September 22nd, 2005 by Bob Bly
In his new book ?Libey and Pickering on RFM and Beyond? (MeritDirect Press), Don Libey states: ?I believe price has become the dominant factor in business-to-business and consumer purchasing today.?
He attributes this to four causes:
1. The Wal-Martization of America.
2. The economic slow-down of 1999-2005.
3. The Internet.
4. Online price comparison technologies.
?All things being equal, customers will buy on price,? concludes Libey.
My problem is with the statement ?all things being equal.?
Of course if everything else is the same, and only the price is different, then price is the key factor.
But even in an age where products are increasingly commodities, all things are rarely if ever equal.
For instance, a Nissan Maxima is a Nissan Maxima, regardless of whom you buy it from.
But I might buy my Nissan Maxima from Dealer A instead of Dealer B because they are a mile closer to my home ? or they offer free loaners when my car is in the shop ? or the salesperson was friendly and didn?t pressure me ? or they had the color I wanted in stock ? or a friend raved about their service department ? even though their price was not the lowest.
After all, if you went to three cardiac surgeons for quotes on the triple bypass you need, and the three quoted, respectively, $10,000, $11,000, and $850 ? would you really buy the $850 operation?
Often a low price is a warning sign to the consumer that there?s something wrong with your product ? and as Don knows, in split tests, higher prices often beat lower ones for the same product.
What do you think? Are customers primarily price driven today? Or are other factors more important in making purchase decisions?
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