Rather than pinning the blame on one camp or the other, let's recognize that it takes two to tango. Consumers are effectively colluding with brands. Fifty-two percent of consumers we surveyed agreed that they are as much to blame for the increased focus on pricing over quality. That at least offers a chance for some redemption. So, in an atmosphere where price is the main driver in purchase decisions, how can companies compete without hurting the bottom line?
It's hard to put a finger on how this dangerous dance began, but digital technologies and new disruptive business models certainly added gasoline to a fire that was perhaps sparked by the downturn of 2008.
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Through technology, consumers at every level have an abundance of information at their fingertips, with 63 percent using deal sites to find better prices. Offer up something better, and 55 percent will take advantage of a deal, even if they are pleased with their existing provider.
For most companies, prices just can't go any lower. Luckily for them, customers are beginning to look for alternative value propositions and many are recognizing there is a trade-off for "lowest price." Consider how Uber customers are willing to pay higher prices at certain times, showing that they are open to paying more for a convenient service they deem superior to that of traditional taxi services. Thirty-seven percent of consumers surveyed said the purchase of a discount-priced product or service backfired on them in the last year, ultimately causing them to regret not buying the higher-priced alternative. And certain segment groups are looking for different value propositions. Recent research by Havas Media and Accenture found that two-thirds of mothers and 18-34 year-olds actively buy sustainable brands. Almost a quarter of the younger cohorts say they always consider the social and environmental ethics of brands when making purchasing decision.
With consumers beginning to understand the lowest price trade-off, the window of opportunity to exit the pricing wars is finally open. But, real change can only happen if companies wave the white flag of surrender to considering only price and look toward new models. There are a few things companies need to focus on to find a smooth exit – customers, value and differentiation.
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