New Retail Strategies: Offering a Better Fit for Today’s Careful Consumers (Knowledge @ Wharton)
Many marketers assume that during slow economic times customers will adjust their buying habits and seek out less expensive products. The assumption is based on the notion that during down times customers are forced to reevaluate their needs. This leads them to focus on just the basic or core benefits of products and forego products offering enhanced options. For instance, vacationers may change where they stay when traveling by booking economy hotels, where the core benefits are available (e.g., simple room furniture, self-serve breakfast, small fitness area), instead of more luxurious hotels, where many more benefits are offered (e.g., high-end furniture, full-service restaurant, expanded fitness area). For customers lower priced products offering fewer bells-and-whistles are now more appealing since, in the customers’ mind, they offer more value compared to higher priced product.
But marketers need to remember that customers’ perception of “best value” does not always mean they will choose the lowest priced product. What “best value” means is that customers have compared the benefits offered by different products and have decided they are getting their money’s worth from the one they have chosen.
For marketers, knowing the key benefits sought by customers will often require extensive marketing research. As we note in the Buying Behavior tutorials, the benefits sought by customers can vary from one consumer to another. For instance, one consumer may seek a product offering time saving benefits, such as cutting down on how long it takes for her to prepare a certain food product. Another consumer, seeking a similar type of product, may look for one offering psychological benefits, such as a certain perceived level of status when others view him serving the product.
However, when done right the research may also show that products offering more benefits at a higher price are perceived as providing greater value than products offering fewer benefits at a lower price, even when the economy is not strong.
In this story, we see a clear example of how this works. Coca-Cola has introduced a new vending machine, called Freestyle, that enables customers to choose from over 100 flavor options. Better yet customers can mix and match to make their own flavor. While some may think this extreme (who needs to decide among over 100 beverage choices?), it clearly is empowering customers by giving them choices. Even in a slow economy, Coke expects that many customers will see the Freestyle as offering significant benefits and customers will be willing to spend more to obtain it.
In addition to discussing how vending machines are changing the retailing landscape, the story also looks at how the Internet and globalization are impacting retailing. Overall the story offers good information on trends facing product marketers and the retail industry.
What it does mean is that the price has to be right. To the value-conscious consumer, for example, a classic suit made of cheap fabric would be no more appealing than a trendy outfit made of the finest silk: Neither would last long — the first because of the material, the second because of style. A better fit for today’s careful consumer: a classic suit made well, or a fashionable outfit made affordably.
Is the Freestyle vending machine a fad or will other marketers follow this design by offering customizable products that can be purchased through vending?
Image by Guerrilla Futures/Jason Tester