Book notes: Trading Up

Finally got around to reading Trading Up: The New American Luxury after hearing about it about a year ago. The idea of "Masstige" - luxury goods available to the mass market - is something I wanted to dig deeper into.

I really enjoyed this book and tore through it in about a week - pretty fast for me. And a sign that I really couldn't put it down.

Trading Up recognizes a growing trend in the US market: consumers are "trading up" to luxury goods in many categories (cars, homes, restaurants, appliances, personal care, etc). In turn, Trading Up identifies a number of demographic trends that are influencing the overarching Trading Up trend; in the end, all these trends translate to more disposable income for the average American consumer. Such demographics include (paraphrasing):

• Women now constitute almost 60% of all college graduates. As such, Americans are taking longer to get married. Average dating time frame has grown from 1.8 years in 1950 to 8 years in 2000.


• Americans are living longer, which means Empty Nesters are living longer.


• The above two imply a decrease in the number of households with children; in fact, households with children now number only 20% of overall households, down from 40% in 1950.

The authors used a number of examples to demonstrate the Trading Up trend, including BMW, Panera Bread, Victoria's Secret, Whirlpool Duet's (shameless plug), Williams-Sonoma, The Cheesecake Factory, and many others. I'm always impressed with these type of marketing books that use real data and real examples rather than anecdotal or trivial observations.

The authors observe the following:

• Consumers either trade up or trade down for a particular category. There is no middle of the road. (Note that this supports the theories of Clayton Christensen and disruptive technologies).


• Higher income consumers simply trade up in more categories.


• "Lower" income consumers will still trade up in certain categories.


• Consumers can "trade up" to a market segment, then "trade down" within that segment. Mercedes' lower-end vehicles demonstrate this trait in action.


• In order to be an option for "trading up," companies must have products that meet all three parameters (technical, functional, emotional) on the benefits ladder.

My takeaways:

• Market segmentation by income, or other demographics, doesn't align with marketplace realities. Segmentation must be done by consumer attitudes.


• Standing pat is never an option. Either add value, or simplify.


• There is plenty of opportunity in the US for companies that can create "trade up" opportunities for consumers. Just because the world economy is globalizing doesn't mean US companies have to compete at the bottom end of the market.


• Odds are, for any given category, there are consumers willing to trade up. As the book states, if consumers can love their Whirlpool Duets, anyone can create a trading up opportunity.