Investments in Psychological Differentiation

Bicycle Biz Economics Glass Houses Warnings & Examples

Even though the UCI hasn't communicated anything to national federations about how its UCI Approved Frame Sticker program is going to be implemented, monitored or enforced anywhere outside of professional events (and even the details there are pretty thin), several brands sprinted for the holeshot and right to claim that they were the first to obtain the magical little decal for their frames. Among them is Felt, who have gone so far as to gain the UCI's approval post haste, and then launch an ad campaign on VeloNews bragging about it. The picture you see here is one of the ads. It is a premium (ie, "expensive") 300x250 size running in the site's premium (ie, "most expensive") inventory slot on the site. The ad is an animated .GIF with two panels, but the timing was screwy on the VeloNews site so I broke out the panels separately so you can see them. The ad rotates between the two.

UCI Stickers are the new ProTeam sponsorship. They allow the bigass brands to differentiate from smaller companies by spending money, then amplify that differentiation by spending more money telling people about the money they spent.

But this is an example of the least valuable form of differentiation. If a company wants to invest in proprietary R&D or wind tunnel testing in order to structurally or mechanically or aerodynamically differentiate their products, passing that R&D expense or weeks in the wind tunnel at $400/hour along to their customers is justified. It's not how we do it, but at least the customer is paying for something that ostensibly affects a bike's performance. 

But to spend money on meaningless differentiation - like the UCI sticker - and then tout it as some sort of competitive advantage, is, frankly, disrespectful to customers. Instead of structural or mechanical or aerodynamic differentiation, this is psychological differentiation. Its purpose is not to match a rider with a bike that suits his or her personal qualities, but simply to command a higher price through a perception or image.

This ad makes pretty clear what the overwhelming backlash to the UCI sticker program has been - that the big companies that can afford to sponsor professional squads and attend ad hoc meetings in Geneva and go to Eurobike see the UCI sticker program as an opportunity to stifle competition from smaller brands and turn the frame market (to start, followed shortly by the wheel market and the apparel market) into an oligopoly. If the $6K spent on a UCI sticker is a mere expense, you suck it up, spend it, and move on. But what Felt is doing with this ad campaign is leveraging the expense, which means it's acting as an investment to them. And with any investment you aim to make more than you spend. Dave and I are furious over the UCI program but look at Felt's ad - they come off as positively gleeful.

Could you argue that trying to turn a pointless expense drummed up by the UCI into a profitable investment is innovative resourcefulness on Felt's behalf? Maybe. But it walks and quacks a lot like psychological differentiation to me.

Oh and by the way - guess who gets to foot the bill for whatever a bike company spends on its UCI sticker, and also the ad campaign launched to promote it? 

Race smart.

 


Older Post Newer Post


Leave a comment