Hunting for Treasure

Treasure_chest
In a recent series of posts on pricing, we discussed three types of consumers and the pricing strategies that appeal to each group.  In a new book, "Treasure Hunt: Inside the Mind of the New Consumer", Michael Silverstein, sr. vp of the Boston Consulting Group, discusses the growth of the low end and high end price categories, and the decline of the middle. 

According to Silverstein, where the US economy has traditionally been pictured as an egg shape, with a small top and bottom and a large middle, today the consumer economy is becoming more of an hour glass, with a large top and bottom and a shrinking center.  Interestingly, he says that the same customer is shopping at both ends of the scale.  The customer "in the middle" no longer buys everything in the middle.  Instead, they "trade down" on certain items so that they can afford to "trade up" on others.  He cites the example of a couple who might buy their groceries at a warehouse club and use the savings to buy a BMW.

In the post, "Your Business Strategy",  we discussed this principle briefly, but according to Silverstein, it’s more prevalent than we thought. 

So, what’s the bottom line?  What does it mean to our business?  It means that unless we want to dwell in the low margin, low price end of things, we must make our high end offerings attractive to this new "treasure hunter".  Silverstein cites the statistic that 75% of discretionary spending in the United States is controlled by women.  If we want Ms. Treasure Hunter to  "trade down" to warehouse club grocery shopping and lunch at McDonald’s so she can afford our latest and greatest, then  we’d better give her a good reason.

As suppliers, we must continue to provide you with innovative products at good price points and you, as retailers, must provide an attractive shopping environment, knowledgeable sales people, convenient shopping hours, and world-class service. 

Michael Silverstein writes a weekly consumer column that you can find here.

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