Value at a Premium Price: Moving Consumers Away from a View of Cheap as Valuable
Value, as defined by the Marketing textbook, is the relationship of benefits to costs, or what consumers get for what they give. But in consumer situations, value pricing and value options often imply the cheapest offerings. A value menu seems to mean really low prices, rather than referring to the benefits that the menu items provide to consumers. This common misunderstanding may be changing though.
As the slow economic recovery continues to plod along, marketers cannot simply keep their fingers crossed and hope that eventually buyers will be willing to pay more for their products. Instead, as Proctor & Gamble has profitably learned with its Tide Pods, they need to offer more value, which will prompt consumers to give more, because they are getting more. The added convenience of the single-use pods, together with the detergent’s effective cleaning technology and the brand’s high-quality image, have convinced household laundry buyers to pay more per wash—and be happy about their choice.
In contrast with McDonald’s, which continues to expand its dollar menu (reportedly even to items that cost more than $1 to produce, such as its McWraps), Wendy’s has expanded its pricing options. Thus if a fast-food patron wants a smaller item on a particular visit, he or she can purchase the 99 cent version, but if he or she is much hungrier or in the mood for a fresher option on another day, this consumer can jump up to a $1.99 menu item. In a sense, these moves mimic the trends in dollar stores, which quickly realized that limiting themselves to only $1 options also limited the depth of their offerings and made them less appealing to consumers, who sought a great deal, not just a way to get rid of all their single dollar bills.
Another example refers to the automotive industry, where Ford has enjoyed higher revenues from adding its Sync hands-free communication technology. Approximately 50 percent of Ford buyers cite the technology as a primary reason for their purchase choice. The associated price increase at the transaction level is reportedly around $4,000.
Adding more, when the offerings added appeal to consumers in some meaningful way, thus can mean getting more. For modern marketers, this lesson may seem basic, but it is also one that they need to be reminded of regularly.
Source: Maureen Morrison and Matthew Creamer, “How P&G, Ford, and Wendy’s Are Redefining Value,” Advertising Age, April 22, 2013