Mike Bolden » Posts for tag 'Price-Performance'
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Even In Recession – The Key Elements of a Good Strategy

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Posted in Advanced Marketing Strategy
December 15, 2008
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Three Keys to The Lowering Price Strategy
If the Chanels, Versaces, and Chloes of the world really feel compelled to lower prices as a response to the economic downturn, they need to incorporate three elements into their strategy. First, they need to focus on the lower price customers who have “traded down” to target critical masses of strategic consumer groups which have shifted their behaviors away from higher price points. Secondly, they must diverge from groups completely out of the lowered price range. Avoid wasting effort targeting groups buying at substantial lower price points, and ultra-premium buyers purchasing items above their products’ offerings. As mentioned before, it is advantageous to differentiate the product features when lowering the price. Lastly, to capitalize and leverage the brand – which is critical for luxury items – develop a unique new tagline.


Use A Functional Orientation Shift To Differentiate Your Product
A great way to differentiate a product when lowering costs is to use the Blue Ocean Strategy of more functional orientation in less important features of the product or brand. Do not reduce the features and benefits for which customers have strong emotional ties or reactions. This a slight variation of Mike Bolden’s “selective feature reduction” strategy in which less important items are chosen to take costs out along with the elimination of unimportant extras. Although the lower-priced item is differentiated, it’s still associated with the brand, so it is key to determine the right price point “prestige threshold” level. To gauge this point, observe and access:
1. Competitors in the same marketspace
2. Competitors above and below your product/brand’s marketspace
3. Range of spending for like items by your customer base

Downward Shift To A Different Marketspace
In lowering the price point for a luxury-goods item, it is critical for a manufacturer to avoid shifting its market position in the price-performance vertically “straight south” without differentiating the product, and moving laterally “left” or “right.” By shifting downward to the left by reducing or changing product features or to the right by adding or altering features, a goods-maker is entering a different marketspace, and the Blue Ocean strategy means the water’s fine!

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Luxury–Goods Makers Coming Down Off Their Pricing Pedestal in Rocky Seas

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Posted in Advanced Marketing Strategy, International
December 10, 2008
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Cut Prices For First Time In Recent Memory
“For the first time in recent memory, luxury-goods makers are cutting prices on designer apparel, shoes and handbags in the U.S. market,” according to the Nov. 14th, 2008 Wall Street Journal. This is in direct response to a shift in consumer spending habits even among the rich – who normally do not change consumption patterns even during economic downturns. According to the WSJ, “The cuts range from 8% to 10% on most products sold in U.S. from Chanel S.A. to Versace SpA, Christian Louboutin and Chloe.” These retailers are trying to “net” a critical mass of consumers in strategic groups that are looking to trade down price points.

Moving Down Price-Performance Grid
Shifting to move down the price-performance grid via lowering price is a partial Blue Ocean strategy. However, luxury-goods makers are not altering the performance, which is good news-bad news. The good news is that it does get more people to buy on a short-term basis, and really accomplishes the same thing as a sale. The bad news is that it’s not a complete or authentic Blue Ocean Strategy, because the competition can follow right along by lowering price too. These current luxury manufacturers are really slipping into a Red Ocean by lowering price and not changing the performance. It would seem to be a better value to consumers given a lower price even without changing the product – but as a luxury good, it’s also about perception and exclusivity. These two factors for luxury goods are usually more important than the actual product itself – especially for items such as clothes, bags, and perfumes.

The Lowing Price Red Ocean
These luxury-makers need to avoid Red Oceans at all costs, and maintain their product’s uniqueness – and in less crowded spaces. They should not pursue a mutually exclusive low-cost strategy without product changes – otherwise it’s not a strategy, but a sale! There is nothing wrong with lowering the product price, but these manufacturers should product features which have “stripped out” low utility features thereby reducing costs. Make the product different and less expensive!