This year, more than ever it seems, the high street retailers are looking to instil a perception of value with consumers in order to kick-start Xmas shopping. We’ve seen many of the big names running value events with 20-30% off a wide range of products for a day or more. There’s little doubt from my elbow-fuelled experience in M&S last week that these tactics work in the short term, but in the long term, price-cutting ends up trading the value out of a brand and business.
This requirement for bottom-line value is something that preoccupies many of our clients and is a subject that has very much come to a head in conversations about 2009. Retailers are putting ever greater pressure on manufacturers to drive down prices to consumers through promotion in order to stimulate sales. Our challenge is to help our clients create (the sense of) value for consumers whilst maintaining (or ideally, increasing) price.
Value is a perception, not an absolute. It is unique to individuals, but of course moderated by social norms and expectations. We were thinking the other day about all the ways in which an fmcg company might offer value to consumers, and the list is quite long and varied when you get into it, from ‘altruistic’ value such as donations to charity or Innocent’s tree-planting scheme, to ‘virtual’ value as Sam described a little while back on this blog, to ‘lifestyle’ value where other aspects of consumers’ lives are supported (e.g. Walkers’ Brit Trips – adding value to people’s leisure time), and plenty more.
All this came to mind again when reading this post in the consistently excellent Neuromarketing blog, which discusses how to create a sense of value through portfolio management. Put simply, people become prepared to purchase a product A at price X if that price is framed in some way as of good value to them. This can be achieved by advertising a ‘superior’ product B (that may not have that many more advantages to it) at a greater price Y, thereby making price X seem good value for what product A offers. Product B can basically be a decoy, a product that no-one would buy, but its job is to aid the value perception of A.
This has a faint whiff of duping the consumer about it, but there’s no denying that it feels familiar in terms of how we go about shopping. This is particularly true in this day and age of internet shopping and the huge amount of information and comparison that this involves. I for one now find myself spending much longer over major purchase decisions in general, but get a flush of joy when I see a product at a price that I think is good relative to the cost of ‘superior’ options. This often acts as a real purchase pathway shortcut.
There’s a load of other factors that we need to think about if applying this kind of thinking to any one market. Competition is clearly one – if the market is cluttered then it’s unlikely that consumers will just compare price X to price Y within your product portfolio, and the effect can be easily undercut by the competition (though the power of brand is likely to play a big role here). How heavily framed is the market in terms of price expectation? It’s more difficult to believe that launching a very expensive packet of crisps is likely to make the price of a standard bag more resilient, since the value expectation in crisps is so deeply ingrained. Compare this to a market like new technology, where the pace of development blunts the ability for norms to get set.
Add to this the whole area of choice paralysis – you don’t want to give people too many choices in a range of products for fear that they’ll find the computation of value too difficult and defer choosing altogether.
We’re all going to be asked to have an opinion on how to drive value concurrently for both consumers and our clients’ businesses in the next year, so worth thinking about how the market you work with is set up and what a brand can offer.
-- Alex