By Brian H Meredith
From the NZBusiness Magazine"Marketing
Maestro" Archive.
First published Februrary 2007
It is sometimes said that we kiwis know the price of everything and the value of nothing.
This surely isn’t true on many dimensions – we value our world renowned environment and are happy to invest in its protection and development. We value our unique lifestyle and proclaim its life giving benefits to anyone who will listen (and long may that continue). We value our national sports teams (or at least we do just as long as they are winning) and don’t have any qualms about stumping up big bucks to go see them perform on the world stage.
Increasingly, we are spending up large on our cars, our homes (and many of us have more than one of those), our nutrition (or, more accurately, our visits to cafes, bars & restaurants), our holidays – in fact, for those things which we do value, we will spend what it takes in order for value to accrue to us – nice cars, comfortable and/or stylish homes, good food & beverage and relaxing, adventurous or mind enriching holidays.
It is, therefore, paradoxical that the concept of value seems so poorly understood by so many marketers in this country. The term “value proposition” which should be central to any discussion on marketing strategy, is rarely heard. What does it mean? One dictionary definition for value is “Worth in usefulness or importance to the possessor; utility or merit.” One definition of proposition is “the act of offering” or “that which is proposed or offered.”
A well crafted value proposition should define, precisely, just what the unique combination of features & benefits being offered to an equally carefully crafted target market or segments therein. Typically, this recipe of features & benefits which combine to offer the value proposition would comprise some combination of quality, price, delivery, service, design, functionality, warranty, etc. etc.
Customers purchasing a car will be considering price, performance, design, cost of ownership, warranty etc. and will consider and evaluate these characteristics on a combination of both the objective and emotional dimensions.
Customers purchasing a fragrance will be considering aroma, colour, packaging, price and their relationship with the brand (utility, aspirational etc) Once again, objective and emotional dimensions will be consciously and sub consciously considered.
Even bread will be purchased on dimensions that include the objective dimensions (freshness, taste, price etc) and the emotional dimensions (relationship with and perception of the brand).
Given the complexity of these decision making processes combined with the easily understood reality that that consumers purchase products & services on a variety of both objective and emotional dimensions, why do so many marketers retreat to “price” as the sole discriminator for their products versus those of the competition?
Why is the “Choose me – I am cheaper” proposition so prevalent in so many sectors of New Zealand business?
Consumers are assaulted by the price proposition every hour of every day “Never mind the quality. Feel the width!” Retailers are the worst offenders by far but manufacturers and distributors are also to blame – after all, retailers are the front line of consumer marketing and, left alone and in the absence of any other considerations, will revert to the price proposition in order, in their mind, to compete with the guy across the street. When this happens it is often a failure of the manufacturer to have developed a compelling value proposition for their product and to support the retailer in driving sales through deploying that proposition in an effective manner.
The simple truth is that it is so much easier to trade on price than it is to truly understand, segment and develop compelling value propositions to, target markets and the segments therein (where the nature of the proposition will often need to vary form segment to segment – not everyone purchases their BMW 335i coupe for the same reasons).
Understanding customers buying behaviour and the needs & wants that underly it is hard work. Knocking 10% of the price is so much easier.
Designing marcoms campaigns that offer “50% of absolutely everything” and then hiring some moronic voice to shout it out on televison & radio is so much easier than taking a carefully crafted value propositon and creating marcoms collateral that makes that propositon come alive in a complelling way.
Seeing results from this week’s price cut is so much easier than investing in the longer term develoment of sophisticated, multi-dimensional marcoms strategies that position a brand in the consumer’s mind and leverage that position to develop product & service offerings that deliver the value proposition that reflects the diagnosed needs & wants of that consumer.
Research shows there are very few products & services that customers purchase on the basis of price alone or, even, where price is the dominant factor. Continuing to mindlessley hammer the price proposition is, therefore, at best, naïve and, at worst, a fundamental failure of marketing thinking.
In the short term, the battle for the contents of the customer’s purse can be fought on price. In the long term, however, success is only achieved through the battle for the hearts & minds of customers which is won when you can demonstrate an accurate understanding of their purchasing behaviors, the needs & wants that underlie them and you can then design your own offering/s to match that.
Win that battle and their purses will follow.
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