How Important is Price to Customers?
It turns out that while price is important so is value. A study conducted by Nielson asked grocery shoppers what is the number one attribute that influences store selection. High quality fresh produce was the winner. Being able to touch and feel produce and select the best items is one of the reasons that online grocery shopping and delivery has yet to take off. Having the lowest price was viewed as less influential to store selection than convenience factors such as location.
Attributes That Are Highly Influential in a Consumer's Decision to Shop at a Store
(Nielsen Global Retail-Growth Strategies Survey, Q3 2015)
When thinking about how to price a brand’s product and services what should be taken into consideration? Perhaps brands can take a page from luxury retailers in order to think differently about pricing. According to Richard Marcus a former CEO of Neiman Marcus: “price is important, but quality is remembered long after price is forgotten, as are qualities of uniqueness and originality”. High end retailers also focus on the customer experience as a way to differentiate themselves. According to eMarketer, 94% of internet users said that a consistently good customer experience is the number one reason for a customer to be loyal to a brand versus 57% that said regular low prices.
Rob Wallstrom, a former President of Saks OFF 5TH said that “one can create extraordinary value by either increasing the perceived value through quality, exclusivity, and desirability or by reducing the price. Our goal is to provide the best value, not just the cheapest price. Our customer wants luxury product at a great price. If we want to increase the value, we often add more to the product desirability rather than merely reducing the price”. Value is determined by all of the benefits provided to a customer including price, convenience and features.
The bottled water industry provides an excellent example of how brands have strategically turned a commodity, water, into a differentiated product group. Bottled water brands who have successfully differentiated themselves from one another through differences in packaging, quality and marketing messages have more leverage with pricing.
Pricing is never a simple exercise but perhaps brands have more leverage than they realize by focusing on other elements in the value equation such as the customer experience. What does your product or service's value proposition look like? Is it time to rethink what you are offering?
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