Market overhang is a term derived from the physical world meaning things that stick out or hang over another thing. Often from the viewpoint of standing beneath an 'overhang' there is shade provided by a protrusion from the adjacent vertical domain, such as a tree or building.
In marketing, ''overhanging the market'' relates to the business practice of announcing a new product or a new
business strategy
In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessmen ...
by a company in an adjacent space to the target. To be an overhang in this context, the following conditions must exist: the announcer is a market leader in the adjacent space; the new product is not ready for release at the time of the announcement; the market is new and standards are not yet clearly defined; and, the goal is to forestall
competitor
Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, indivi ...
growth by encouraging
customers to wait for the new product.
Recent examples of overhang
In June 1999 -
Nortel declared a voice over IP strategy, while Cisco and its newly acquired Selcius Systems IP PBX were starting to gain traction. Nortel was a leader in enterprise PBXs and made this announcement to retain the loyalty of their enormous installed base and to slow down the adoption of the IP PBX product category. Nortel ''overhung'' the IP PBX market, announcing products 12 months or more before their availability.
In June 2006 -
Microsoft
Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washi ...
entered the IP Telephony market with PowerPoint. Here the collection of products and related applications in adjacent markets combined with announcements of as-yet-not-available products, attempt to ''overhang'' the IP PBX market, slowing down the growth of the market, forcing the players to consider the implications and adjust, encouraging customers to think about what Microsoft can bring to the market, giving Microsoft engineering the time to catch up with product.
Effectiveness of Market Overhang
The empirical evidence suggests this technique is effective since it continues to be used as a marketing tactic by major players that are slower to respond to the high growth of adjacent markets that are rapidly emerging. As the high technology industry continues to consolidate, ''market overhang'' is likely to continue as a mechanism for marketers to 'shape' emerging segments.
References
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Promotion and marketing communications