at Sun, 07 Mar 2004 17:14:20 GMT in <pan.2004.03.07.17.14.19.719335
@Socks.Invalid>, lid (Socks) wrote :

>On Sat, 06 Mar 2004 19:14:00 +0000, shipwreck wrote:
>
>> If KitchenAid is the #1 home mixer, with probably 75% of the market,
>> who comes in at #2? ...
>
>to take this in a slightly different direction (or maybe not), i just read
>a very interesting book called "trading up". it is all about how the
>concept of luxury has changed in America. a quick synopsis might be that
>it used to be that there were low-priced goods which sold in high volumes,
>and as prices raised volumes decreased ... until you ended at true luxury
>goods which sold to very few rich people.
>
>the new thing (perhaps because we have more disposable income) is that
>there can be inversions. things that cost more, can sell more, than the
>lower priced options...

My impression is that there's a different phenomenon going on, namely,
repositioning. What's been going on is that the general quality, in
virtually any market segment, is inching down over time, as manufacturers
try to cut costs, not necessarily to gouge the customer but quite
frequently simply to stay alive in industries filled with incredibly
cutthroat competitors. A company will accept a slight loss in quality of
product in exchange for a massive cost reduction, and the inexorable
downward spiral starts to happen - now another slight reduction in quality
is allowed on the already-modified product, and in a few generations the
product is markedly worse that the original, even though the incremental
changes were small and possibly went unnoticed.

Cutting costs at the expense of quality may be the only way to compete for
many companies, if they choose to stay positioned at the same market
segment, but there's another option. You can retain the same quality level
by repositioning your product into the next higher market segment. So a
"consumer" model can be positioned as a low-high-end model. A low-high-end
can be positioned as a "luxury" model. So instead of changing the product,
you change the perception of it. This can also happen in a slightly
different form - a company goes through the cost-cutting cycles several
times on their original product, and keeps that product in its now-
compromised state, but introduces a new, higher-end product that
essentially duplicates the quality level the original product once had.
It's the same net effect.

A KitchenAid, for example, isn't really a particularly high-end mixer,
rather, it's a decent home machine that years ago might have sold to the
consumer segment. But now the consumer position is occupied by products so
junky that in an earlier day they might not have sold at all. Those
products are dirt cheap, to be sure, but you get what you pay for. And in
the end, the customer isn't quite so easily fooled as meets the eye. Most
people recognize the difference between something reasonable and something
worthless. In the areas where competition is most severe, and quality at
the low end is most noticeably poor, people "trade up" because they
recognize that you need something that supplies at least adequate
functionality. KitchenAids are relatively popular because consumers reach a
frustration level with the cheap machines that convinces them there must be
a better way. That certain things can be seen as status symbols merely
supplies the consumer with a convenient excuse to justify buying them.
(Although I don't quite see why the simple need to have a functional item
isn't enough justification in its own right).
--
Alex Rast

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