The economic storm that has swept the world has made one point strikingly obvious: we are entering a new reality. We are already seeing people, who only a few months ago were still keen on making major purchases, putting all, or some, of that cash aside just in case. A few months ago you could walk through a supermarket and see the occasional shopper working out comparative prices with calculator in hand. This behavior is now commonplace.
I see this as a shift to a safe harbor. A breathing space where people evaluate their decisions and take new bearings as they decide what to do next. I believe that what follows will be a new understanding of value.
When I was a kid, price seemed easy. The price of products on the shelf stayed pretty much the same over a long period. When they did increase, they usually crept up slowly. Price changes were something you noticed in the long-term, like when you looked back on the cost of your first car or the price of a movie ticket ten years before. More recently we have seen prices go down as well as up. Anyone who has been buying personal computers over the last 25 years will have been astonished every time they went in to upgrade. Not only at how the price had decreased, but at the increase in value. It is very clear that price and value are distinct from each other. From a consumer’s point of view, price is associated with the number a manufacturer puts on the label and value is what people perceive they are getting.
Here’s how I see it. Value is created in the minds of consumers when they are getting a good deal. Value is created in the hearts of consumers when they feel a deep emotional connection with the service, brand, or product. I believe this happens at both extremes of the market. Already we are seeing some well-off shoppers reluctant to flaunt their wealth at a time when others are hurting. It’s very human in that it is inspired by empathy. There is simply no point in governments telling people that it’s their responsibility to get out there and spend to kick-start the economy when there are such human qualities in play. Simply telling people what to do no longer works. They are in control and they know it. Increasingly they will be on the hunt for value in goods that have both realistic pricing and high quality.
Look out for change in the luxury goods market. We’re already seeing products that attract less, though offer subtle cues to people who have a knowledge of workmanship and connoisseurship. Classy rather than flashy. At the other extreme of the market we come head-to-head with commodification. You can only lower prices so far to improve your price. Shoppers are turned off by something that no one else seems to want. It’s a kind of negative buzz. In medieval times, lepers were issued a bell to warn people of their approach. Some discounts and offers seems to me to be tolling for many products. The race to the bottom (think of bank rates in the U.S. for instance!) too often seems a one way street. The saving grace for successful brands, and for Lovemarks, will be to attract consumers with great service, outstanding products, perfect empathy, and emotional resonance. Will this be easy? No. But it will create a new reality that genuinely looks to consumers for inspiration, and that can only be a huge plus when it comes to creating true value.