Crossing the chasm with beacon products in the portable music player industry

•Apple's first iPod triggered market takeoff with important product innovations.•We demonstrated that competitors emulated the original iPod design using Levene test.•The emulation of the beacon product by competitors leads to the development of a dominant design.•Apple effectively preempted competitors from gaining market share by introducing iTunes and innovative new models with lower prices.•We named products like the iPod a beacon product, a concept that complements dominant theory but emphasize the importance of product innovations.

Firms competing in new product categories face great technical and market uncertainty as they try to move from early adopters to mainstream markets (Mahajan and Muller, 1998, Muller and Yogev, 2006 and Rogers, 2003). While the management literature identified several factors that may contribute to adoption, the role of specific product models has been understudied. To address this gap, we studied portable digital music players (MP3 players) from 1987–2006 and tested the role of specific product models in market takeoff, convergence and product category evolution. We introduced the concept of beacon product, defined as a specific product model that has great appeal to customers and sends a strong signal about what they want.We found that Apple's first iPod model triggered market takeoff and that many competitors tried to emulate the original iPod design, leading to convergence around its key design features. But it took the iPod/iTunes store combination, a new ecosystem for the legal download of digital music, to bridge the gap between early MP3 adopters, primarily young people, to mainstream markets. The iPod/iTunes ecosystem proved more difficult for competitors to copy and many of the firms that had pioneered the MP3 category exited the industry or were relegated to small niches. By subsequently introducing new models with smaller form factors at lower prices and expanding iTunes Store offerings, Apple effectively preempted competitors from gaining share in this growing market.