Banning low-price from your strategy
In my November 2018 article entitled “Why free is not the best price”, I questioned the quality of customer service and the fact that profit is a better deal than large market share at no, or very little profit at all. The article has resonated with some but then, it seems that many do not want to really address the point by fear of going against possible policies or trends.
In an article published by the BBC about standing seats in airlines in July 2010 and another one in CNN’s article “Here’s what it might be like to travel on a stand-up airplane seat” on April 3rd this year, I just cannot imagine how far low cost could come before people say “Enough!!”.
Let’s start by listing the 2 worst (on my opinion) effects of a low price strategy:
1) Mass consumption
Marketing is a fantastic science when it comes to product positioning and promotion yet, it responds to the trends of the public and it seems, at this time, that all comes with the magic sentence: “I worked for it…I deserve it!”.
This means that the consumers at large (including you and me) think that their work and income is good enough for enjoying the fruit of it, possibly at the cost of others, nature or even… oneself.
Airlines, grocery stores and businesses have been battling for driving low-cost as the best tool for gaining market share and proving to the consumer an affordable product or service. This ranges from getting cheap strawberries at Christmas in Europe (strawberries growth season in Germany is May-June) to joining 3,000 tourists on a cruise ship to visit endangered wildlife areas such as Alaska or the Nordic Fjords. The impact of this increased accessibility has disrupted the air travel, cruising and good transportation markets, adding pressure respectively for larger aircrafts (Airbus 380’s end of life program), the launch of mega cruise ships and for massive container ships to lower cost of transportation. In the same line, the airlines introduction in 2017 of the “Cattle Class” or Basic Economy Class reflects the mentality that ‘it is okay as long as it is cheap”.
2) Levelling from the bottom
When it comes to selling cheap, there are many shortcuts and those are mostly about quality and sustainability. For too many products, this entails low-wage workers, low quality mass production and, most importantly, short product lifetime. Indeed, as one thinks that one’s smartphone, t-shirt or pair of shoes is cheap enough to avoid repair, replacement is the default policy, focusing on low-priced, low range quality and easily replaceable product (and constant opportunity for a customer to change brand). The low-cost approach is only attractive (for some) as long as nobody else undercuts you. Sad enough, there is always someone able to find a way to make it cheaper by sacrificing the combination of quality, environment and workplace ethics, giving you only a short-lived, low-margin business lead.
Action 1: Create customer loyalty
The same as the news from the Good News network, good things come in lower amounts but last longer. For this reason, your product focus must not be market share but customer satisfaction (we will talk about this in a couple of paragraphs) and lasting quality. In the same way, your marketing shouldn’t focus on “see how cheap I am” to “see how great my features are”.
Good brand examples (and yet sizeable companies) using those messages are BMW, Apple and American Express just to mention a few. Their cost is higher but so are the quality and longevity of their product. Those brands have some of the highest customer satisfaction and loyalty level you can find in the world. They are mostly driven by great customer loyalty programs that are not just about accumulating points (like hotel chains and airlines). Those can be like getting a great BMW vehicle as replacement car while yours is being serviced, free upgrade to 4K video for the movies you have purchased on iTunes when it was “only” HD, free computer or smartphone (which is a computer too) MacOS/iOS upgrade (lifetime) to be up to date with your products, points to purchase products, pay your annual card fee or travel vouchers when you use your credit card (Amex)…
After all, isn’t the cheapest customer the one you do not have to go find every time you have a new product?
Action 2: Focus on sustainability
Apple just unveiled their new recycling facility in Austin Texas and has vowed to run its facilities on renewable energy and is pushing its suppliers to be greener as an incentive to attract environment friendly customers to purchase their products and use their services. Volvo cars has been a forefront pioneer in advocating recyclable plastics and metals in their cards. Other companies, like German’s national train company (Deutsche Bahn) focuses on running its network on electricity produced by renewable technologies to the point of now offering households energy contracts for green electricity). Regardless of the size of your company, sustainability in product development, production, longevity and reliability is now a serious marketing differentiator that resonates even more with the millennial generation coming into buying power.
Action 3: Promote respect for the people
In a world of power hungry politicians and industrial leaders, the daily news report conflicts of working class people feeling enslaved by the economical systems of our countries. China’s 9-9-6 program (work from 9am till 9pm 6 days/week) is a great example of what one is pushing forward to be “competitive” into the market yet, at the great expense of respect for the individual. Companies that take care of their employees and care for their customers have a better leverage into the market to position products at a higher price because they support the cause of better living for all. I have just acquired a new photo bag from company Peak Design that uses all the points above as their marketing and product positioning. Their success is a wonderful example about how the customer base reacts to the right attitude and culture of the company, creating customer loyalty and long-lasting success, attracting distribution channels like REI in the US.
In conclusion, I can only say that, as Freelance consultant and writer, it is always easier for me to focus on customer satisfaction. Not the one that I know will be just at the moment they pay for their service (like “wow it is cheap…. I’ll have it too”) but the one that makes customers come back, year after year for a great collaboration and service. The low price strategy only opens the door for customers to constantly look for one thing and one only: can I get this for cheaper. From there, the battle for customer loyalty and product quality is over. It can’t be won regardless of what anyone will try to “sell” to me. If it is too cheap to be good, it is most likely that it won’t be good at all.
Provide your feedback
What is your product positioning like and how is your marketing message reflecting the value you want your customer to pay for? Is your business culture aligned with the customers you wish to attract? Have you been able to evaluate the cost of customer acquisition and retention? Do you have a sustainable business strategy? Let’s talk and define your future.
About the writer: Flavio Stiffan is a business development specialist with focus on creating market expansion strategies supported by academia programs. He has implemented and managed alliance networks and is at the core of academia relationship management with a network of over 130 universities and 300 technology companies and distributors. For more articles, visit www.stiffan.eu or check out his profile on LinkedIn.
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