What Is a Complementary Good?

A complementary product is one that needs to be consumed with another. Two kinds of goods that need to be consumed together to make consumers satisfied are mutually complementary. The complementarity between goods is often asymmetric, and the degree of complementarity varies according to the characteristics of the goods. As the demand for a commodity increases, so does the demand for its complementary products. An increase in the price of one commodity will cause a decrease in demand for the other. Cross-price elasticity between complementary products is less than zero. ^[1]

Complementary Products

Complementary products refer to the existence of a certain type of consumption dependence between two commodities, that is, the consumption of one commodity must be matched with the consumption of another commodity. In general, a commodity complement

Ordinary complementary products: There is no fixed simultaneous use between two commodities

Master of strategy

Due to the openness and development of the theory itself, it needs to be enriched and expanded according to the constantly developing practices of the business world

Increase sales of flagship products

To implement the right complementary product strategy, we must pay attention to the following three main issues:

First, it is necessary to understand complementarities and complementarities correctly and comprehensively. Complementers are those participants from which consumers can purchase complementary products or suppliers can sell complementary resources to it. Complementary products and complementary products are always relative. The same product has different complementary products and complementary products for different subjects and different purposes of the same subject. For ordinary tourists, the villas and hostels around the water village may be the relationship between substitutes; for more "professional" tourists who have high pursuit and appreciation of the similarities and differences of the scenery, the villas may Complementary products for hostels. The relativity of complementarity and complementary products is also manifested in the fact that complementarities may be suppliers, customers, or competitors in the same industry, and may not have direct commercial relations with each other.

Second, identify which products are complementary products of the company's products, and on this basis, identify complementary products of strategic importance. The relativity of complementary products and complementors gives us a useful revelation that a particular product may have many complementary products corresponding to it. Therefore, searching for various complementary products of enterprise products with an open perspective has become the first task that we must complete when establishing complementary product strategies. In this regard, Porter gave a vivid example, he pointed us to a series of complementary products of housing. Since any product has a considerable number of potentially complementary products, it is necessary to distinguish between those that are strategically important and those that are not.

Complementary products of strategic importance have two characteristics: (1) they are linked or can be linked in the buyer's mind. (2) They have a significant impact on each other's competitive position. Finding complementary products of strategic importance requires strategic decision makers to have good judgment. The strategic importance of complementary products changes with the evolution of the industry, the industrial structure, and the rationality of consumer consumption.

Third, dialectically view the relationship between the company's products and complementary products. At different stages of industrial competition, an appropriate complementary product strategy should be selected based on the comparison of the competitiveness of competitors, suppliers, customers, substitutes, and complements in the industry. A common misconception is to treat complementary and complementary products as just friends. This problem-oriented perspective ignores its symmetry. Although there are obvious cooperative factors acting on the complementarity, there will also be a competitive factor interacting on the complementarity. When companies and their complementers come together to create value, the relationship between them is a cooperative relationship; when they begin to distribute added value, the relationship between them is a competitive relationship. In any space-time environment, creating value and distributing value are two sides of the same coin. Therefore, the relationship between a company and its complement is a competitive relationship. When the industry is growing rapidly, the added value is rapidly increasing. The focus of attention between companies and their complementers is often bigger the cake. At this time, the cooperative side is more obvious. Focusing on getting a larger share of the "cake", the competitive side of each other is exposed.

Considering the coexistence and co-prosperity relationship between complementary products, when the industry where the complementary products are developed is not high, enterprises need to provide complementary products themselves or support other enterprises to produce complementary products. The world-renowned companies Kodak, 3DO, Microsoft and other companies provide us with classic cases in this regard. To expand film sales, Kodak encouraged manufacturers to enter the camera industry with the same film specifications. 3DO has a 32-bit CD-ROM hardware and software technology required for next-generation audiovisual games. In order to sell software, 3DO's strategy is to transfer production hardware technology licenses when more hardware cannot be used in the early hardware. This action has attracted companies such as Panasonic, Venus, Sanyo and Toshiba. The entry of many manufacturers has forced hardware producers to compete in price, which has reduced the price of the complementary product of hardware. In addition, 3DO found that in order for the market to generate purchasing power, hardware must be sold below the cost price, and hardware producers will not do so. As an attraction, 3DO now gives them 2 shares of their own company after each machine is sold. 3DO's strategy has effectively increased customer purchases of hardware, which has led to better sales of software products.

Creating competition in the complementary product market is another important aspect of the complementary product strategy. Increasing the number of manufacturers in the complementary products industry is an effective way to improve the company's ability to control and negotiate with complementary products. A special case of this is that companies enter the complementary products industry themselves. In the early stage of development, due to the limitation of the amount of remaining resources, companies often cannot enter the complementary products industry in a diversified manner. However, after the enterprises have established their dominant position in the industry, they have more surplus resources in order to High profits, companies can consider the issue of entering the complementary products industry. Microsoft's infiltration into the application software industry and Microsoft's IE challenged Netscape's Netscape. Essentially, Microsoft started to produce complementary products and demanded added value from the complementary products industry.