Wednesday, April 27, 2005

Trading Up: Why Consumers Want New Luxury Goods... And How Companies Create Them.

Yesterday, I heard Michael Silverstein, author of Trading Up: Why Consumers Want New Luxury Goods... And How Companies Create Them address a group of luxury good marketers in a conference at Kiawah Island in South Carolina. The audience ranged from high-end jewelry and watch makers, to high end travel and hotel players, to top shelf auto and electronics manufacturers and everything in between. Michael shared chart after chart showing how both the upper end and the lower end of most consumer markets are growing nicely while the middle of the market is shrinking by double digit percentages.

It seems that consumers are buying $500 jeans at the high end shops but their underwear and socks are coming from Wal-Mart and Target style stores. This phenomenon, in part, is addressed in detail in Michael’s book. How as business owners, marketers, and salespeople can we make sure that our day to day offerings are in tune with this trend? Further ask yourself how we make sure that our offerings don’t get caught in the veritable squeeze of the middle market?

Michael also took the opportunity of his speech to warn the purveyors of luxury goods that the growth they are enjoying now, at the top end of the market, will very swiftly and very definitely be attacked by Korean and Chinese manufacturers who are ever so rapidly coming up the innovation and quality curves at the same time their brethren attack in the more traditional low priced entry level arenas.

So, if you’re enjoying the luxury business today, you need to be ready for an attack by entrants who may not even be on your radar as of yet while also watching out for those middle of the pack players who will attempt to move upscale to avoid the squeeze of the middle.

Likewise, if you are middle market player, not only is the trend working against you right now, you need to also worry about 1) today’s luxury players expanding downward, 2) the new entrants who shoot for the top of the market landing in the upper middle to compete with you instead, and of course 3) the potential for the low end suppliers to creep into the lower middle of the market where they’ll fight for your share as well. Oh the woes of the middle!

What a market battle we have brewing. Surprisingly, Michael didn’t get any questions from this group of luxury marketers who sat in semi-disbelief as to the potential turmoil just ahead versus the positive, go-go messages of their 2004 successes. That’s a real shame as Michael has posed some great questions for discussion amongst businesses of all types. See and enjoy Trading Up: Why Consumers Want New Luxury Goods... And How Companies Create Them.

Monday, April 25, 2005

Malcolm Gladwell - BLINK: The Power of Thinking Without Thinking

Last evening, I had the pleasure of hearing Malcolm Gladwell speak during a conference at Kiawah Island in South Carolina. Malcolm is the author of Blink: The Power of Thinking Without Thinking and The Tipping Point: How Little Things Can Make a Big Difference. I had read Tipping Point a few years back and looked forward to hearing him speak. In fact, his appearance at this conference was a big reason for my attendance.

True to form, Malcolm’s message rang out with all the directness of his written word. Malcolm shared the story (also shared in Blink) of how a museum was fooled, even after much time intensive (read expensive) study as to the authenticity of a piece of “ancient” artwork. However, once fooled, yet still unbelieving, they found it unfathomable that one art expert after another, upon seeing the piece for the first time, instantly commented that it was a fake.

Thus began Malcolm’s advice that one should put far more trust into our individual instinct when it comes to key decisions then in the “established” process of decision making often lauded as the only respectable way to reach a conclusion.

Inherently, I think we all understand this to be true. However, the analyst in us seeks to back up our decisions with logical explanations. In the world of selling, this happens all the time. People will tell you that they make their purchasing decisions based on logic when in reality, they buy based on emotion; a sort of gut instinct as to what's best if you will.

For instance, I recently purchased a new, used-car. Now, I could tell you I bought it because it was a great deal, priced below market value, had four doors with adequate interior room, was still covered under warranty for another 20k miles, and it was in excellent shape. All good logical reasons to make such a purchase I’m sure you’d agree. However, the real reason I bought it was because it had a 400HP V8, a 6-speed manual transmission, was black on black leather, and it simply made me grin from ear to ear when I test drove it! See? Emotion made me do it!

In the world of marketing, we endeavor long and hard to question customers in depth so we might understand why they buy what they buy. Imagine though if we developed our marketing campaigns purely around the logical reasons for making a purchase? If we did, we’d miss the entire point for the customer (all of them) whom “decides” based on emotion!

Malcolm’s advice to trust our intuition and not attempt too heavily to explain our reasoning with logic is a great reminder to all of us in the marketing and sales world to seek out those things that trigger such intuition driven decision processes as much as we possibly can. Of course, always have a handy list of logical reasons at the ready so the customer can justify their purchase to others!

Check out Malcolm’s books at Amazon: Blink: The Power of Thinking Without Thinking and The Tipping Point: How Little Things Can Make a Big Difference.

As Fast Company wrote in January, 2005, Malcolm “is ‘just a thinker. But what a thinker. His provocative ideas are taking the business world by storm.”