* Low Prices Are Not Always Your Friend *
What do you care the most?
What is your main consideration when you purchase the products? Quality, brand name, and price are the things that pop up first to most consumers. However, out of many important factors that might affect to the purchase directly, price is the most sensitive factor when you make a real purchase. This article talks about low price strategy is not always good even though consumers think about the price most seriously. The author of the article, Steve McKee made some comments about this phenomenon.
Summary
This article mainly talks about how low price has two side effects when consumers make a purchase. They always ask for low prices but that doesn’t mean that they want the products. They prefer low prices but what they satisfy with is not the low price but the higher price which they believe or perceive that the higher priced product has better quality. McKee points out not only consumer’s sensitivity of price but also their perception of product according to the specific set price. They always evaluate their purchase whether it is worth buying it or not with the price they paid. McKee shares his personal stories not as a columnist but as a consumer for certain product. He experienced this phenomenon as well.
Opinion
As the article claims that “cutting prices might seem reasonable given the state of the economy, but doing so could backfire over the long run,” I expanded my thoughts further to business level strategy where emphasizes cost-leadership and differentiation learning from both marketing and strategic management classes. If you are a consumer who only chases low prices not the quality at all, then this case is not the one for you. However, I think it applies to everyone in a sense of psychology which I think rules the process of purchase. People tend to think the product seems better if they pay a bit more money compared to other products which they might have purchased with lower prices. “Higher prices may lead to lower sales volume in the short term, but they also provide the margins companies need to invest in brand-building or to expand their distribution networks.” Like McKee mentions, if the company is not like ‘Wal-mart’ which consists of ‘everyday low price,’ then positioning low price is very risky in the long term.
Conclusion
As a present consumer and a business-major student, as a future business woman, this price set is as critical as any other strategies. I strongly believe this phenomenon of all price related phenomenon is under psychology. Low price is not always welcomed for the matter of consumers’ satisfaction eventually. Setting higher price sometimes is needed to target consumers open their wallets who psychologically believe it has better quality and of course, you get what you paid for.
Annotation
Steve McKee, "Low Prices Are Not Always Your Friend," BusinessWeek, April 14, 2008
What do you care the most?What is your main consideration when you purchase the products? Quality, brand name, and price are the things that pop up first to most consumers. However, out of many important factors that might affect to the purchase directly, price is the most sensitive factor when you make a real purchase. This article talks about low price strategy is not always good even though consumers think about the price most seriously. The author of the article, Steve McKee made some comments about this phenomenon.
Summary
This article mainly talks about how low price has two side effects when consumers make a purchase. They always ask for low prices but that doesn’t mean that they want the products. They prefer low prices but what they satisfy with is not the low price but the higher price which they believe or perceive that the higher priced product has better quality. McKee points out not only consumer’s sensitivity of price but also their perception of product according to the specific set price. They always evaluate their purchase whether it is worth buying it or not with the price they paid. McKee shares his personal stories not as a columnist but as a consumer for certain product. He experienced this phenomenon as well.
Opinion
As the article claims that “cutting prices might seem reasonable given the state of the economy, but doing so could backfire over the long run,” I expanded my thoughts further to business level strategy where emphasizes cost-leadership and differentiation learning from both marketing and strategic management classes. If you are a consumer who only chases low prices not the quality at all, then this case is not the one for you. However, I think it applies to everyone in a sense of psychology which I think rules the process of purchase. People tend to think the product seems better if they pay a bit more money compared to other products which they might have purchased with lower prices. “Higher prices may lead to lower sales volume in the short term, but they also provide the margins companies need to invest in brand-building or to expand their distribution networks.” Like McKee mentions, if the company is not like ‘Wal-mart’ which consists of ‘everyday low price,’ then positioning low price is very risky in the long term.
Conclusion
As a present consumer and a business-major student, as a future business woman, this price set is as critical as any other strategies. I strongly believe this phenomenon of all price related phenomenon is under psychology. Low price is not always welcomed for the matter of consumers’ satisfaction eventually. Setting higher price sometimes is needed to target consumers open their wallets who psychologically believe it has better quality and of course, you get what you paid for.
Annotation
Steve McKee, "Low Prices Are Not Always Your Friend," BusinessWeek, April 14, 2008
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