Wednesday, April 8, 2009

Value Trumps Price

According to the 2009 Brand Keys Customer loyalty Engagement Index consumers are not buying on price alone. Brand Keys, a consulting firm polled 26,000 consumers of 441 brands in 63 categories earlier this year. Consumer expectations regarding brand value went up 20 percent. Robert Passikoff, president at Brand Keys, made some interesting observations from the results. Some of the comments he made include:
1. Those brands that aren't perceived as being worth it will fall to the wayside.
2. There is a price-value formula consumers use to calculate brand differences and to decide which brands to buy.
3. Shopper consciousness has shifted from just trying to ferret out deals to looking for brands that provide value.
4. This harkens back to why you build a brand. If you're a commodity item or a category placeholder like the GAP, the only way you get attention is by cutting price which ends up being an evil death spiral.
5. Value was a driver In the coffee category along with service and surroundings, quality and taste, and selection. Dunkin Donuts secured the top spot followed by McDonald's and then Starbucks.
6. Perhaps proving the value over price argument convincingly is the fact that Geico was dethroned by Allstate, which had previously been No.3. Consumers rallied around Allstate's added value combined with its rates. It's not just about lower prices, it is Allstate's Accident Forgiveness program, promising no rate increases despite multiple accidents that resonated with policyholders.

The bottom line is that people naturally integrate buying experiences from all their buying experiences so that they know value. While there is a group that is on the financial edge and thus will always buy the cheapest product or service, when given the option financially, people prefer value to price. The people at Brand Keys have demonstrated that premise once again.

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