The great price divide

We are currently seeing a massive shift in pricing in many consumer markets. Anecdotally it feels as though product and service categories which typically operated in the middle of the market are either being pushed either into a premium pricing space, or into heavy price competition.

And so what is emerging are two larger markets of pricing extremes. Some categories which one would expect prices to rise, such as air travel with rising fuel infrastructure costs, prices are actually falling. And categories where we’d expect to see prices to decline (ice cream) we are witnessing inflation. Granted much of the premium pricing that is occuring is caused by consumers upgrading and the move to gourmet versions of the product. But the fact remains that consumers are gravitating to markets of extremes.

In order to illustrate:

Deflationary items: Air travel, hotel rooms, computers, internet access, computer programming, digital design, televisions.

While on the inflationary side we have the gourmification (if you can call it that) of products and services where people are paying an ultra premium for bottled water, gourmet ice cream, gourmet yoghurt, gourmet coffee, spa treatments et al…

The implications for startups are many. But the primary consideration should be how this paradigm influences which categories we want to get into, and which ones we believe there is an opportunity to shake up at launching in one end of the pricing extreme.

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