In today’s market, it’s value, not price, that prevails
By Bob Tancula, Senex
When times get tougher and competition grows fiercer, the temptation to cut prices can become overwhelming. Customers always want a deal, don’t they?
There’s truth in that wisdom. However, it isn’t always clear what kind of “deal” consumers are most interested in. Price is just one piece of the total value equation. Retailers can’t simply cut prices and expect to make up lost margin with more units sold.
There are other potential paths to sales aside from simply being the cheapest. Customers will spend more for the right product, provided that a) the benefits are genuine, and b) those benefits have been properly communicated to them.
Tell Your Story
Which raises an important question: Just how well are you communicating the value of your products to your customers? It’s commonly assumed that superior products will speak for themselves, which simply isn’t so. In times such as these, most of us will go broke waiting for word to spread about the quality of what we’re bringing to market. And even then, quality, while essential, is only one more piece of the value puzzle, which, in addition to price, includes elements as varied as time savings, service, visual appeal and peace of mind.
“The things consumers find valuable are numerous, and they can surprise you,” said Bill Webber, retail operations director at BrandSource member Famous Tate. “Price is only the most obvious piece of the value equation, and one we try to never hang our hats on. Rather, we put emphasis on taking care of the customer and trying to introduce a new bit of value in everything we do, from the purchase experience to customer follow up. The opportunities are almost endless.”
Do Your Research
But of course, identifying what it is about your business and your products that deliver the most customer value isn’t always easy. If you’re not sure, try doing a little research. Start by finding out who your customers are — where they live, how much they bring home and how much they paid for their houses. That will give you a rough picture of who you’re selling to, and how many of that type of customer is near your store(s). Once you know that, you’ll know how many of a given product will likely be sold in your trade area.
Next, do some competitive research. Find out what similar products other retailers are selling and how they’re selling them. What benefits and features are they pushing the hardest? Or are they relying on service to carry the day? Taking stock of what other retailers are doing will provide clues as to what your consumers are willing to spend money on.
Chart Your Own Course
But of course, no one ever found their own ownable value niche by strictly copying what the others are doing. Ultimately, the point of the whole exercise is to identify gaps in the market that that no one has discovered yet — and then dive in with a set of value propositions that are unique to you, whether they’re about the products, product delivery, installation, service or some combination. Whatever it is that will help set you apart from your competition and win.
“The way we see it, outperforming the industry is mostly a matter of communicating our unique value,” said Webber. “Obviously, we have to think at least a little about price, and make sure we more or less keep it in line with what our competitors are doing. But we try not to think about them too much.
“We try to keep the focus on what we’re doing,” he added, “and making sure every touch point of the customer experience is as valuable as we can make it.”
Bob Tancula is president of Senex, a Louisville, Ky.-based research and analysis firm that provides market intelligence and strategic business insights for multiple industries. Contact Bob at bob.tancula@senexglobal.com.
