Why Do Consumers Pick Your Product? Is it Your Price?

A key component of branding is to establish value in the mind of the consumer.

When a customer has a gut reaction to and a strong feeling towards a product then price is a secondary consideration. Sometimes price isn't even a consideration at all.

Why then, would your company position your product as a commodity and get into a price fight with your competition?

Do you want to target the type of consumer that is going to drive across town to your competition to save a $1 (transactional) or do you want the type of consumer that will always buy from you without even considering your competition, no matter how low they go (relational)?

Ask Best Buy which consumer they prefer.

A few years ago, Best Buy and Circuit City were in a knock down drag out fight to determine who would be the THE consumer electronics store of choice. Throughout history, there have been companies waging a war like this - Mac vs PC, Nike vs Reebok, Coke vs Pepsi.

Unlike those companies, Best Buy didn't outspend the competition in an attempt to buy the attention of the most consumers. Quite the opposite. They put together a plan to reach less people.

What?! Less people, you might ask.

Yep.

Fewer, but better consumers.

See, what Best Buy did was analyze their current consumers and determine which ones were transactional and which ones were relational. The relational customers provided more profit with less hassle.

The transactional consumers were easily identified. They were the consumers who shopped with coupons and would often make a purchase only to return it because they found one less expensive some where else. The transactional consumers were purged from the database. No more email or direct mail for them.

In addition, the arrangement of the store was changed and the training of the salespeople was modified. The goal was to improve the experience for the relational shopper thereby improving the engagement.

It worked. Best Buy's sales increased and more importantly so did their profit.

And I'm sure you know what happened to Circuit City.

So, do you want to position your company in a price war? Do you want to go after the transactional consumer?

What can you change to better target the relational consumer and stop making it all about the price? How can you change the conversation to focus on value?

Jaci Russo

Sr. Partner/Brand Strategist

The Russo Group