Business and Operations
Stuck in the middle with you
November 6, 2007 By Michelle Brisebois
Strategic shopping is revolutionizing how we go to market.
The rules of target marketing used to be pretty clear. If you were situated in a high-income neighbourhood, you would do well with upscale products and services. If you were targeting lower-income neighbourhoods – offer lower-priced products and services. That was the old paradigm. Today’s consumers are much more strategic about how they shop and the lines are beginning to blur. Marketing mavens are referring to this trend as “trading up / trading down,” and it’s revolutionizing how we go to market.
Picture Carrie Bradshaw from Sex and the City – living in a one-room apartment yet spending $500 a pair on a closet full of Manolo Blahnik shoes. This is how the strategic shopper works. They bargain hunt for some items and splurge on others. In one day it’s not unusual to see a millionaire shopping for cheap paper towel at Wal-Mart only to load it into a BMW to drive home. It’s not the consumers’ level of income that determines whether they’ll pay a higher price for a luxury item, it’s how important the category is to them.
New-luxury products include dog food, beer and household appliances. These products evoke a stronger emotional response from some consumers than comparable products. Often priced as much as 20 to 200 per cent more than competitive products, these new-luxury items sell in much greater volumes than traditional upscale products, turning the usual price-volume demand curve on its ear. The losers in all of this will be those companies who market to the middle, as consumers shift to high-end for some things and low-end for others. The top 10 categories for trading up include: houses, food away from home, kitchen appliances, furniture, bedding, cars, home-entertainment systems, shoes, travel, and cookware. Notice that three out of the 10 categories involve eating, and it’s easy to see that this trend bodes well for artisan bakeries providing upscale baked goods.
Commodity baked goods are the domain of the large operator able to provide the operational efficiencies and volume. Smaller operations should take the high road and stake out a premium position. It’s truly becoming a bigger piece of the pie!
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