In every category from retailers, to restaurants, hotels, liquor, appliances and more, the high and low ends are growing while the middle is sucking wind. This article in the New York Times covers this in more depth.
If you are aiming your building product at the middle of the market you are probably in trouble. Many companies design their products to appeal to the middle of the market where they think they will find the largest volume.
In the commercial market, luxury hotels and offices are doing great. In the residential market high-end customers want luxury features and upgrades in new homes and remodels. GE’s fastest growing appliance line is their more expensive line.
If you think the high-end market isn’t that big,
the top 20% of earners account for 61% of the personal expenditures.
Many building material companies start with their entry level product and then struggle to move people up to the middle. They then dream that people will move to their best products.
A better strategy is to aim as high as you can.
Here are some things to think about:
1. How has the history of your brand positioned itself in the minds of your customers? Sears and Olive Garden will never be viewed as premium.
You may need to develop a premium sub brand such as Ultra if your brand can support this. If it can’t then you will need to develop a new brand from scratch.
2. You can’t make the Cimarron mistake. GM thought they could take a Chevrolet, call it a Cadillac and charge a premium price. It didn’t work, as consumers are too smart to be fooled.
If you are going to go premium you need to go all in.
You can’t value engineer a premium product.
3. You can also redefine premium. Perhaps, for you, premium is actually your better product. With this strategy you focus on up selling the low-end frugal shopper by convincing them that your better product is a better value.
If you do this and still offer your premium product, you risk encouraging more people to stay with your entry-level product. If they can’t have the best, then many of them will just stay with your basic product.
4. To be successful with premium products you may need to rethink your distribution. Big boxes and premium don’t go to together. Architects, designers, high-end dealers, owners and builders do go with premium.
There is also plenty of volume at the bottom but that takes a totally different mindset and business model.
Only a few companies can do both well and they are probably organized to make them successful in both areas.
It may be a good time to step back and take a fresh look at your product offering if you want to continue growing. You only have to think about all the struggling companies who were once successful to realize how you should rethink who you are on a regular basis.