We've all seen the adverts: Supermarket A tells prime-time television audiences how many of its products are cheaper than those in Supermarket B. As a result of some of the most difficult economic conditions in years, cash-strapped consumers are being bombarded by retailers and brands alike offering them a multitude of price cuts and low-cost options.
In fact, I think the notion consumers focus merely on price when economic conditions take a turn for the worse is grossly overstated. I n times like these consumers are primed to think more deeply about the trade-offs they should make between spending (on added quality) and saving. People are not necessarily looking for the cheapest option: they are looking to maximise value - an equation of quality minus price .
So what can brands and retailers do in such conditions to attract consumers? In my opinion, retailers and brands need to think more cleverly about communicating value for money and not just mindlessly promoting and dropping prices. With major brands, consumers will rely on past experience and familiarity to make purchase decisions or look for quality cues such as established brand equity. Repeat buying tends to increase, so for a new brand trying to attract attention the key is to combine traditional money-based promotions with value-based activities that stimulate trial. Similarly, o wn-brand products should not be promoted purely from a price perspective. Trust needs to be built between the shop and the consumer with the value-for-money concept promoted in shop-floor leaflets and advertisements, on the company's website and in its magazines.
A new two-day programme at the London Business School entitled Pricing for Profit has been designed to address some of these issues. Ultimately, the key to success with any pricing strategy is to manage the relationship between quality and value. Of course, there will always be a segment of consumers who buy purely because of price. However, in reality, this segment is much smaller than many would think.
Marco Bertini is an assistant professor of marketing at the London Business School. His research focuses primarily on the psychology of pricing and money.
In fact, I think the notion consumers focus merely on price when economic conditions take a turn for the worse is grossly overstated. I n times like these consumers are primed to think more deeply about the trade-offs they should make between spending (on added quality) and saving. People are not necessarily looking for the cheapest option: they are looking to maximise value - an equation of quality minus price .
So what can brands and retailers do in such conditions to attract consumers? In my opinion, retailers and brands need to think more cleverly about communicating value for money and not just mindlessly promoting and dropping prices. With major brands, consumers will rely on past experience and familiarity to make purchase decisions or look for quality cues such as established brand equity. Repeat buying tends to increase, so for a new brand trying to attract attention the key is to combine traditional money-based promotions with value-based activities that stimulate trial. Similarly, o wn-brand products should not be promoted purely from a price perspective. Trust needs to be built between the shop and the consumer with the value-for-money concept promoted in shop-floor leaflets and advertisements, on the company's website and in its magazines.
A new two-day programme at the London Business School entitled Pricing for Profit has been designed to address some of these issues. Ultimately, the key to success with any pricing strategy is to manage the relationship between quality and value. Of course, there will always be a segment of consumers who buy purely because of price. However, in reality, this segment is much smaller than many would think.
Marco Bertini is an assistant professor of marketing at the London Business School. His research focuses primarily on the psychology of pricing and money.
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