19 Jul When Cutting Price is the Worst Thing You Could Do
When Cutting Price is the Worst Thing You Could Do
Extensive research into consumer behavior has revealed that there is a huge, relatively untapped consumer group that price-cutting will never reach.
Chris Norton and Ross Honeywill carried out research on 800,000 people in 3 countries over 10 years to discover what they bought, why, and how that changed over time. And they discovered that there are two distinct types of consumer: that’s right, just two.
The first is the Traditionalist, whose only concern is for the deal. Traditionalists won’t get their wallets out unless they feel they are getting the best offer ever, regardless of what they are looking to buy.
The NEOs (New Economic Order) are far more complex. Their reasons for buying are broader and they are the first to try new ideas, places and concepts. They look for things outside of the mainstream, they like to discover things for themselves, they love great design and authenticity and they are willing to pay a premium to get it.
The interesting thing about Traditionalists and NEOs is that they share the same broad demographics – the same ages, incomes and social groups. What makes them different is mindset and with NEOs it is the desire for individual, authentic and unique things. Of those people considered to be big spenders, 93% are NEOs; when the economy crashed, their spending on items they really wanted actually went up.
Apple is a classic NEO purchase – sales of iPads, iPhones and other devices saw a steady increase during the recession, at full price. While Traditionalists were purchasing the cheapest laptops available at Walmart, NEOs were lining up outside uber-designed Apple Stores to buy their latest expensive gadget.
Norton and Honeywill’s research discovered that NEOs account for 77% of consumer spending and almost all of the profit for companies. Isn’t this the kind of customer we should be attracting? Those who value our products, see their uniqueness or authenticity and are willing to pay for it?
Instead of constantly selling on price, shouldn’t we be focusing instead on what makes our products unique? On what makes them better than the dozens of other, discounted versions of similar stuff? Accentuate the unique, authentic and individual aspects of your products and the NEOs will come. Sell on price and you bring the Traditionalist herd. Which customer are you after?
You can watch the video about Chris Norton and Ross Honeywill’s book, “One Hundred Thirteen Million Markets of One” in the link above.