A friend of mine works in the music industry. It is an industry in crisis due to the rise of downloads and digital piracy (when was the last time you bought a CD?), and is desperately seeking ways to remain profitable.
The solution being talked about is to create lots of different versions of the same product to cater for different consumers. This would see the death of the standard CD, replacing it with a suite of other differently-priced products: the £6.99 download, the £19.99 special collectors edition, the £200 gold version signed by the band, and the £3,000 dinner-included deluxe experience. This is a recognition that even fans of the same band have different preferences and purchasing power.
To describe this phenomenon my friend uses the term ‘de-averaging’. The message is simple: the Henry Ford adage ‘any colour as long as it’s black’ is no longer a viable strategy.
We could see de-averaging as echoing other trends towards greater choice and variety in our lives – for example personalisation in public services, the rhetoric of choice in politics, and even the bewildering variety of niche cable TV channels.
I think there is a lesson in this for everyone, including charities. In a de-averaged world charities are already learning that they must work harder and harder to engage with clients. People no longer respond to a standard product and are beginning to expect to be greeted with a more individual offering. The same is true for donors. We want to hear about the things that we care about, and get grumpy when we don’t.
De-averaging may be a profoundly unappealing word but as a concept expect it to run. You heard it here first.
Friday, 24 July 2009
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5 comments:
I think that's called "price discrimination" and as a concept has been in operation for quite a while!
True, but there are interesting economic questions about how best to carry out price discrimination and which markets it works best in. I have written more at http://www.knowingandmaking.com/2009/07/de-averaging-and-behavioural-economics.html
Dear Anonymous:
Yes it is, but there are a series of interesting economic questions about how best to carry out price discrimination and which markets it works best in. I have written a response at http://www.knowingandmaking.com/2009/07/de-averaging-and-behavioural-economics.html
[apologies if this shows up twice, as the first copy doesn't seem to have appeared]
Thanks for comments. Thinking about it a bit more, 'de-averaging' is probably a marketing and communications term for what economists call price discrimination. I guess this reflects the fact that in marketing you are principally concerned with working out who the customer is (and in this case moving away from thinking in terms of an 'average customer'). It is someone else's job to set the price.
More broadly I think the example shows an interesting trend of increasing segmentation, diversity and choice in what we consume, which applies across our lives.
If gold version is selling than "special collectors" edition is worthless for some people ... i think :)
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