This morning, a friend reported that Stowe, VT real estate is doing OK, in part because if you’re on the East coast, and you downgrade your Aspen aspirations a notch — you end up at Stowe. (I also learned that Stowe is a big AIG project, which was interesting).
Similarly, McDonald’s is doing OK while Starbucks gets creamed.
In tough & uncertain economic times, we all tend to downgrade in a sort of musical chairs: “A class” buyers downgrade to “B”, “B” to “C”, etc. (Recession or not, I still don’t understand people paying $4 for coffee.) It’s gotten so bad, we’ve got hedge fund guys flying first class instead of charter. OMG!
For entrepreneurs, this suggests a model for thinking about opportunities.
New ventures can look for existing premium products and services where you can be the more efficient, cost-effective downgrade offering. The premium incumbent has already “taught” the market — can you find a better/cheaper way?
Existing ventures should ask: “What are we the downgrade for?” and “What do our customers want to downgrade to?”
Recessions: never boring.