The vacuum cleaner was an archetypal new economy product of the early twentieth century. It offered both major time savings and qualitative advantages over previous household cleaning methods—the brush, broom, and manual carpet sweeper—and was sold in a novel way (by household demonstration). The direct sales techniques pioneered by vacuum manufacturers in the United States were to have a profound impact on the way vacuums were sold in Britain, and globally. Yet by 1939 their household diffusion was relatively slow compared to refrigerators or washing machines. This chapter explores why the industry evolved a structure based on high prices, high cost distribution methods (door-to-door sales), and a strong emphasis on non-price competition, based on differentiation through features. It also shows how door-to-door selling eventually came to constitute both a key firm-level competitive advantage and a substantial industry-level constraint on product diffusion.
Price competition in the Hotelling model with uncertainty on costs