It’s no secret that everyone loves a good sale. In fact, 79 percent of consumers consider themselves “price conscious.”
This consumer dynamic has pushed many business owners to worry about how to price their products, charging as little as possible — operating on razor-thin profit margins — to attract increasingly thrifty consumers.
An aggressive pricing strategy can be a dangerous path, with competitors caught in an endless game of price-tag chicken. Payless ShoeSource, for instance, recently filed for bankruptcy after it could not keep pace with online rivals. Countless businesses face intense pressure from e-commerce retailers to slash prices on a regular basis.
But what happens when lower prices stop working? Companies see discounts as a great way to bring foot traffic into their stores, but what truly brings consumers back is their perception of your prices. If consumers feel like your prices are lower than those of competitors — even if they’re exactly the same — you are more likely to see repeat business.
It’s equally important to consider what your prices say about value and quality. While many retailers believe offering the lowest price possible makes them seem like the most attractive option, that approach could inadvertently lead consumers to think your products are low-quality or not worth purchasing. Business leaders must master the tightrope walk between price and value.
Price vs. Value
Price might seem to be the most important factor in a purchasing decision, but it’s actually less critical than several other considerations. In one study, 57 percent of shoppers said product quality is the most important factor when choosing where to shop; only 48 percent of respondents said they make a decision based solely on price.
Despite the numbers, big-box retailers still have their sights set on offering the lowest prices possible. This approach has reached the point that customers have started to accept inferior products simply because they are saving so much money.
That being said, companies that focus on product quality should theoretically be more profitable. Fewer product defects leads to lower costs via reduced service and manufacturing expenses. In the end, better products can create a larger return on investment.
To find the right balance between quality and price point, consider your competitors. Figure out what they are doing, and try to capitalize on their shortcomings. If your competitors offer high-quality products at steep prices, there is space for you to swoop in with decent products at a lower price. If they are cranking out low-quality products at discounted prices, you can provide customers with top-tier items that will establish you as a premium brand.
Wooing Thrifty Consumers
While it’s relatively easy to find ways to undercut your competitors on price, the path to success with a premium product is less apparent. Consumers are always hungry for a bargain, making it difficult to market products that are not the cheapest. Provided you approach this situation in the right way, you can win over consumers and increase your profits.
- Build to Last
High-quality products last longer than items that are made as cheaply as possible, ultimately saving customers money in the long run. If consumers know they are getting a valuable product, you will be able to charge more upfront.
Value does not strictly pertain to quality, though. The Global Poverty Project and YouGov found that 74 percent of consumers are willing to pay more for clothing that is made under fair and safe working conditions, and a recent Nielsen survey found that 55 percent of global online consumers would pay more for products from companies that are committed to social and environmental responsibility. Assess your audience’s values, and adjust your product accordingly.
- Respect Their Time
Value can also come in the form of customer service. Companies that do things right the first time and more quickly than competitors end up saving consumers time (and headaches), which results in superior service.
Instead of making a sale your top priority, step into consumers’ shoes. Consider ways you can simplify the buying process. In addition to making it more likely that consumers will complete purchases, a streamlined purchase process provides better customer service and encourages shoppers to come back in the future.
- Give Them What They Want
Rather than sell consumers on what you want them to buy, sell them something theywant. If it’s a product or service they actually need, they are willing to pay more money for it.You can help them work through this process by providing them with the details they will need in order to know that your brand is the best value. Whether it’s on your website, social media, or other channels, bring your product to life by sharing as much information as possible. The easier you can make the buying decision, the more likely you will be able to close sales.
When it comes to budget-conscious consumers, cheaper does not necessarily mean better. People understand that they get what they pay for, with lower-priced items not offering the same value of more expensive alternatives. Retailers can use this to their advantage, embracing a higher price point to stand apart from competitors while attracting consumers who are interested in the best value.