What is happening? Consumers are buying what they want at the price they're willing to pay, and they're buying more variety of goods and services. They have ignored the tweaks and variances of big brands like Pepsi and Coke and flocked instead to Arizona Ice Tea and bottled water. The consumer continues to ignore Coke, which has dropped three points in the new Interbrand equity index.
Upstarts are making impact, and the big guys are continuing to compete for the same market of fat spots aimed squarely at high concentrations of consumers in the middle market. By chasing fat spots -- with no shortage of competition -- brutal price confrontation becomes the norm. More customers are selecting more differentiated products in niche or sweet spots around the edge of categories. These products have a small market share, yet with higher margins. These customers find differences that are neither upscale nor horizontally different.
Some consumers are buying upwards with brand names without necessarily having more discretionary money. Others are committed to "saving money" on categories. Despite enjoying significant income, they are driving their SUV to Costco or Sam's Club, staying in Holiday Inns and flying JetBlue, in order to keep costs down.
GM is a paradigm case for customer ignorance: not low cost, not luxury, not highly differentiated. It is fulfilling the "not for me" category. The customer is no longer paying less and expecting a less-perfect fit. The customer no longer has to worry if he or she is getting it right. The uncertainty discount has been eliminated and the competition discount is as high as it ever has been.
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