Price Is No Longer Enough to Motivate Consumers to Act

It is a debate among marketers that has raged since the word “Discount” first found its way into consumer’s vocabulary. Add descriptors like “Sale”, “Reduced”, “Low price leader”, “Special”, “We sell for less”, and “We will not be undersold”, and any observer would come to the conclusion that the lowest price alone determines who gets the sale. Is the buying decision all about price? All things being equal, will the lower price always prevail?

The assumption that consumers are motivated to act based on just one reason more than any other is an over simplification of the decision making process and a premise that a large and diverse market can be moved to action by deploying just one factor. The truth is consumer’s reasons to purchase are as diverse as the market and as complex as the individual making the decision.

According to a recent CEI Survey, 86% of buyers will pay more for products when accompanied by excellent customer service, product quality, or perceived added value.  Based on a buying hierarchy model, first outlined by Windermere Associates, most consumers follow a pattern for action when making a buying decision:

1. Functionality – Where a product or service fills a specific customer need or want that cannot be accomplished by other products or competitors, consumers will not base their decision on price.
2. Reliability – When two or more similar products have the same functionality, consumers will favor the competitor whose product offers the better reliability.
3. Convenience – When the products or services offer the same functionality and identical relative reliability, consumers will choose convenience.
4. Price – When competitors all have similar products or services that offer equal function, reliability and convenience, then price will prevail as the deciding factor for the buying decision.

In addition, a Nielsen’s 2014 Global Survey on Corporate Social Responsibility indicates that 55 percent of global online consumers are willing to pay more for products and services from companies that are committed to positive social and environmental impact. “Consumers around the world are saying loud and clear that a brand’s social purpose is among the factors that influence purchase decisions,” said Amy Fenton, global leader of public development and sustainability at Nielsen.

There will always be those who will pay a higher price for brand status or those who perceive value in brand loyalty. And a generous portion of consumers will always harbor affection for getting the best deal and paying the lowest price. But for the greater number of consumers price alone is no longer enough to motivate them to purchase. In a highly competitive market environment, where marketers are offering added value to their lowest price, buyers are becoming increasingly adept at discerning the difference between real value and low price.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net