Commodity Price Wars: Using Customer Centric Strategies to Maintain Guest Loyalty
By Steven Pinchuk Lead Customer Intelligence & Revenue Management, IBM | March 06, 2011
The best way to build and maintain guest loyalty during times of commodity price wars is to use Customer Centric Strategies (CCS). The term "commodity" means that the consumer sees all products as the same and the only difference to the consumer is their price. In a commodity market, consumers will usually make their purchase decision based predominately on price.
Increasing Your Value in a Commodity Market
Do you want to keep from becoming a commodity, and settling for the prevailing price of the other products that the consumer sees as a substitute? To avoid being bought as a commodity you can either make your product better than the competition, in the eyes of the consumers, or differentiate yourself to the consumer in another way.
Differentiating your product by building and maintaining guest loyalty using CCS is far less expensive than creating a product that is clearly superior to your competitors' products in all of your customers' minds. Customers want different things, therefore, swaying all of them with a clearly premium product is a complex and very expensive proposition. Remember that it is the customer that decides what a product is worth. Telling your staff what your product is worth and expecting that to influence what customers are willing to pay is at best naïve.
CCS can differentiate your product from the competition by creating true one to one customer loyalty between you and each individual customer. If you can get your product to exist as a "substitute product" in the customer's value proposition decision on what to purchase, then loyalty derived from CCS can tip the scales your way. However, if you are not considered to be good enough to be a "substitute product" by the customer, then loyalty must be very intense and may not sway that customer's decision.
Understanding Your Market