We all know consumers are having a pretty tough time of it with prices rising, asset values flat lining and earnings struggling to keep pace. It means more of us need to forensically analyse the household budgets to see how we can move from a surviving to a thriving state of existence again.
We look for trust agents to help. Comparison sites and money saving experts have encouraged us to assess everything on just one dimension – price. It’s easy to work with but the problem is that we now only look at the price tag to calculate whether or not we are getting a good deal. And as any good marketing scholar could tell you, there is more than one ‘P’ you can use in business to leverage the ultimate ‘P’ – profit.
Brands are wise to the naivety of the ‘consumer champion’ types who proclaim value is found through the lowest prices, as these examples show. They are now beating the experts at their own game, but is this at the detriment of consumer satisfaction?
1. Not quite ‘pound for pound’
Poundland, 99p store and Poundstretcher are as familiar sights on the high street as Comet and Woolworth were ten years ago. Their strength has grown so that now they stock recognisable brands as well as cheaper alternatives. This has meant they now appeal to a wider cross section of the UK. Poundland, who now accept American Express, has identified that 13% of middle and upper middle class consumers in the UK shop with them. Sound and successful business models.
But with an upper price point ceiling, they have one less marketing lever to play with. So when VAT went up or raw material prices rise, the pound price pointers have to be creative in keeping products profitable and in line with their raison d‘etre.
So how do they do it? Of course they bulk buy and have powerful buying power. They also reduce how much the customer gets for their £1. As cost of manufacture rose, Toblerone reduced its size from 200g to 170g to keep to the 99p store pricing requirement.
It’s not only the pound stores using weight as a marketing tool. The legitimate art of shrinking products is at play amongst many brands. According to a Telegraph article from 21 March 2013 the worst offenders are:
1. Birds Eye Original Beef Burgers with Onion (25% or 4 burgers less)
2. Fry Light Extra Virgin Olive Oil Spray (24% less)
3. Pledge Clean & Dust Furniture Polish Jasmine (17%)
A survey of 1,257 Which? members found that 58% said they would rather prices rose than packs got smaller. A further 37% accepted it but would rather have been told first. Whilst not happy about this once explained, consumers are not always aware in the first place. Even if they were the constant ‘buy on price’ media noise and brands reacting to this has meant most consumers will struggle to add another variable, such as weight, into the equation to assess value when it’s not being shouted about. So price is now working against the consumer and provided a great mask for profit instead.
2. Squeasyjet
I’m a fan of easyJet and it may just be coincidence but they seem to have really got their customer experience act together recently. Whether it’s Richard Bacon (is it really him) as the safety announcement voice overs, improving the UX when booking or their latest initiative – allocated seating. Yes, the very thing they introduced to reduce costs has now been brought back in.
I think it’s a brilliant example of giving customers less for more and increasing satisfaction. easyJet have introduced allocated seating but if the passenger wants to choose a seat it will cost £3.99 extra. I am sure there wasn’t a long game strategy dreamed up by the original easyJet team – squeeze £4 out of customers in 20 years’ time. It’s probably that the efficiency of the booking system means it’s now possible at little cost to easyJet or time to the passenger.
But everyone is happy because if I upgrade I get to choose again, for what seems like a small charge (less than speedy boarding). And because I have a seat already I don’t need to stand and queue at the departure gate if I chose not to. Now that’s better (even though it’s less than I used to get before easyJet arrived on the scene).
With an order of 100 planes to Boeing to bring their fleet up to over 300 from two when they launched, and 60 million passengers a year, easyJet appears to have got the balance right.
3. Customer betterment strategy
As these examples demonstrate consumers should be helped to understand ‘value’ rather than ‘price’, otherwise they will continue to lose out.
Consumers don’t want to buy cheap stuff. Consumers want only products and services that are going to make their lives better. And it’s here the one dimensional price pushing commentator falls down. ‘Better’ is a very complicated emotive requirement to understand. It includes weighing up cost verses gain but that is just one part of it.
When a consumer is assessing options through a comparison site’s criteria ‘the computer’ will invariably fall short of achieving the consumer’s emotional fulfillment because it has assumed the consumer is 100% rationally motivated in their choice.
It’s an added challenge marketers have to face. A marketing friend of mine has lost faith and believes too much damage has been done. He feels marketing needs to embrace this warped way of assessing choice and play price at its own game –
“If you must tell customers it’s all about price, just ensure your business model isn’t based on the same dynamic”.
Once again price proves itself to be a very short term game. If this is the future for many markets, then I am encouraged to see brands like easyJet demonstrating how to squeeze more from less and still keeping customers happy.
I’ll continue to help brands to understand what ‘betterment’ means to their customers and how to achieve this in a way which provides brand distinctiveness and competitive advantage. If you ask the right questions in the Customer Relationship Study it soon becomes apparent how little impact price has compared to brand, comms and experience.
So this approach can take you in so many directions to explore: proposition, brand activation, reputation, leadership style, customer experience, product, channel etc.
Whilst it may be a slightly more involved and taxing undertaking than a Q&D ‘we are cheap’ strategy, it will prove a more fulfilling and sustainable one for all involved, not least of all the customer.
Posted by Christopher Brooks.
Lexden is a Customer Strategy Agency. We put customers at the start and the heart of marketing strategies.
We work with brands to attract and retain happy customers. We achieve this by helping them to understand what makes their customers tick, building memorable customer experience strategies and creating engaging customer value propositions.
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For more information about how we can help you take your customer strategy forward please contact christopherbrooks@lexdengroup.com or call us on M +44 (0) 7968 316548. You can follow us on LinkedIn Facebook and Twitter @consultingchris.
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