Students in professor Kim Saxton's M450 class last semester where assigned to do research on backpacks and write a blog post. We will feature a few of these blogs in the coming weeks. This week's entry is from senior Rachel Hetrick:
After chatting with many customers shopping for backpacks in Nordstrom in a high-end fashion mall, one thing stood out over everything else in my research findings: When asked what price range the customers had in mind upon coming into the store, about 38% of respondents admitted to having no price limitations for this product. That might not sound unreasonable of customers shopping in Walmart, but we’re talking about backpacks with price ranges that reached up to $2070! I don’t know about you, but spending two grand on a backpack is completely unfathomable to me … I am still laughing at the look that must have shown on my face when I happened across that price tag.
Now, here come the statistics for my fellow data lovers:
Through this same research, I found that only about 17.5% of respondents expected to spend less than $500 on a backpack, while about 26.5% expected to spend anywhere from $500 to $1000. What I find most interesting about this data is that what these people are paying these premiums for is not comfort, it’s not capacity, and it isn’t durability either. My genuine leather backpack of a medium-large size (can carry multiple hardcover textbooks along with laptop and general school supplies) with supportive straps and padding in back lining, which also features a laptop sleeve and five separate zipper pockets, cost me about $80 and is in great condition after two years of daily use carrying heavy books. In fact, the premium prices being charged for these backpacks are not related to quality at all; they simply represent the cost of a designer label.
All of the bags offered at Nordstrom carry designer labels such as Marc Jacobs, Kate Spade, and Steve Madden. And all of the bags I saw seemed to be of a perfectly acceptable quality. What separates the $50 bags from the $2,000 bags is the status of the designer who created each one. The bags that are $1,500 and higher bare labels of very high caliber designers—specifically Marni, Alexander McQueen and Proenza Schouler at Nordstrom. These names may or may not mean anything to you, but in the world of high fashion they certainly serve as a high status symbol. In other words, the people who carry these bags are doing so with the intention of sending a message to anyone who sees them. That message has to do with the wearer’s financial status—letting everyone know that the wearer has such a high amount of money available that she can spend $2,000 on something as nonessential as a backpack. The wearers of these backpacks live a life of luxury and want to let everyone know. This creates the market segment deemed luxury trend followers.
Looking for the bottom line? Well, here it is…
If the dollar signs aren’t already flashing before the eyes of my fellow marketers, this overview of the luxury trend follower segment may offer some more insight to my thinking:
- Traditional measures of quality—comfort, capacity, durability—are not key decision-making factors;
- “Value” is instead assessed in terms of status;
- Higher prices communicate higher achieved status.
Luxury trend followers are a marketer’s dream because the backpacks can be sold at a high price with a relatively low production cost. The main indicators of value to these customers are a high price and a designer tag. This means that, while the bags are certainly expected not to fall apart in two weeks, with this segment you can get by without using the highest quality materials or offering the most possible comfort but still charge a premium price. Regarding price sensitivity, I found that even in observing those customers who cited a specific price range upon entering the store, most of the customers did not seem to be considering the price in selecting a backpack. Instead they were searching for a pack in the color they wanted that bore their favorite designer’s label and would purchase whatever pack was found that met those qualifications, regardless of the price.
In marketing for the apparel industry as a whole, the small but mighty luxury trend followers should be your primary target. They show a very low price sensitivity, and will be frequent customers because they are concerned with staying current with the constantly developing trends. So as you develop your next marketing plan, I recommend that you consider the benefits of targeting a segment that will pay premium prices for mediocre quality merchandise.