Will businesses that only focus on low-cost be most successful?
Malcolm says:
Customers, even in strained economic times, don’t just buy based on price. In broad terms they buy based on perceived value but in selecting one supplier over another a different set of factors come into play. It’s not necessarily the best price and best perceived value supplier in the market that is always selected.
The other set of criteria that comes into play is what I call the RET factor. This stands for Relationship, Expertise and Trust. If you already have a very good relationship with an existing supplier you might well want to stay with them even though they are not the lowest cost or provider of the best value. In some cases you may not even have a direct relationship with a potential supplier but you may want a relationship with them. An example of this could be a shop local campaign or a major brand that you want to be associated with such as Apple.
People are prepared to pay for demonstrated or perceived expertise. Would you buy the very cheapest tyres for your son’s car? The top aspect is Trust. Even if a supplier ticked all of the other boxes if you don’t trust them to deliver as promised you will not buy from them.
I believe that the after-crisis economy and the in-crisis economy favours organizations who can demonstrate high perceived RET factors in the minds of their customers. To me the RET factor will be much more important than price in gaining Sales