On this data, the price of a Winchester in real terms remained pretty much the same for half a century. Then, a couple of years after buying the company, David Collischon took a decision that would spark a huge boom, but would also plant the seed for an equally huge bust. He decided to virtually double the prices across the range, and position the product as something exclusive, which you could use to organise your life. You can see the massive price increase on our graph reflected in the 1983 data.
The strategy worked very well at the start, with Filofax becoming a premium product. Annual sales revenue increased by a factor of 120 between 1981 and 1987. But, from 1988, cheaper competitor products and falling sales sent the company ever deeper into crisis, and the “golden age” of Filofax drew to a close.
Thank you Max for another informative post. I had forgotten what I paid for my Winchester back in 1986!
I'm afraid the model captions mentioned haven't made it on to the graph, but the models were E199 (1937), 5CLF 7/8 (1981 to 1985) and 4CLF 7/8 (1986 to 1994).
ReplyDeleteI managed to get them back again by doing a screen grab of the Word File!
DeleteWhy haven't you also shown the purchasing power equivalent in other major currencies like USD, Yen, and some combination of DM/EUR?
ReplyDeleteHaha! just kidding!
Interesting post, as usual.
The point about Collischon boosting prices illustrates a classic problem in business: short-term vs long-term value maximization. If prices had been kept more moderate, there may have been less incentive for competitors to enter the market, but that could have very well been offset by the immense popularity of ringed planners - surely Filofax wold have sold MANY more had the prices been lower. (**) Those even higher volumes would have attracted competitors into the market. I don't doubt that had Filofax not jacked-up the prices their success would have been sustained over a longer period.
However, fundamentally a Filofax is a durable consumer good, like leather shoes or a handbag. It takes people years to wear out a good leather binder. While some will want new shiny binders every year or so, others will still be using their Winchester 25 or 30 years down the road. A natural reaction is to use colour and variety to stimulate turnover demand that we see today: Whenever Filofax introduces a new model or colour of "Original" and there's a chorus of "I need that" on social media. That also changes the business model as there will be shorter production runs of more models, which reduces margins.
(** I remember being in the Filofax shop in London in 1986 or 87, and leaving with 3 OL7/8 because, as a student, I could not justify the cost of the leather binders.)
Thanks Alan.
DeleteYes - I too would have bought more items if the Filofax prices then had been lower, and would also have chosen more Filofax products over competitor ones.
A crucial difference between then and now is that the extensive range of leaves in the 1980s provided Filofax a substantial ongoing revenue stream after the initial binder purchase. I think they did go a bit overboard with the range, causing problems with stockholding and administration. Ironically, with the ability to print on demand and sell over the Internet, that business model might just work again today.
They may we'll have been able to sell more, but Collischon realised that they simply could not produce enough. Therefore he took the decision to dampen down excessive demand by pricing, This achieved the bonus of product exclusivity and boosted profits in the short-term. Of course, it also allowed lots of new entrants into the market and forced a reversal within 5 years. Filofax then outsourced production overseas to enable them to expand the range and increase sales considerably. The expanded range is something that has continued to this day - but the niche exclusivity tag was lost forever.
DeleteOne other factor should be considered, namely that on the horizon was the PIM/PDA phenomenon (Sharp Wizard, Psion Organizer, Casio Digital Diary, and Apple Newton). The Wizard debuted in 1989 and was all the rage amongst middle management.
ReplyDeleteUpper management, of course, stuck to their Filofax and Time/system planners. Given the inarguable superiority of paper-based planning, perhaps that's why they ended up in upper management!