Many business experts have hailed the arrival of a changing marketplace, one with a great emphasis on value and even a new value-conscious consumer.
But more than a little debate surrounds the questions of what really constitutes value and whether the so-called value-driven consumer actually exists.
Over the years, some have argued that today’s consumer is no more value driven than Cro-Magnon man was or space colonists are likely to be. In other words, the erosion of brand equity is nothing more or less than bad marketing.
Does value equal price?
Much of today’s ineffective marketing stems from confusion between the words “value” and “price.”
Every consumer purchase can be seen as an equation in which value equals what you get divided by what you pay – and too many people mistakenly use “value” to describe the denominator of the equation rather than the result. This leads to tactics like price reductions and promotional discounts, “value” strategies that can actually erode a brand’s value.
On the other hand, by building up the “what you get” part of the equation rather than reducing the “what you pay” portion, smart marketers know they can get a stronger response over time.
How does prestige factor in?
Admittedly it has become fashionable to consumers to demonstrate smart buying.
Yet prestige remains an important part of the value equation. In marketing terms, it’s senseless to cut price and quality in order to maintain margins. Smart marketers maintain prestige imagery as part of their brand equity, while shifting their marketing emphasis to communicate the quality of their brand in more tangible terms.
Economists who think value equals price miss the point. In many cases, price is a secondary, sometimes limiting factor rather than the essence of value.
For example, while builders are notoriously price conscious, this does not keep a high-priced entry-door supplier from being the market leaders. A builder may actually consider the line low-priced because its decorative glass enhances the look of a home so much that its selling price is boosted far beyond the extra cost of the door.
Who defines quality?
Then there is the manufacturer’s mistake: defining value as quality. Wrong again.
In a nutshell, value to a consumer is the satisfaction of a desire, not quality as defined by the manufacturer. What manufacturers consider a quality product may be irrelevant to the consumer, nothing but waste and useless expense.
Manufacturers may see this as irrational, but business common sense says there are no irrational consumers; they all behave rationally in terms of their own priorities.
There is nothing esoteric about this concept. Value merely means different things to different people at different times.
For more posts on value from Channel Instincts, see Are You Ready For A Dog Eat Dog World? and Are You Your Customer’s Biggest Fan?
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Photo credit: StuartPilbrow via Flickr
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