Service stars: Putting price in perspective
Retailing can become a focus on price very easily. I remember attending a conference years ago where one of the speakers chided the audience of retailers for using the same basic market positioning: “We have stuff, and we sell it for a low price.”
While price/value will always be an important element in purchase decisions, it isn’t the only one. Retailers who find marketing approaches that transcend pure price can enjoy superior sales, higher margins and more loyal customers.
Understanding the target consumers who want more than just low prices is an area that is clearly important to the success of retailers. One attitudinal statement tracked by the Home Improvement Research Institute (HIRI) regularly since 1988 reads: “A home improvement retailer who can give me good product information and advice is more important than one who only has low prices.” Study respondents rate their agreement with this statement on a 1 to 5 scale, where 1 is disagree completely and 5 is agree completely. (The data in this article are based on the top-box ratings of “agree completely.”)
Looking back over the history of this study reveals that overall agreement with this statement has remained fairly constant, but there are meaningful differences in the types of people who strongly relate to this statement. One clear distinction is in how various generations view this issue. As can be seen in the graph on the left, significantly more members of the mature generation agree completely that information and advice are more important than low prices. Since the youngest of this generation is 64, this can indicate that getting information and advice from retailers may become less important versus prices in the future.
But looking at a different set of numbers reveals a more service-oriented outlook. The HIRI study covers 228 specific products used in home improvement. Respondents are grouped for analysis based on how many products they report purchasing. This ranges from none (zero products) to light (one to four products) to medium (five to nine products) to heavy product purchasers (10+). It turns out that as people buy more products, they tend to value information/advice more heavily in relation to low prices. The chart on the right shows this trend. Certainly this heavy purchaser segment is a highly valuable one for retailers to attract.
These attitudes also relate to where people shop. Among those who reported buying at least one product in a hardware store, the number of respondents who said product information/advice was more important than low prices was significantly higher than it was for people who had purchased at least one product at a discount store (25% versus 19%). Since discount retailers tend to offer little in advice on products, it is quite logical that shoppers in that channel would have a different set of attitudes on this type of issue.
What does this mean for retailers today and in the future? While price is clearly an important factor in where consumers shop for their home improvement products, it by no means is the only factor. From other HIRI studies, we know that convenience and product selection are also very important. In-store service can be another important differentiator and has clear appeal to older shoppers and those heavily involved in buying home improvement products. Knowing your target customer and having the right mix of merchandising elements is the key to success. It will get you beyond just having stuff and selling it at a low price.