricing. 

The mechanics of price erosion

Traditional pricing power rested on three pillars: scarcity, complexity, and friction. Companies could charge premiums because their offerings were hard to access, difficult to replicate, or cumbersome to replace. Disruptive technologies attack all three simultaneously. Take professional photography. The scarcity of skilled photographers, expensive equipment, and darkroom expertise once justified substantial fees.

Smartphone cameras and AI-powered editing apps haven’t just reduced these costs—they’ve eliminated entire categories of photographic services. The wedding photographer still commands premiums, but passport photos, real estate listings, and product shots have been democratized beyond recognition.

The financial services industry offers another compelling example. Robo-advisors now provide portfolio management that once required expensive human advisors. The algorithms aren’t more sophisticated than what top wealth managers offer, but they’ve made “good enough” portfolio management available for basis points instead of percentage points. When Charles Schwab can offer comprehensive financial planning for free as a customer acquisition tool, traditional advisors’ ability to charge 1-2% annually becomes increasingly tenuous.

Strategic implications for incumbents

In a world where technology makes everything easier and cheaper, competitive advantage increasingly comes from business model innovation rather than product superiority. Amazon Web Services doesn’t charge premiums because its infrastructure is superior; it dominates because it transformed computing from a capital expense to an operating expense, fundamentally changing how companies think about IT resources.

The most successful responses involve three strategic moves. First, companies need to be open to unbundling their offerings, recognizing that customers will no longer pay premiums for features they don’t value. Second, they must shift from product-centric to ecosystem-centric thinking, finding new sources of value in sticky network effects and data rather than in the core product itself. Third, they must embrace the reality that in many categories, the price will trend toward marginal cost—which in digital goods means effectively zero.

The new basis of competition

As traditional pricing power erodes, new sources of competitive advantage emerge. Speed of innovation, ecosystem orchestration, and customer intimacy become more valuable than product features. Creating stickiness that makes it hard to switch, adding value to the experience and reinforcing new forms of scarcity – perhaps embedded in algorithms – are all powerful ways that digital firms sustain competitive advantage. 

Spotify, for instance, operates in a world where recorded music is effectively free. Its pricing power doesn’t come from exclusive content but from its recommendation algorithms, social features, and ecosystem integrations. The premium isn’t for the music—it’s for the experience around the music. And for artists, their revenue is increasingly coming from what is scarce – the experience of attending a live performance.

The bad news is that for many experts with years of investment in the old paradigms, the good enough revolution will make their experience less valuable. The good news is that democratizing who can create what’s good enough can be a basis for massive growth. 

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