trading up and trading down

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trading up and trading down
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introduction

• this consumer is in control like never before
• and the LDA to 25 is a master of the strategy
• tatty 30.00 Levis and an Armani T
• decent wheels with a blow away Stereo
• theyre living at home longer to afford these
  little luxuries
• theyre not loyal to any one product theyre
  loyal to the product given the occasion
• discount at home/university --- Stella at the bar
• theyre trading down to trade up

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what is trading up

• a positive phenomenon
• driven by middle class educated and discerning
  consumers ready to engage in the goods and
  services they consume
• theyve been brought up in the information age
  and they do their research
• they balance their budgets and trade down in more
  categories they trade up in
• they are the New Luxury consumers

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what is trading down

• when the consumer chooses low cost alternatives
  in categories of little importance to them
• without them many consumers couldnt afford the
  trading up products
• polarizing most products and services --- witness
  our own Beer Category phenomenon
• growth and profits in the high and low end
  leaving the middle in a quandry
• 100 billion dollars freed up by discount retailers

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take jake

• Jake is 25 years old. Works in construction and
  makes about 50K
• it took him a year to buy a complete set of
  Callaway Golf Clubs ---- and 3000
• he could have got what he needed for a thousand
• he works the morning shift so he can be on the
  course by 2PM
• hes playing 18 every weekday, 36 on Saturday and
  Sunday
• hes in the top 1 of recreational golfers
• he loves his clubs and knows everything about
  them in intricate detail
• but the real reason I bought them is they make
  me feel rich. You can run the biggest company in
  the world and be one of the richest guys in the
  world, but you cant buy any better clubs than
  these. When I kick your butt on the course, I
  feel good, I feel equal. I may make a lot less
  money than you do, but I think I have a better
  life.
• Jake lives at home

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the new luxury goods

• Conventional Wisdom out --- no longer the higher
  the price the lower the volume
• Selling at much higher prices than conventional
  goods but much higher volumes than traditional
  luxury goods
• Three types
• Accessible Superpremium
• Old Luxury Brand Extensions
• Masstige Goods (Mass and Prestige)

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accessible super premium

• Beer, Liquor and Wine play here
• priced at or near the top of their category
• still affordable because they are relatively low
  ticket items
• Example Belvedere Vodka versus Absolut
• anyone can afford Belvedere if thats emotionally
  important to them

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old luxury brand extensions

• lower priced versions of products created by
  companies whose products are traditionally
  available to the rich
• luxury car marques like Mercedes (C coupe and
  Smart) and BMW (Mini) have dramatically changed
  their product mix in quite different ways
• they each have products that are at once more
  accessible and more aspirational

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masstige

• Mass - Prestige
• neither at the top of their category in price nor
  related to other iterations of the brand
• occupy the sweetspot between mass and class

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what differentiates new luxury

• always based on emotions (consumers have a much
  stronger emotional engagement with them)
• its more intense and longer lasting with big
  ticket items (example BMW owners wash their cars
  more frequently than owners of other cars.
  Theyll park. Walk away and turn back for one
  last gaze.)
• Have you ever seen a Taurus driver gaze lovingly
  at his car
• emotion is essential but not enough
• technical differences in design, technology or
  both
• superior functional performance
• combined with brand values and company ethos

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back to our LDA to 25

• they want it all
• they spend on themselves but do right by the
  world
• they follow fashion and scoff at it
• they buy for individual style and a little bit
  for status
• they will try anything but give loyalty sparingly
• they dont believe in debt but they dont let
  money stand in the way
• they love objects but dont believe in
  conspicuous consumption
• they rocket --- trade up and trade down

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implications

• merchandising
• store layout/experience
• product selection
• staffing
• advertising and promotion

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Apple
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the four emotional Spaces

• Taking care of me
• Connecting
• Questing
• Individual Style

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The eight keys to Trading Up Success

• Never under estimate the customer
• Shatter the price-volume demand curve
• Create a ladder of genuine benefits
• Escalate innovation, elevate quality and deliver
  a flawless experience
• Extend the price range of the Brand
• Customize the value chain to deliver on the
  benefits ladder
• Use influence marketing and seed success through
  brand apostles
• Continually attack the category like an outsider

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