cbrstar

I borrowed this graph, but you also have to imagine your customer base as a pyramid. The bottom there's tons of people with the least amount of money and at the top is the least amount of people but with the most amount of money. Lets say a product or a bike is priced right in the middle of a pyramid. What happens is a product see's huge sales but eventually it hits 100% of that level of new customers and you will see a sudden huge drop in sales like in the above graph. Basically just about everyone who is going to buy one has, and now it takes 50x the effort to try to attract new customers. When this happens a company has a few different options. 1) Innovate new products to sell to the same customers, and maybe even reach customers at a higher level 2) Which you most often see is to make it cheaper and sell it at a lower price. Which basically means to go down a level and reach a wider amount of new customers. You often hear fans of a product say "They don't make them like the used to" etc. So when I see brands like Kona, Trek etc start offering more economic models I immediately think the brand has hit the point of having a sharp sales decline. There's lots of brands that started being prestigious but the brand keeps getting watered down.


But there's also another problem that manufactures face. When inflation out paces wages. If your customer base can lets say only afford $300 for a pair of shoes but thanks to inflation the shoes should be selling for $500. But $500 pushes you up to the next rung of customers where there is less of them and maybe they are not interested in your brand as they see it as inferior. Well now you have to find a way to manufacture them even cheaper to stay in the same customer base. Which is why many big time brands have been going to places like China for decades. We saw this back in the 80's where most of the bicycle manufacturing in Japan was forced to relocate to Taiwan after the US increased the value of the Yen.