Complements are products or services that make another product more valuable when used together, such as apps for a phone or ink for a printer. Demand for one rises when the other gets cheaper or better.
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Types of complements
- Production complements: inputs that must come together to make and deliver an offer, such as chips, software and screens in a phone.
- Consumption complements: things customers combine when they use the offer, such as games for a console or chargers for an electric car.
Key factors
- Availability at launch. Buyers hold back until complements exist, and makers of complements hold back until buyers exist. Someone has to move first.
- Where the bottleneck sits. Profit flows to the scarcest complement. As one part becomes plentiful, the bottleneck and the profit move to another.
- Pricing together. When separate firms price each half of a pair, each charges too much and both sell less. A firm that controls both halves can cut the price of one to sell more of the other.
- Control. A firm can own a vital complement, contract for it or open its platform so that many firms supply it.
Examples
Apple. Apple launched its Vision Pro headset in the US in February 2024 at $3,499. Several of the biggest streaming services, including Netflix and YouTube, chose not to build apps for it at launch. With few complements made for it, the headset struggled to find buyers, a case of complements arriving too slowly.
HP. HP sells printers on thin margins and earns much of its printing profit from ink and toner. Supplies bring in about two-thirds of its printing revenue. HP’s firmware updates that block cheaper third-party cartridges have drawn lawsuits from customers. Because HP controls both halves of the pair, it can price them together.
Frequently asked questions
What is the difference between complements and complementors?
Complements are the products. Complementors are the independent firms or people who make them, such as app developers, game studios or accessory makers.
How are complements different from substitutes?
With complements, a lower price for one raises demand for the other. With substitutes, a lower price for one cuts demand for the other, because buyers choose one instead of the other.
Why do firms give away one product and charge for its complement?
Cheap access to the first product builds a base of users who then buy the complement, often repeatedly. The model works only if the firm can stop rivals supplying the complement more cheaply.
Can complements turn into competitors?
Yes. A complement maker that grows strong can add features until it replaces part of the core offer. Platform owners also move into complement markets they find profitable.