BMW, Apple `Downshift' Prices
PRICE-CUTTING is no longer just the tool of retailers such as Sears Roebuck and K Mart. Even upscale manufacturers are reducing prices - the result of changing tastes by consumers as well as the sluggish global economy and concerns about the Gulf war. But in turning to cost-cutting, some companies are adopting a new marketing strategy that might be called ``downshifting'' - i.e., introducing lower-priced products that essentially utilize the existing technology of higher-priced items.
``Selling a product with a `price-cut' often sounds somewhat crude,'' says Donald Lehmann, a professor at the Columbia Business School. The objective, Dr. Lehmann says, is to sell the newer low-priced product without damaging the image of the more expensive brand name. And in the case of very expensive products, ``conspicuous consumption is no longer as `in' as was the case back in the 1980s.''
Examples of recent price-cutting efforts involving expensive products include BMW and Apple Computer. Other car companies are repositioning some brands at different price levels to take advantage of consumer concerns about finding the best value at the lowest price. The Toyota Motor Corporation's Lexus luxury car division is introducing a new luxury sports coupe this June, to be packaged between its lower cost and most expensive products.
BMW is now offering a version of its popular 3-series at a price below $20,000, the first time BMW has offered a car below $20,000 since the mid-1980s. Meantime, late last year Apple introduced the Apple Macintosh Classic, a computer that has a suggested retail price of $999, half the price of an older product.
Is BMW lowering standards by introducing a lower-priced model? ``Not at all,'' argues Carl Flesher, vice president of marketing for BMW of North America Inc.