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Friday, January 7, 2005
YOUR BUSINESS: David Vazdauskas
The way out of marketing limbo may be to look higher
Copyright © 2005 Blethen Maine Newspapers Inc. | ||||||
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Also on this page: About the Author | |||||
Is your business caught in the murky "middle ground?" In today's economy, the middle ground is rapidly disappearing. Retailing provides a perfect example of this phenomenon. A few decades ago, the largest, most successful retail stores were those that sold middle-market merchandise - good, solid (and in that time, American-made) products. The cheap stuff was left to the five-and-dimes and surplus stores, and the luxury items to tony stores on Fifth Avenue and Rodeo Drive. Of course, all that has changed. Prices for most "middle market" electronics, durable goods and clothing have dropped relative to U.S. wages, thanks in large part to the use of drastically lower-cost offshore labor. In addition, the growth of "big box" retailers has greatly increased buying power for these chains, allowing prices to drop further. The middle market has now become the discount market. It is quite crowded, and sales are stagnant. On the other end of the spectrum, the luxury market has grown by leaps and bounds. Why? First, the baby boom population has entered the height of its spending power. Mortgages and kids' college tuitions have gone away, so boomers are clamoring for their just rewards - whether it's a big-splurge vacation or a $500 Bordeaux. In an ironic twist, the luxury market has been buoyed by the growth of the "big box" stores. Luxury brands find it easy to position themselves against discount chains. To remain low-cost, discount retailers are cutting back on customer service (or at least human customer service), fancy packaging and other extras. So now, smart "luxury" retailers are exploiting this void, offering a deeply human touch with all the frills. And they're finding a growing market ready to pay for these small luxuries. Often referred to as the "mass market for luxury," these consumers aren't the yacht and caviar crowd, but rather people who simply value an occasional indulgence. Whether it's the $5 latte or the $20 bottle of shampoo, these are folks who are otherwise thrifty but who want the best when it's time to act on a special craving or acquired taste. Some marketers think this is the fastest growing consumer segment in the United States. It's a market often overlooked by most brands. Maybe yours? What does the squeezing out of the middle market mean for your business? First, take a look at whether your brand has unconsciously slid into the treacherous middle ground - where you can't compete on price, yet your products or services aren't perceived as special or unique. Your first instinct is to try to find ways to cut costs and slash prices. But you soon realize that it's difficult, if not impossible, to compete on price with the national chains. For a while, you might position yourself solely on service. "Sure, you'll pay more for the same toaster that you find in the big box stores. But here, we greet you by name." And that's not a bad brand positioning, but the problem is that in the consumer's eyes, there's a disconnect between the product experience and the service experience. As a consumer, you're giving me luxury service, but in the end, I'm walking home with a cheap toaster (and paying a few dollars more for the thing). Your brand is caught in never-never land, where you're not pleasing the "quality" crowd, and you're not attracting the consumer who just wants a cheap toaster. The way out of this limbo may be to look not lower (and cheaper), but higher - maybe much higher. How can your business realign its product line to match the superior and more personalized level of service you are uniquely able to provide? How can you aggressively target customers who value personal service or hand-made products and are willing to pay a premium for them? Fortunately, Maine is blessed with a significant number of potential customers in this segment. The burgeoning influx of retirees "from away," who are used to the levels of service and quality provided by their former communities, will be seeking the same experience here. If your business isn't already considering how to serve this market, it should do so - and quickly. The tourist market also contains a specific segment of "quality seekers." Much is written about Maine's weather-dependent tourism. But these statistics - which often report only total numbers of visitors - mask a more stable tourism target. While "quality seekers" may be currently dwarfed by the number of budget travelers coming to Maine each year, it is a segment that should get more attention from your business. These are the very same aging baby boomers fueling the "mass luxury" market, and they'll be the ones seeking little indulgences on vacation, too. And best of all, because their tastes have migrated to more indoor pursuits - like shopping, dining and the arts - they may be less sensitive to weather forecasts, or even the price of gasoline. Whether you're marketing to the world or to the local community, you may find that the best way out of the middle ground is to look up. There might be more room at the top than you think.
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