Osborne Effect

Osborne Effect

What does Osborne Effect mean?

The Osborne Effect is a phenomenon in marketing where the announcement of a new product or model leads to a decline in sales of the existing product or model, even if the new product is not yet available. This decline is caused by customers delaying their purchase decision until the new product is released, resulting in lost sales for the Current product.

The effect is named after Adam Osborne, the founder of Osborne Computer Corporation. In 1983, Osborne announced the upcoming release of the Osborne Executive, an upgraded version of the Osborne 1 portable computer. The announcement caused a sharp drop in sales of the Osborne 1, as customers waited for the new model. The company filed for bankruptcy in 1985, partly due to the Osborne Effect.

Applications

The Osborne Effect is a significant concern for companies in the technology industry, where new products are frequently announced and released. To mitigate this effect, companies may use various strategies such as:

• Delaying product announcements: Companies may delay announcements of new products until they are closer to release to Minimize the impact on existing product sales.
• Managing customer expectations: Clear communication about the release date and features of new products can help customers understand the timeline and reduce uncertainty.
• Offering incentives: Providing incentives for customers to purchase existing products before the new model is released can help maintain sales.
• Introducing transitional models: Companies may introduce transitional models with incremental upgrades to bridge the gap between existing and new products, reducing the impact of the Osborne Effect.

History

The Osborne Effect emerged in the early days of the Personal Computer industry, where new models were released frequently. As the industry matured, companies became more aware of the potential impact of product announcements on sales. The term “Osborne Effect” was popularized in the 1980s and has since become a well-known concept in technology marketing.

The effect has been observed in various technology sectors, including smartphones, tablets, laptops, and Gaming consoles. In recent years, the Osborne Effect has also been applied to software products, as companies announce new versions and features.