Low-price Companies Change Consumer Behaviour Permanently

by on 6 December, 2006 - 22:46

By: John Caddell

There's a very interesting article in this month's Harvard Business Review entitled "Strategies to Fight Low-Cost Rivals" by London Business School professor Nirmalya Kumar. It's got lots to say about how traditional companies can compete with low-price insurgents.

Within the article, however, are several passages that will send chills up the back of any marketer. Customers will pay more for more value, correct? Prof. Kumar says yes, to a point. But he also says this:

My research suggests that if a business gets a customer to buy its products or services on the basis of price, it will lose the customer only if a rival offers a lower price.

So once a customer defects to a low-price rival, she ain't coming back.

Well, how about the marketer's favorite tool, feature differentiation? That can help, can't it? Says Prof. Kumar:

Many companies find it tough to persuade consumers to pay for additional benefits. A small premium for greater services or benefits is a powerful defense, as Target and Walgreens have shown.

With the emphasis on small. The marketer's toolbag certainly has shrunk. Thanks Wal-Mart, Dell, Southwest, Huawei!

Original Post: http://shoptalkmarketing.blogspot.com/2006/12/low-price-companies-change-consumer.html