Benjamin Franklin once wrote that “the bitterness of poor quality remains long after the sweetness of low price is forgotten.” I love this quotation because it serves as a reminder that price is just one part of a customer’s experience.
The problem with winning on price (at the expense of quality) relates to both frequency and recency.
- Recency – As time progresses, the point of purchase slips further into the past. Focusing on price neglects the reality that customers experience a product or service over a much longer time span. Recency says that customers will remember their most recent experience more easily than an experience that occurred further in the past. (More here on why creating memorable customer experiences is so important.)
- Frequency – The “buying” phase of the experience happens once but experiencing a product often happens repeatedly. If the price is attractive but the product doesn’t work, companies don’t get the opportunity to sell again.
The problem with Franklin’s statement is that he missed the concept of value. Instead, we might say that “the bruises of low value persist long after the glow of getting a low price.” Here are three important points to consider:
- Winning on price directly impacts one’s ability to deliver quality. This is the exactly the corner Sprint has backed itself into in the mobile phone wars. They are competing on price because they can’t compete on quality. Unless they can rectify the latter quite quickly, their ability to compete at all will continue to diminish over time. Repeatedly offering low prices squeezes margins which undermines Sprint’s ability to deliver high quality. It’s a difficult balancing act.
- When customers talk of price it is essential to shift the discussion to value. This is precisely what Verizon has done in the same wars. They differentiated themselves as a higher price and higher quality alternative. This stance gives them the benefit of looking like a premium brand offering superior value.
- If customers can’t or won’t discuss value, you have just been given a gift – a sign that the customer may be a perfect fit for the competition. Or as Verizon put it, “the customer who is just price-sensitive and does not care about the quality of the network… that’s probably the customer we’re not going to be able to keep.” The reality of course, is that Verizon doesn’t even want them!
The pivot point is that satisfaction derived from price is only temporary and fades into a distant memory. To win battles and the war, companies must focus on building, selling, and delivering value.