There’s an interesting article in Harvard Business Newsletter about counting the cost of competing on price. Our group has done Customer Satisfaction research for many different companies in many different markets. A common assumption I hear among managers and executives is that their customers will be happy if they simply slash their prices.
The data often prove otherwise.
Customers may say, top of mind, that they’d like lower prices. Who wouldn’t? (Hey, I’m Dutch! Of course I want to pay less!) Nevertheless, when you dig into what really drives customers’ satisfaction and loyalty you will find that they are willing to pay more if they know the result will be a higher quality product or a higher level of service.
Your business can compete on three things: Product Quality, Service Quality or Price. You don’t have to be the cheapest when your customers understand that they will receive superior product, superior service or both.
Bottom line: It pays to do the research and know the mind of your customers.