I remember when I last went shopping for some new climbing shoes.
As most people do when buying something, especially when it’s your first time and you have no idea what to look for, I did some research on the different types of climbing shoes, what makes each shoe different, what a good shoe should have (and what it shouldn’t), and some other tips and tricks to know whether a shoe fits me and my climbing style.
So, armed with my newfound knowledge, I went to my local sports equipment store to find myself a new pair of shoes.
There were so, so many different shoes, but eventually I narrowed it down to three pairs of shoes that had all the qualities I was looking for (and which I found visually appealing, an importance that can’t be understated, of course)
Out of those three, one had a price way above what I was willing to spend at that time.
So only two remained…
As far as I could tell, the features were the same. They both looked equally nice. They both fit my feet (and my climbing style) equally well. And they were almost identical when it came to the specific attributes that mattered.
The only difference was the price…
One of them was about $50 and the other was $80. (this happened quite a while ago, so the real figures could differ, but the relative difference was more or less the same)
Now, seeing as both shoes were more or less the same, you would think I, or any other rational, thinking human being, would have chosen the $50 pair of shoes and continued with their day, right? Right??
Well, that’s not what happened.
Instead my mind, even though I wasn’t aware of it at the time, went “Huh, why is this one almost half the price of the other one? There must be something wrong with it.”Of course, I had no idea what that something was. And I’m not even sure if there actually was something wrong with it in the first place. But this, seemingly odd, behavior isn’t all that weird when you look at how people make buying decisions.
In fact, that’s how most, if not all, people think—or at least in circumstances where money isn’t a major issue and people actually have a choice to make instead of being forced into one.
This is why merely “competing on price” isn’t a viable strategy.
There are, of course, many reasons for that. One of them is that, as Dan Kennedy said, “There’s no strategic advantage to being the second cheapest…”, and I can guarantee you there are always dozens of others who will compete with you to be the cheapest of all, resulting in an arms race to going out out business.
Another, which neatly ties up my shopping adventure, is that, to the consumer, price is an indicator of quality and people simply won’t trust something that’s cheap… unless there’s a narrative around it as to where the cost savings are made.
That’s why Ikea can afford to be “cheap”, you have to build the damn thing yourself, after all.
Funnily enough, that’s why Ryanair not only has to be cheap, it has to look and sound cheap as well. If they acted like any other normal airline, people wouldn’t trust their prices and decide not to fly with them. Instead, Ryanair does everything it can to uphold its reputation of “cheapness” so there’s a surrounding narrative as to why tickets are so cheap compared to other airlines.
Moral of the story: if you want to compete on price, you better create a narrative as to why that’s the case. Otherwise, just increase your prices, increase the perceived quality, and call it a day.
Speaking of quality.
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