Trading Up . . . Trading Down

I don't know who first alerted me to Trading Up by Michael J. Silverstein and Neil Fiske, but I've had the book on my shelf for a couple of years, and I've been pretty aware of its message:

• "New luxury" retailers (companies like Victoria's Secret, Panera Bread, Callaway Golf, Trader Joe's, etc.) do exceedingly well in today's marketplace. Why? Among other reasons, because . . .
• Luxury purchases are not [or, perhaps, no longer] the province, solely, of the very wealthy. The reason? Because . . .
• Almost everyone in today's society "trades up" in one or more purchasing spheres while "trading down" in others.

It is that last phenomenon that has attracted my eye. As Silverstein and Fiske summarize their findings (pp. xiv to xv):

Now that most [American] consumers can afford to buy the goods that fulfill their basic survival needs and still have cash available, they will [trade up and] buy products and services that are emotionally meaningful to them. . . .

Trading down is when consumers choose the low-cost alternative in product categories of little importance to them, and it is an essential part of the larger phenomenon [of trading up]. Without the availability of low-cost alternatives and commodity goods in a very wide range of categories, many consumers would be unable to afford the New Luxury goods they want to buy in the small number of categories that are most meaningful to them.

In category after category, the entry of a New Luxury brand, combined with trading up and trading down behavior, has caused its category to polarize. Both the growth and profits in the category move to the high and low ends of the price spectrum, while companies offering conventional goods get "stuck in the middle" and struggle to succeed and even survive. . . .

Well . . . I was reading a marketing newsletter late last year and came across a wonderful example of what Silverstein and Fiske are talking about.

This is from Joe Polish's Marketing Money Map newsletter. Polish's partner, Lisa Wagner wrote,

One day I took my grandmother to the grocery store, and she insisted on buying herself day-old bread in order to save a few dollars. I told her she didn't need to do that, and she told me that she wanted to be smart about her money, and that the bread wasn’t that much better fresh anyway. So we dropped the topic.

Then something interesting happened. . . . We checked her mail and her Neiman Marcus catalog arrived. She immediately saw a set of placemats, a set in a shade of red that would go great with her décor. I asked the price and she said, "$200. . . . Hmmmm. . . . These are good quality and that is a good price."

And on the same day that she bought day-old bread, she turned around and bought a set of pricey placemats!

Getting bread for herself is not important to her, so the price she was willing to pay was low . . . but entertaining others is very important to her, so the price threshold of what is a "good price" was much higher.

When I was a "starving" student in college, and Top Ramen was one of my food groups, I always managed to save up enough money to see my stylist on a regular basis. I didn't think twice about scrimping on the quality of the food I was eating, but my hair . . . --Are you kidding me? Risk a bad haircut or color at a discount shop? No way!

In our family I have seen the same behavior.

Back when we were so poor that we bought virtually everything as cheaply as possible, there were a few depths to which we would not stoop.

One: We would occasionally buy ice cream. And while it seemed we enjoyed almost every other form of "unbranded" food, ice cream was not one of them! If we were going to buy ice cream, we would wait for Breyer's or one of the other premium brands to go on sale.

Similarly with fruits and vegetables. Sarita likes fresh. Canned and frozen are . . . for other people.

So even in the middle of the winter, we would buy those fruits and vegetables we could afford fresh. Nothing less would do!

So how is it with you? Where and how do you trade up . . . and down?