Price vs value — a conversation over dinner
Price vs value — a conversation over dinner
At a recent dinner party I was overwhelmed by the number of conversations dominated by price.
Sounds funny when I put it in this context, but the reality was there seemed to be a chorus of conversation centred around how many items people had recently purchased on price alone. Online, in-store, classifieds, online auctions and more. So much of the evening was centred around this topic, I found myself being influenced and I’m not sure whether I liked it.
It started early into dinner when a discussion sparked up around how cheaply someone bought a dozen bottles of wine for online. Now, while I sat back and listened to the conversation gain momentum from one person’s recent purchase to another, and putting aside any psychological one-upmanship, it was made clearer to me that not only are we all fixated by price, we’re becoming addicted to the social conversations around it as well.
What struck me though, as the night grew on and people were more comfortable, was how the chat started to move from price to value. As though the earlier price discussions were the ice breaker before people had the confidence to divulge their acquisitions like the new home, new car, new suit and the value they placed on them. Prices were now being left out of the conversation.
Today, if you’re connected and savvy, you can sniff out a bargain from anywhere – choice is at your finger tips. In the old days, your options were limited – see who’s on sale or just suck it up and pay RRP. Recommended retail prices these days mean more to wholesalers, letting retailers know a level which helps them justify their trade price, than to the majority of consumers. I recently asked a post-grad student what RRP meant and their response described a ‘rapid reload protocol’ from an MA15+ war themed video game, but that’s another article in waiting.
Retail and price perception have been changed by definition through the considerable penetration of research and shopping online. Ultimately it’s these influences that are driving or converting more purchases than ever before – having been ingrained into our lives through search and social networks. Search is the big one that really drives suggestion and influence. I am searching for this type of product or brand, but I am open to being convinced otherwise. The simple fact Google dropped their trademark rules around keywords is evidence of the power and profitability in this type of influence.
Next up, talk moved to Australia having a ‘two speed economy’, and as I swirled the wine around in my glass, I thought maybe we’re becoming a nation of ‘two speed consumers’. Fast-paced price reaction on one level and considered value acquisition on another:
I am determined to act now and believe I only have to pay this price.
I am considering and beginning to understand this product and the true value it could add.
When you act on price, you will often accept less and won’t necessarily care if it’s blue or red. When you consider an acquisition you will seek out value attributes and may just as likely defer or never act at all.
So now desert is being served. The conversation has swung around to the share market. One gentleman mentioned the share price, another mentioned growth. One appeared to be speculating and taking calculated risks, the other looking for long term gains and dividends for superannuation.
As my taste buds greeted desert I wondered what has happened to the motivated consumer of today? Conversations like the one I was having reinforce that brands are a part of our lives and we are genuinely in a constant buying cycle. Constantly motivated by price purchases. Besides, when it comes to being motivated these days, we tend to hear more about motivated sellers. Yet isn’t the term ‘motivated seller’ an oxymoron?
This leads me back to today’s consumer. Price driven purchase frequency is on the increase, value driven acquisition potentially on the decrease. Retailers drive volume on price. Acquisition by its nature assumes more time and a process of adding real value. We really do have a veracious appetite for consumption, I confessed as I finished a lemon tart purchased by one guest from her local patisserie which we soon discovered was a relatively new franchise successfully growing across Melbourne and Sydney.
Over coffee someone mentioned the high quality of the barista at a new local café. But within a few minutes responded with an issue over the price. When you buy a simple product often, like coffee from different venues, you dilute the value perception to a price you’re comfortable paying on a regular basis. Insights tell us people will naturally fall somewhere in the middle of the range. Reliable coffee at a reasonable price. The consumption level you’re comfortable with.
So we’re getting ready to go, and the chat starts about the babysitter, inevitably ending with a discussion comparing hourly rates. “We’d better leave now or we’ll be charged another $22”. “We’ll need to stop at an ATM on the way home”. Focus had swung back to price towards the end of the evening after all.
I left well satisfied by my hosts and the fact that price is driving consumers more than ever before. In a country already obsessed with price, we’re now just as obsessed with the social conversations influencing price and consumption daily. So much so, they’re creeping into the sanctity of our real-life social conversations. The hospitality was great, but unfortunately for me the conversation felt more like a newsfeed in a social channel than one you might expect at a dinner party. The subtle nuances and influences were evident at all times.
If you’re reading this Steven and Anna (names have been changed), I trust you’ll appreciate the dinner party was an absolute success on all fronts including the illuminating insight it provided this restless mind.
LinkedIn: Paul Giorgilli, Founder