Wednesday, June 24, 2009

From Steel to Gold - Part III

So what? Why does the whole concept of the Utility-Luxury grid really matter? Well it's important because a product's placement on the grid influences nearly all of its characteristics.

I'll take the liberty to apply a slightly modified version of Four Ps model to demonstrate this fact:

  1. Product. The physical characteristics of a product determine Utility-Luxury placement, perception, and expectations. More luxurious products are often associated with quality and durability - whether this is factual is irrelevant. On the other hand, silly putty isn't expected to last forever.
  2. Price. Price serves as both an actual result of the market, but also as a signal - often a higher price screams that a product is really useful/necessary, that it's very luxurious, or both.
  3. Placement. This usually refers to the physical or digital point of sale. I often expand the definition to include customer placement - i.e. segmentation and targeting. A new Mercedes is never sold to low-income individuals via a multi-brand car dealership in an inner-city setting.
  4. Promotion. The public image of a product is the most direct way of communicating where the product is on the Utility-Luxury grid and where it wants to be.

The Four Ps are the vital components that make up a product or service. The past, present, and future placement of a particular offering along the Utility-Luxury grid directly influences and is influenced by the product's particular characteristics.


  1. Interesting further analysis: Look at which of the 4 P's in each of your examples (watch and internet) are contributing most to the shift on the graph and which hardly contribute at all. For example, in the case of the watch, 3 Ps are remaining relatively unchanged through time: Product (in the sense that watches have undergone relatively little physical change over the years), Price (in the sense that they have remained attainable by a similar percentage of of the population since their hey day as a utility), and Placement (in that they are purchased in the same places they have always been).

    What has changed - and quite drastically, i might add - is the Promotion; watches are no longer advertised as, or seen as, functional. And as a result, are not bought or sold for their "usefulness".

    Subsequently, the entire shift on the graph from Utility to Luxury as experienced by the watch has been brought about by a large change in the final P, Promotion.

    One the other hand, Internet's shifted position on the graph has resulted from an entirely different set of Ps changing. In this example, the Product changed (as seen by how different today's internet is to 1995's), the Price changed (in the sense that, to get on the internet, you must have a computer and the price of computers have come down drastically (another example of luxury to utility), and the Placement changed (again, many more people have a far easier time accessing the internet today than 15 years ago).

    Interestingly - and quite conversely from the watch example - the final P, Promotion, has barely moved. The internet is still billed, as it always has been, as another source or access point for information. Furthermore, any movement that has occurred in Promotion has arguably been a reaction to the other P's changing.

    Now, we may differ as to my assessment of which Ps are changing and by how much, but I bring up the idea of individual changes because it help me make sense of the total shift we have witnessed with each example. I have an idea for a supplementary graph that would display the individual changes in each P but I need to get my hands on some graphing software first ;)

  2. Wow - awesome analysis. Thank you for adding depth to the concepts.

    For the wristwatch example - I'm not so sure that the Promotion characteristic was a cause for the movement on the grid. I think that it was more of a reaction by the industry - i.e. an attempt to completely re-brand in order to survive the quickly declining watch utility level.

    I agree with you for the Internet example.

    But both of these examples illustrate a tough concept to swallow. The Four Ps can be both a catalyst (mechanism) for movement and a reaction to it. So it seems that movement along the U-L grid can be caused by either a conscious decision(s) by the providers/makers of a product/service or by a major market shift. In both cases, the change alters the way business is done.