Which quality DO customers pay for?
Prof. dr. Koen Pauwels
Top AI Leader 2024, best marketing academic on the planet, ex-Amazon, IJRM editor-in-chief, vice dean of research at DMSB. Helping people avoid bad choices and make best choices in AI, retail media and marketing.
Marketing is the art and science of creating change (disequilibrium) in markets in such a way that the change benefits the firm and consequently comparatively disadvantages rivals. If a market is in equilibrium, marketers are not doing their job (Dickson 1996, p.102).
Digital transformers such as Amazon exemplify Dickson’s advice to create and understand change in markets. But you don’t need big data to do so – publicly available information on competitive prices, product attributes and sales will do the trick.
Strategy rockstar Rick D’Aveni (author of ‘Hypercompetition’) and I team up to explain and demonstrate the formation, evolution and replacement of price–quality relationships (FormationEvolutionAndReplacementofPriceQualityTradeoffs published in the FT-50 Journal of the Academy of Marketing Science). Using easily available data, we establish the primary quality dimension
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What we often observe is a ‘race to the bottom
But we see it among competitors in today’s environment of online algorithms recommending your products to consumers: “the algorithms do work – to a point. They do find people who are in the market for certain types of products and they dynamically generate adverts that use all the right clickbait-style buzzwords to attract attention and generate clicks. But unless I’m in the mood to buy right there and then, all they can achieve is a desire for a product that any old brand can then take advantage of. The algorithm is essentially commoditizing every single product out there, ensuring that the only differentiator becomes price. Once that happens to your category, it becomes a race to the bottom"
What do you think? Have you seen change in customer quality dimensions disrupt your industry? Were you successful in being the change and driving customer perceptions
Interesting indeed, thanks for sharing. I would bet though that different consumer groups behave differently to changes in the price quality ratio. Some consumer groups are much more focused on the prestige of using (and being seen using) strong brands (in this case strong means high social prestige value). Also for some consumers (more so in emerging markets) price it self is a quality indicator "take the expensive one -it must be better" (this is a literary quote from some qualitative research).
Associate Professor of Marketing at D'Amore-McKim School of Business at Northeastern University
2yI've taught the Dickson framework in my elective for years. (Peter was something of a mentor to me early in my career.) Interesting to see this empirical test of how it might unfold.
International Marketing Manager
2yConjoint analysis models may provide solutions to different combinations of price/quality, although these are applicable to brands that lie towards the low-end of the tangibles/intangibles continuum. The more a category is driven by non-product bound intangible associations, the less plausible the applicability of models that abide by a 'product' rationale. The same holds in image/equity studies where perceived value is portrayed as a composite index, rather than an image attribute in a battery (i.e. VFM- although this is accepted occasionally in academic research instrumentation). This poses challenges in terms of data collection, i.e. relying on conscious brand associations for eliciting value drivers. At least this is what I have been teaching in my curriculum on equity-driven strategic brand management.
Founder @ HealthPoint Research | Marketing
2yI’ve often wondered if novelty/newness is mentally equivalent to quality in some categories. As a category becomes more familiar with product features, the sense of novelty is decreased, perceptions of quality also decreases, and willingness to pay premiums also falls. Example 1: I’m old enough to remember when power windows were a newish feature on cars. Inclusion was, back then, novel and seemingly an indicator of quality. These days it holds no such indication as it has become standard. Example 2: “teeth whitening” ingredients in toothpaste was once a novel addition and demanded a premium. It has also become standard, and now the lines blurred with high price options.
Commercial Strategy Consulting CCO/CMO/CRO/CGO. Champagne aficionado
2yI see this a lot. Firms focused on quality dimensions which have become tablestakes and betting their entire growth strategy on this.