The only way is down

Something odd is happening in mature industries. When new entrants succeeds in stealing the old guys market share it seems only one strategy is available: Follow! And as new entrants often base their success on lower prices, and they are organized for it, that means considerable lower margins for the previous leaders as they often have a rather high fixed-cost structure. This is what airliners are suffering from, as well as the retail industry.

But, hey! What happened to innovation and making your customers trading up?

Customers doesn't always live for paying less. They live for experiencing more. But if the same experience is available to a (considerable) lower price they that's the price they want to pay.

In fact there are a lot of companies getting this. And they profit from customers who doesn't want to live in a capitalistic communism, where everything is the same, although it's the capatilists that has narrowed our choice. BMW, Victoria's Secrets, Virgin Atlantic, Apple are just a few who are doing fine with this strategy.

Seth Godin also writes about this, whith the retoric question:

So, I think I understand what happens when you win the race to the top. You end up with a healthy, motivated workforce that's focused on adding art and joy to your products. You end up with profits and market share and a community that's glad you're there.

What happens, though, when you win the race to the bottom?

Some people that should be extra worried are the environmentalists and people fighting for better conditions for third world workers (I hope we all are). Because as price turns more and more important (and we are talking low price), less customers are willing to pay a premium. This means products that are sold with ethical and environmental arguments will only be sold because of good will. And, I am sorry, there is not enough of that for building markets.

However. Don't blame the customers. Blame the uninnovative industry that hasn't got this. Or even better, take their business by trading up.