Marketing trading up trading down
BMW is parked in front of our discount stores. Why would somebody who pays fifty or sixty thousand pounds for a car want to save 50 cents on a liter of milk? Trading up is what consumers are prepared to pay a premium price for certain products that they think bring more luxury. It can be in things like pub food or in the doll industry, with American Girl. Luxury, strategy, management, behavioral economics, marketing, strategic management, corporate strategy, product innovation, market diversification.
Jake saves for most of the year and spends very little on most things. However, for the exception of golf, which is his passion, he plays at least once a day. He is prepared to pay a premium price.
New luxury goods, they say, are based on emotions, and the consumers who buy them have much stronger emotional engagement than with other goods. This can be for very expensive items, such as a set of golf clubs or a washing machine.
It can also be for relatively low cost items, such as a beer or a glass of vodka. The book gives a whole host of examples of different areas in which consumers are willing to trade up. Each chapter deals with a marketing trading up trading down type of product or service, and one good example of marketing trading up trading down products or brands that have broken into that market, and convinced consumers to pay a premium price for their luxury goods or services.
Each chapter is an excellent read and is packed with figures and analysis about how that product or service has succeeded. They also explain why people are willing to spend more marketing trading up trading down themselves these days, and why they are willing to trade up. In particular, demographic issues have had a major impact. Firstly, people are dating for much longer before they get married, so they want to create an image of themselves that they can project to the world.
Secondly, divorces are much more common, so that once people become single again, they feel as if they need to buy products or services that match the image that they want to give out. Quoting a character from Sex and the Citythey state:. Europe is considered to be an area where growth in premium products can be developed. All of the examples given in the book deal with companies that are US-based, with some notable exceptions, such as BMW. However, the final two chapters look at opportunities for growth, and for once, it is quite refreshing to see that Europe is considered to be an area where growth in premium products can be developed.
France, in particular, is cited as an area where there is a huge potential for companies to develop new products and services, and charge premium prices. The book also gives some interesting examples of products and marketing trading up trading down that have the potential to transform their categories into premium products. We have all got used to the five-dollar Starbucks coffee, but tea is cited as one of the products that could be traded up. Already, there is some evidence of the tea category beginning to polarize, with specialist teas coming onto the market.
Similarly, there is room for improvement in the healthcare industry, and with the aging of the populations in the developed world, this would marketing trading up trading down to be an area that has the potential marketing trading up trading down great success in premium products. A final example comes from the university sector, and this is a wonderful case of looking at things differently. Boston University found that incoming students were unhappy with the size of their dormitories, having been used to much larger rooms at home.
The university therefore developed new dormitories, offering single rooms with private baths, Internet access, and premium services. It has to be said, however, that when people are complaining about the marketing trading up trading down of universities today, this is part of the problem. Trading up will give an excellent insight into many different companies, and how they have looked at new markets.
They give a good strategic analysis of a variety of different companies and, despite the fact that they are conscious that all types of trading up cannot last forever, eventually competitors, seeing higher profits, will be drawn into that market.
New Luxury goods are always based on emotions, and consumers have a much stronger emotional engagement with them than with other goods. Even relatively low-ticket items, such as premium vodkas, have a well-defined emotional appeal for their consumers. Divorced women said they would trade up in as many as thirty categories, far more than any other consumer profile. In Japan, there are about 5 million young, single, working women who live at home with their parents.
They spend up to 10 percent of their annual salary on fashion items, and they are the largest spending segment of Japanese society. As a result, they are powerful tastemakers: Old Luxury is about exclusivity. New Luxury goods are far more accessible…. The company makes only 6, bottles per year and, according to founder Jim Koch, sells out the entire stock in a week. The numbers are not the business — they are the symbols of the business. European producers once controlled 90 percent of all wine imports to the United States.
Today, their share is 60 percent and still falling…. In the last marketing trading up trading down years, global share of the old world Western European producers has dropped from marketing trading up trading down percent to 67 percent. The outsides are winning because they have lower costs, a greater investment in advanced technology, and more-sophisticated marketing methods and pricing strategies.
Beer was one of the first American industries revolutionized by low-cost, high-speed, high-throughput methods manufacture and distribution in the late nineteenth century. In addition, the brewers discovered image advertising and mass promotion that squeezed the weaker producers out of market. As a result, tremendous consolidation has taken place in the industry.
Over the past one hundred years, a business with two thousand independent local producers has been consolidated to three national brewers with a combined 80 percent share. During the years throughsales grew at marketing trading up trading down 15 percent compound annual growth rate CAGR ; from tosales grew at just 3 percent CAGR.
A return from the dead is unlikely in New Luxury. BMW, Mercedes-Benz, and Lexus have already so transformed the market- making their cars more affordable at the low end and more aspirational at the high end- that Cadillac may not be able to escape death in the middle.
Two examples of New Luxury goods that marketing trading up trading down the potential to transform their categories are premium tea and high-performance athletic clothing.
In Germany, exposure to TV advertising has increased by 85 percent over the last six years. French seniors are already noted traders up. People fifty years of age and older account for 33 percent of the population in France. They earn 45 percent of net domestic income and hold 50 percent of the net financial assets. Americans never liked to settle back, give up, and trade down unless they are absolutely forced to by world events or personal marketing trading up trading down.
It takes committed leaders and bold execution to seize the trading-up opportunity. Ask consumers what they want, and they will stare blankly at you. Engage them in the category and ask for improvements, and they will work with you.
Most of the innovations in the thirty categories we have studied would have been killed by traditional customer research. And what a captivating read it was! It was difficult to put it down once I started it. The book was very well researched and a lot of data has been presented in the book to justify the points made.
Now Silverstein and Fiske take a close look at its buying patterns. Their homes are no longer cash machines and their investments are in a ditch. I have just finished my classes for the marketing trading up trading down in Strategic Management. As I did my fifteen minute wrap up of the course, I announced some interesting news to my students.
It is a rare marketing trading up trading down to subdue a group of enthusiastic business students marketing trading up trading down their stunned silence was fascinating to watch. Many have written about the key components of business success. Theories build on approaches ranging from marketing trading up trading down lessons learned to recognizing opportunities and having a willingness to take measured risks.
Clearly such concepts can play an influential marketing trading up trading down. However, there are three key foundational imperatives for ensuring enduring success. As I thought about the this movie, I saw a lot of pertinent things to today in both acceptance and leadership.
Thanks for the review. Thank you for your comment. It is a really good book; fun and interesting to read but also full of lots of details. It would have to be in my top 10 for the year.
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New luxury goods are based on emotions. Empty nesters are important traders up. Rolls Royce represents an old perception of luxury goods.
February 8, at 3: February 11, at 2: Leave a Reply Cancel reply Enter your comment here Fill in your details below or click an icon to log in: Email required Address never made public. Follow Global Ed via Email Enter your email address to follow this blog and receive notifications of new posts by email. Chan Kim and Renee Mauborgne Post was not sent - check your email addresses! Sorry, your blog cannot share posts by email. Fantastic read for anyone thinking about their leadership style.