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Pitch Exclusive: What works: Low price or value?

Pitch Exclusive: What works: Low price or value?

Author | exchange4media News Service | Tuesday, Jun 21,2011 9:35 AM

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Pitch Exclusive: What works: Low price or value?


“Brands today are not built on pricing”
Ajay Kakar, CMO, Financial Services, Aditya Birla Group:
Today, the consumer is evolved and is gradually becoming part of a global consumer set. He knows what is happening around and he knows the best. He is willing to wait, he is willing to window shop, and he doesn’t want cheap but he wants value.

Did you ever think that an Indian will pay for water? But today he is paying because he can see a perceived value in it. So, he does want value. He does not want cheap.

Meanwhile, discounting is not working perfectly today. It can work for a short term. I agree that the Indian consumer psyche still goes for ‘Value for Money’. Obviously, you can see value for money in Big Bazaar shops but even there, discounts and offers are for short periods. The brands today are not built on these pricing strategies, but on value.

“Discounting should be done cautiously”
Sanjay Tripathy, Head, Marketing, HDFC Life:
Price will remain important for certain categories and certain segments. But what has happened is that price versus value is no longer a straight line equation.

Consumers today are ready to pay a higher price for a better value. Indian customers have become very aspirational. They don’t want to compromise with value and buy a product for a lower price but they are ready to trade up for a better value even if it comes at a higher price.
Today, you need to understand your consumer segment and competition.

Consumers would definitely not like to buy a discounted product if the service delivery is not matching. So, if a brand is giving discount they have to be very careful. This might create a new segment of consumers, which may find the product suddenly affordable.

“Involvement with the product is increasing”
Amit Tiwari, GM, Country Head Media, Philips India:
I think price goes hand in hand with value today. If you are paying a price you see what attributes you are giving. For example, if somebody has to use five attributes out of 100 being offered in a product, he would not like to pay a premium for it. Consumers today also see value into the interface with a consumer product.

More than experimenting with new products, consumers today are much more involved with the product than they used 10 or 15 years back. Involvement has become much high because people have become very savvy in terms of which to buy, where to buy and which particular reason to buy.

If you notice, the number of FM stations is growing but no new manufacturer of radio handset is coming in.

Consumers today see products like phones and other device as an alternative. It is not that consumers today don’t have a choice but then there is alternative available for each and every thing.

Discounts and offers are still very valid depending upon it does not become a normal process altogether. For instance, most of our garment industry is making a scenario of everyday offer. It doesn’t work because consumer is not fool. Most of the food chains offer special offers at weekends. But that is not a discount. It is all about how consumers see value in it. So, definitely you can’t have an umbrella strategy, it depends upon category objective on what’s the goal that you need to achieve.

“Promotions still hold relevance”
Ashutosh Tiwari, EVP, Strategic Marketing, Godrej:
Earlier, the focus was how do I get things cheaper, but today, the consumer is willing to pay more if marketer is willing to give more. For instance, we could have brought the prices of Godrej No. 1 soap to reach out to the mass consumer, but we bundled three soaps together, so we are offering more to the consumer and charging more. So it is more about value of the brand now.

Meanwhile, promotions in a value conscious market like India are very important, however the nature of such offers keeps changing. Promotions are becoming more contextual, strategic and having more thematic overlay (example Godrej Powerplay which has seen over four lakh registrations – powerplay uses cricket as the theme and is set to achieve long-term brand loyalty). So promotions are becoming less tactical, less about ‘give me cheap’.

They are becoming far more about value upgrading, increasing consumption and building deeper emotive connect. McDonald’s Happy Meal – is a brand building promotion with an emotive connect, rather than a transactional promotion.

“Consumers are upgrading themselves”
Soma Ghosh, Director, Marketing, Nivea India:
Consumers are upgrading themselves to premium brands. If you see, year on year, the prices of products are increasing because brands do understand the changing consumer buying behavior. Discounts and offers are generally on products that are in their nascent stages.

In India, the deodorant category is in its nascent stage, therefore there are discounts and offers on this particular product category. However, in the women’s face wash category, there are less number of discounts, because it is an established category. In the soap market as well, consumers are flooded with schemes such as 3+1 because consumers are still price sensitive when it comes to this particular market.

Our Take
Indian marketing warfare has seen a lot of pricing wars in the past. Be it the colas, telecom, DTH or any other category. But things have started changing. The Indian consumer today no more looks at price as a deciding factor in isolation. It has moved from a price driven approach to value driven approach and so has the marketers. The consumers don’t mind paying a few extra dimes if the marketer is able to ensure that the brand offers that extra value. They are upgrading themselves to premium brands and marketers are well aware of the changing consumer buying behavior. People are willing to pay more for something they value and aspire.
Having said that, it is also true that discounts and promotional offers are still in vogue but the nature of the same is changing. It is not about the cheapest at the cost of quality. Price plus quality is the order of the day. Also, if a brand is always on discounts it doesn’t work because consumer is not fool. They are apprehensive buying such brands doubting the quality. The apparel retailer Koutons is a case in point.

It is all about how consumers see value in it. So for marketers the challenge is not about offering the brand/product at the lowest price but about value upgrading, increasing consumption and building deeper emotive connect. McDonald’s happy Meal is a case in point. It is a brand building promotion with an emotive connect, rather than a transactional promotion.

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