Tiering doesn t work anymore: Navigating the aftermath of the customer revolution
By Dr. Michael Schachler
Many companies are convinced that the market for new products has become increasingly bi-polar, split into high tier (high price) and low tier (low cost), with the middle market drying up. This would be exemplified by the Porsche driver who always buys her groceries at a high-end delicatessen, and the driver of a cheap import who always shops at a discount super market. As a result, companies believe they have to decide to turn one way or the other—either aim high, or aim low.
Yet in the aftermath of the "customer revolution," in which consumers have grown increasingly explicit about what they want (which is not yet what they necessarily really need) simply aiming high or low isn't the smart strategy. While it used to be sufficient to offer a product spectrum tiered into high, medium and low, today's offerings have to be carefully targeted at sharply defined customer segments in order to be successful; the entire notion of a linear feature-to-price ratio no longer exists (it still does for feature-to-cost, though!). As a prominent chief marketing officer quipped to me the other day, "Tiering doesn't work anymore."
Traditional "tiering" works through color, finish, materials and feature sets; for example, real aluminum is used for high tier, painted plastics for lower tier products. (We talked about tiering with authentic vs. synthetic materials in an earlier Design Mind column. New technological features are initially introduced in high-tier products, then mature down to commodity features over time—for example, anti-lock brakes.