Mushy Middle

Interesting article in The New Yorker (via kottke.org) about products priced at the high and low end of the scale succeeding while those in the middle struggle. This is not a new concept, but one I continue to be mindful of—especially as one of those at the high end of the scale.

We develop and market a data collection and audience participation system used for market research, meetings and events, and scoring. We're often lumped in with what are called "audience response systems." Those are also polling systems that are similar in some ways, but different in others, especially in the level of service and greater depth of capabilities offered by Dialsmith and our Perception Analyzer. However, there are preconceptions to overcome because our advantages are not always immediately evident and we are often perceived as "expensive." We are also a smaller, niche developer that doesn't manufacturer on a mass scale, resulting in higher cost of goods on what we sell.

So, what is "expensive?" One of the ways we help our clients measure "expensive" is through what's called the Price Sensitivity Meter, developed by Peter van Westendorp. It's a method of learning the "sweet spot" pricing for a product or service. Wikipedia has a nice explanation:

The traditional PSM approach asks four price-related questions, which
are then evaluated as a series of four cumulative distributions, one
distribution for each question. The standard question formats can vary,
but generally take the following form:

  • At what price would you consider the product to be so expensive that
    you would not consider buying it? (Too expensive)
  • At what price would you consider the product to be priced so low
    that you would feel the quality couldn’t be very good? (Too cheap)
  • At what price would you consider the product starting to get
    expensive, so that it is not out of the question, but you would have to
    give some thought to buying it? (Expensive/High Side)
  • At what price would you consider the product to be a bargain—a great
    buy for the money? (Cheap/Good Value)

Using the Perception Analyzer dials, research respondents assign dollar values to each of the previous buckets and the "sweet spot" will emerge.

Back to the "mush middle" issue. The trick for a product/service combination like ours is to teeter on "expensive/high side" and not fall into "too expensive." Of course, a lot of that is subjective and expensive to one is a good deal to another. We develop what we (and our clients) consider a best-in-class product and offer stellar service. That's just what we're all about. As a result, we can (and have to) charge accordingly and that means we are in no way a low cost provider. But we're also not in the middle, nor do we want to be.

As a small company, we can relate to the Apple example in the article. Not because we're anywhere near Apple's size, but because having only 2.2% of the world cell phone market is a huge win for them at 25 million iPhones sold last year. We see Dialsmith the same way. We don't have to work on the majority of worldwide "audience response" projects each year. By offering products and services that appeal to the select group that needs and appreciates what we offer, we can charge accordingly, do great work, and get enough market share to be quite successful. We can also focus on making products and offering services that our clients (and their clients) are willing to pay for. In fact, they demand it.