Find Value Not Price… 3 Steps How…
I came across an April 22 AdAge story about how companies are working to redefine value. The examples cited involve challenges at Procter & Gamble, Ford and Wendy’s.
A couple points as to why connecting with consumers is so difficult an issue for marketers:
1) Marketers allowed price to become so foremost in consumers’ minds that LOW price is how they define value;
2) Consumer consideration of Value is more complex. It’s a combination of convenience, solution, and timing to address a need or desire. Often this is NOT rational.
Marketers through promotional gimmicks, cash incentives and a lack of consumer insight presumed too much about cost/price vs. cost/benefit to value. The recession became a handy substitute for doing the strategic thinking and questioning of what’s essential.
You end up rewarding current customers for the wrong thing, e.g save money, for an issue they never had.
An example is T Mobile. I’ve been a long time T- Mobile customer; more than 10 years. They recently switched to an all service for one price program that requires no contract.
Very appealing to most everyone except the people most loyal to them. As a long time customer I get nothing extra for my loyalty.
In fact the new service program offers exactly the same thing to me and to someone who just signs up today with no T- Mobile history. So to them a long term loyal customer deserves nothing special.
The main message of the T- Mobile’s service offer is… We don’t expect loyalty and we have the lowest service price of all of the carriers.
This lack of differentiation among customer segments offers price reduction to loyal customers where price was not a consideration. This results in a company taking profitability from the most loyal customers to subsidize acquisition of new customers whose tendency is to switch on the basis of price. In the process nothing is done to enhance the loyal customer relationship.
The lack of analysis around customer differentiation is a problem across many industries. Even with the online sites and technology tools available to provide offers to specific customer targets, marketers fail to differentiate.
For example, I hear about deal sites providing dining customers with attractive coupons for meals. The owners of one I frequent tell me that the patrons come in with the coupon on their return visits. So rather than provide an offer for new customer trial, there’s a heavy portion of the discounts being applied by loyal repeat customers. There’s no profit left for the business.
The U.S. automotive industry practically destroyed itself from the 90’s to 2008 when they trained car buyers to wait for rebates, and other financial gimmicks before buying a car. Features and benefits regarding the quality or other attributes of the car are buried under the weight of promotional clutter about price discounts.
Here are 3 Steps to market value over price:
- Understand who your customers really are. What are their needs and desires? Current consumption, shopping and buying patterns? How do they respond and interact with your product?
- Define value relative to benefits. For example, attributes such as convenience, quality, satisfaction can well position and differentiate to address the customer segments defined in point #1.
- Promote based on adding a point of value to your customer. For example, new packaging; add a relevant offer to the original product. Avoid “lower price” announcements. It screams brand product loser. Stay relevant in your promotion relative to the core of the product’s value proposition.
The linked Ad Age article provides good examples on how companies redefine value. You’ll find a brief on:
- P&G Tide Pods Repackaging
- Chobani Greek yogurt product quality
- Ford Motor’s hands free communications systems
Three categories and multiple cases of successful efforts to redefine value.
You’ll find other posts related to business ideas a company can use to help growth on our blog.