Question

Marketers increasingly emphasize a two-tier, “Tiffany/Walmart” strategy. Many firms now offer different variations of the same basic offering to high-end and low-end segments. Gap’s Banana Republic chain sells blue jeans for $58, whereas Old Navy stores sell a slightly different version for $22.

What do you all think of this marketing strategy as it pertains to targeting different markets? Are you aware of other examples of this strategy in place? How does it - or would it - impact your purchasing decisions?

Answer 1

The marketing strategy targetting different market segments for a single product or near similar products are observed in many businesses, and followed by a number of different companies. The trick is to create different value perceptions for the product in the eyes of customers from different groups. It can be created by using different media of publicity, hiring different types of models endorsing two products and shooting in different locales to convince the target group of the appropriateness of the products for them, and of the price they need to pay. For example, a company ( Versace) markets watches under  premium brand "Versace", priced at $800 upwards, targetting high end customers, while it markets a low cost brand "Versus" targetting upper- middle class which wishes to purchase a Versace for low price of around $200. It is not uncommon to find the near similar features in both types of products. Another example is of a maker of premium travel and adventure accessories, which also sells a "student" edition of backpacks at one third of the price of ts regular range. Barring few graphics, everything is almost same in both classes. It is worth noting that advertisement strategy for both type of products is entirely different, with an aim to create perceived value for high paying customers and functional value for low end customers, so that it can sell to both.

There is nothing wrong with the strategy, and many customers know it, still they don't mind paying extra for that exclusive tag and that psychological satisfaction derived from that brand association. As long as I am concerened, I would pay only a marginal premium for a differently perceived brand, if I know that both products are nearly same, and not double of treble the amount.