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Battle Royale: Has low price finally met its match?

Companies and customers are locked in a price battle neither side can win. The stakes are high.

Overview

Customers’ desire for deals has become an obsession. Established companies have responded by slashing prices—and, for many, their brand value. With profit margins squeezed, and new providers popping up to offer low cost products and services, companies have reduced quality and, in some cases, even product safety to make the all-important sale. Risks to consumers, workers and the environment have become very real.

It’s time for companies to re-examine their pricing strategies. They need to understand what their customers notice, value and are willing to pay for and educate customers on the trade-offs of low-cost offerings.

DOWNLOAD BATTLE ROYALE: HAS LOW PRICE FINALLY MET ITS MATCH? [PDF, 384 KB]

Key Findings

Companies have conditioned customers to expect low prices. Customers have demanded companies continue. Low-cost pricing strategies have eroded providers’ differentiation. Accenture’s research shows:

  • Price is the determining purchase factor across a range of areas—from groceries (51 percent) to clothing (50 percent) to professional services (46 percent).

  • Only 28 percent of consumers believe traditional providers offer unique offerings and services.

  • Just 25 percent believe their providers actually offer competitive pricing—despite overwhelming evidence to the contrary.

But, some customers are finally beginning to see the consequences of their low-cost demands:

  • 52 percent admit they’ve played a part in making price more important than quality.

  • 37 percent have regretted buying low-priced items that ultimately “backfired” on them.

  • 61 percent will pay a higher price if they can be assured that the product or service is of higher quality.

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"61 percent of consumers say they will pay a higher price if they can be assured that the product or service is of higher quality."

Recommendations

​To capitalize on customers’ growing recognition that “they get what they pay for,” companies need to:

  • Understand their customers. Use digital tools and analytics to segment customers, customize offers, and price each product or service according to the value delivered.

  • Prioritize value over price. Educate consumers about the implications of low-price offers and, conversely, the benefits of paying more.

  • Deliver differentiating experiences. When pricing is no longer the sole driver of purchasing decisions, every marketing, sales and service interaction is an opportunity to engage with and satisfy customers, stand out from competitors, and strengthen the consumer relationship.

LEARN MORE ABOUT ACCENTURE STRATEGY

Author

Thomas G. Jacobson
Managing Director – Accenture Strategy
Advanced Customer Strategy, Global Pricing and Commercial Strategy Lead

Tom Jacobson is Managing Director—Accenture Strategy, Advanced Customer Strategy, Global Pricing and Commercial Strategy lead. His role focuses on business transformations that include pricing strategy and execution, sales excellence, and customer and market analytics.


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