The Lowest Price Trap
Playing the Lowest Price War is a Losing Game
Lowest Price means lower margins
The Cheapest Brand. Is it a brand position at all?
Lowest price is costly. Everyone loves a good deal. There are some people who search them out going from store to store, looking for the best deal.
The problem for companies is that these kinds of consumers have very little brand loyalty.
Lowest price shoppers are deal shoppers. These shoppers are hardly ever satisfied.
Kind of obsessive, right?
Lowest Price is Not The Only Reason to Choose
But, if one looks at a big portion of the consumer retail business today. With all its emphasis on lowest price. One would assume these consumers account for a majority of the market.
This assumption, of course, is false, no matter your retail niche.
Many higher end retailers do not view the market this way. Not surprisingly, this is one reason why many of them are successful.
Nordstrom is NEVER lowest price
Nordstrom, for example, promises (and executes) an unparalleled service standard. (Read about brand experience in the retail category)
Grocery chains like Wegmans and Whole Foods understand that grocery shopping should not be strictly utilitarian and that there should be some sense of experience and discovery.
Retail giant Wal-Mart is even playing this game now in the wake of a decline in store traffic for the first time in its history and it has started a robust campaign to cut prices in an effort to remind consumers that it still “Wal-Mart, the home of low prices.”
But lowest price is not a brand that you can own over time. The reason is because your brand promise demands that your competitors play along. They control your brand not you. (You can read a detailed study of the retail market here)
What is significantly lacking with this short-term approach is any long-term viability. Retailers, including grocery, can only cut prices so far and ask for so many concessions from vendors before there is too little margin to support their business.
The logical conclusion for these retailers is to become a commodity.
Retail Brands Becoming a Commodity with the lowest price Brand?
Imagine if prices are the same across the board. And, stores become nothing more than, a “Buy Food Here” or “Get Stuff Here.”
Interestingly, these lowest price competitive retailers have recognized this as well.
For example, drug stores build locations near each other in a battle to be more convenient.
For the consumer products themselves, it’s a constant battle for shelf space.
Buyers use their merchandising savvy to capitalize on shelf space. And, vendors attempt to use their sales savvy to get more of it or simply buy premium positions on the shelf to get that better visibility.
Invest in Your Brand Beyond Lowest Price
The sad fact is that with all of this brain power in the marketing organizations of these retailers there seems to be a failure.
A failure to understand that an investment in their brands protects them from lowest price. And, will give them a buttress against always having to be driven to reduce prices or fight for the most convenient spot.
Even Target, who started a strong push as kind of the “anti-Walmart,” has also returned to selling more “price” than the Target brand.
The traffic problems of retailers are not always price related.
Walmart cut a few national brand names in favor of higher margined “Great Value” brands. Which supposedly had the same quality as the national brand.
Reaction to Walmart’s move
In reaction, consumers complained both in their words and their actions by choosing a different store.
Therefore, Walmart’s traffic decreased last quarter.
Give consumers a reason to choose a particular brand of retailer. Because the store’s brand has a promise to the consumer that is something more than “lowest price.”
Something that tells the consumer, “we understand you” and “we get you, so shop here.”
Without any way to keep them there, consumers will move to the next store for their sale and so on.
Utilize sales to get consumers to experience your brand. Don’t just condition them for the next store’s sale and lowest price.
Once they EXPERIENCE your brand, then live up to your brand’s promise. Do it each and every time they use you. It’s the only way to win.