It is a great time to be a consumer, if you have money to spend. Businesses of all types are responding to weak demand and bloated inventories with deeply discounted prices. As a marketing professor, I think about how I have urged my students to think about how to deliver great customer value without using low price as an easy out. Many brands built their success on being able to charge price premiums because of exceptional benefits offered. Does the approach of building value through benefits still work in today’s price conscious marketplace? I would say “no”… and “yes.”
A benefits-oriented value proposition is more difficult to leverage today if a product is one that is a discretionary purchase for consumers. For example, a person being more cautious with personal expenditures may conclude that life can go on without Starbucks lattes. Although the consumer appreciates Starbucks’ offerings and perceives value in them, he or she might simply opt to cut back on this non-essential purchase. A second variable that makes a benefits-driven value proposition challenging to leverage is if the product sold is perceived to have many available substitutes. The more a product is viewed as a commodity, the more difficult it is to command price premiums.
There is also a “yes” answer to the question of whether price premiums can still be garnered. If a product is truly exceptional in terms of benefits delivered, a company might sell less of it but still be able to sell at a price premium. Also, if there are few perceived alternatives, there is a greater chance of being able to charge higher prices for a product.
Even companies that still have the ability to charge price premiums must be sensitive to the plight of their customers. If your buyers are hurting, what can you do to add value by making product acquisition easier? Price freeze for extended time periods? Price reduction? More flexible payment options? Being responsive to customers’ needs now could pay dividends later when they are more prosperous.
