The market for a $1,095 mattress wouldn't be caught dead shopping at CostCo, even if it's the exact same mattress.
The "Select" branding isn't there to bamboozle them, it's to help them rationalize paying $500 more to be known as someone above shopping at CostCo.
Casper wants one person's $1,095, and another's $599, so they use branding and channel differentiation to scoop $1,694 from both sales, instead of $1,095 for just one, or $1,198 for both.
If we presume their cost is $400, then they go from $398 in margin (two sales at $599) or $695 in margin (one sale at $1,095) to $894 in margin. That's good business!
>The market for a $1,095 mattress wouldn't be caught dead shopping at CostCo, even if it's the exact same mattress.
That's quite an assumption you're making there. I buy a lot of what I need from CostCo, I also spent over $1k on a mattress and have spent further thousands on high quality bedding.
It's erroneous to conflate CostCo with cheap. They're a members only buying club which tends to buy high quality stock in huge quantities, taking advantage of the economies of scale on offer to them.
Costco isn't for the poors - if anything it's the preferred destination of the upper middle suburban class. they sell high ends things. a lot of it.
i'm guessing Casper's main customer base is, again, cash-strapped millennials, so to argue that these customers are somehow above Costco is a strange take.
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The market for a $1,095 mattress wouldn't be caught dead shopping at CostCo, even if it's the exact same mattress.
The "Select" branding isn't there to bamboozle them, it's to help them rationalize paying $500 more to be known as someone above shopping at CostCo.
Casper wants one person's $1,095, and another's $599, so they use branding and channel differentiation to scoop $1,694 from both sales, instead of $1,095 for just one, or $1,198 for both.
If we presume their cost is $400, then they go from $398 in margin (two sales at $599) or $695 in margin (one sale at $1,095) to $894 in margin. That's good business!