“Goodwill is the one and only asset that competition cannot undersell or destroy.” – Marshall Field
The fastest way to gain market share is to sell a popular product at a below-market price. But it’s a tough game to play. You need the financial resources to pull it off and the operational wherewithal to grow quickly.
Another good way to break into a new market is to take the high road: Produce a credibly better version of something popular and sell it for a significantly higher price.
That’s what Sub Zero did in the 1980s with refrigerators. While the rest of the market was competing in the less-than-$1,000 range, Sub Zero introduced the first $2,500 refrigerator. It was larger, a bit colder, and had one drawback (tough to open) that was sold as a benefit (vacuum-sealed). The company’s success was astounding. Today, the typical Sub Zero will set you back $5,000.
The same thing happened with stoves. In 1984, the Viking range was created in Mississippi to supply affluent baby boomers with industrial-type gas burners. Sales soared. Today, the average Viking will set you back $8,500.
Both companies have sales of about $200 million and are very profitable, as businesses at the top end usually are.
The great thing about the up-market is that you can charge a whole lot more for just a little bit of better. That’s because affluent consumers are willing to spend more — sometimes a lot more — to own the best. This is not because they need the quality. (Most of those fancy Viking ranges are hardly ever used.) It’s because they need the prestige that comes with owning the best.
That’s something you need to keep in mind should you design a program for upscale products. You are selling quality, but it’s the psychological benefit of owning the best that drives the sale.