Alvin Koo's Blog

One of the concepts learned from reading Ch.1 of our marketing textbook revealed that customer relationships can be grouped into 4 categories consisting of Butterflies, True Friends, Strangers and Barnacles. In particular I found it interesting that certain companies would choose to fire “barnacle” customers, those that are loyal but not profitable. Coming to a real life example, Apple Inc. appears to be using a similar strategy as described by Rohit Bhargava on his Influential Marketing Blog. Bhargava comments on 4 points that led to Apples’ success, yet I would beg to differ on his third point of forgetting the low-end. Bhargava says that Apple is set on creating high-end quality products and thus “rightfully charges a premium for these products”. This strategy only applies in the micro-environment, given that there’s a healthy and strong macro-environment to back it up. Yet if you look at the macro-environment today I believe that that strategy would be a recipe for disaster. With the global economy in turmoil consumers are becoming more frugal. As a student, burdened with tuitions, I would not be spending a thousand dollars on a MacBook Air. Simply put customers do want high quality, but need affordability. Also not to forget is the trend of rising wealth-poverty gap and that the mass of consumers lie in the low-income sector, thus choosing an orientation diverted away from serving the masses may be detrimental in terms of volume of sales.

To sum up, I would like to share a video of one of my favourite reality shows, The Apprentice. This video describes two teams selling products on QVC and how price was the determining factor that lead to one team losing due to too high of a premium they set for their product in a rough economic time.