Somewhere along the line merchants got confused… and started thinking the more 70% off signs they had around the shop the more loyal customers would be theirs.
What those stores with continual price-slashing sales events fail to realise it’s not what customers want. According to consumer demand specialists, the Cambridge Group, “Value increases as benefits are added at the same price point or as price is reduced for the same benefits.”
That is: price + benefits = value.
Both are equally important to a customer. If the benefits a customer receives are significant, price becomes relatively insignificant. Benefits for any given product could be found in: Outcomes, manufacture process, purchasing experience, customer access, usage, and appearance. Excel in one or all of these areas and your price won’t be an issue for your customers.
The BrandAsset Valuator – the largest online brand study ever – stated that there were in fact there were 8 Paths to Value that a retailer could choose and be successful at:
1. Basic Buys
2. Proven Performer
3. Creative Solutions
4. Expert Advice
5. Built to Last
6. Affordable Chic
7. Small Indulgences
8. Everyday Heroes
That is, brands considered to be ‘good value’ are not necessarily a low price. If the customer perceives that one item will last significantly longer than another, for example, they won’t mind paying a higher price for it.
If you are a retailer who doesn’t want to compete on price alone (Path 1 is often simply a race to the bottom) consider some of the other paths. Do you have a good track record with customer satisfaction? Work on path 2. Maybe your business is built on a new way of doing things – direct competition will be scarce, and customers will consider the solution itself as valuable. This would be Path 3.
Get the equation of benefits/price right and you and your customer will both be happy. Get it wrong and sooner or later the customer will give up on you. Don’t get it wrong!