Friday, May 26, 2006

The impact of product upgrade on replacement demand

Ever wondered why we want to change our mobile phones every now and then (okies...every 2 years or so..now and then is more for Yo Man kind of ppl)...but are content seeing the same damn fan rotating above over our sweating bodies year after year or rather decades after decades. If u think its more to do with a lifestyle product vs a utility product, lets take another example...why do most of us have changed our old A/C's with new upgraded/energy saving ones in the last year or so...where does the lifestyle thing come into play...or even better why have so many of ours mom insisted on changing our old refrigerators with newer ones in the last couple of years or so...but with the fans they dont do anything....akhir kyon...why this love with the hanging piece of machinery....after all all of them are high value (for a average Indian Middle Class family), high involvement household related consumer electronics items...?? This question struck me of late when I noticed that some items just dont have a replacement demand...and this thing gains all the more importance when we look at some of the penetration data in the Indian households and find more and more houses having access to many erstwhile so called luxury/comfort items....a high penetration simply means low potential for growing the market which in turn means that for growing the market what is needed is to create replacement market.... This observation made to sit back and realise why does Television market grow but radio doesnt, why does A/c market grow but Fans doesnt, why does ligting bulb market grow but tube light doesnt..the answer which I could think of (though as quite often, I might be totally wrong), is that some product categories have created higher versions or product upgrade making the consumers believe that while they might be having something, its a piece of shit compared to what is available now...they have created a replacement market and has made the consumer upgrade itself despite the fact that the consumer was till the realisation struck him, was pretty happy with this piece of gadget.... Lets take the example of a Television....a simple colour tv, then a 30-40 channel one, then a flat screen, then with better sound etc etc....after every couple of years u feel that u need a new one...not because the existing one is bad but that because the ones currently in the market are much better...On the other hand, lets look at fans, etc....a fan ages ago was the same fan available now...why should any consumer shift..whats the benefit... Skeptics can say that a fan suffices the need of cooling ur body but the same holds true for A/c's too...why does a replacement market exist there..simply cause the marketers of the latter have consisitently come out with better versions of the A/c tempting people to upgrade. Hence, while we might not have the data to prove, but examples do exist in real life to show that despite a product having a high technical life, product upgrade by the marketeers definitely helps in getting consumers to go for the better variants thus creating a replacement demand which in turn boosts sale....

1 comment:

Anonymous said...

Fans ki le li tune...