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 PRICING STRATEGY

‘Value-conscious’ consumers may not necessarily buy on price

By our News Team | 2021

While the world’s consumers do want value in these difficult times, that doesn’t mean they buy the lowest-cost item, study finds.

You might assume that the world is awash in frugal buyers. Why wouldn’t it be? With most of the global economy struggling to recover from the Covid-19 crisis, one would expect households to be tightening their budgets.

Indeed, says the Boston Consulting Group (BCG) in the major markets it has studied, in rich and poor nations alike, anywhere from 70% to 90% of consumers identify themselves as ‘value conscious’.

But how thrifty are consumers when faced with an actual buying decision? In particular, how attentive are they to the price tag? And are they always likely to go for the cheapest option, or only under certain circumstances?

To answer these questions, BCG’s Centre for Customer Insights interviewed 40 000 consumers around the world to learn more about what drives their choices at the time of purchase in different markets and categories.

‘Value consciousness’ not main preference

Among the key findings: it could be a serious mistake for marketers to base global pricing strategies on the assumption that ‘value consciousness’ is an overarching preference among consumers.

Indeed, when the researchers asked consumers about their most recent purchase in a wide range of consumer goods and services, a surprisingly small portion actually selected the lowest-priced item.

“We found hardly any correlation between ‘value consciousness’ – in other words, a preference for lower price as an attitude – and consumers’ actual purchasing behaviour. And this was true across virtually every market and demographic group,” the research team said.

Several other valuable insights from research

BCG’s research produced several other valuable insights, including:

  • The proportion of price-sensitive consumers varies widely from one market and product category to the next.
  • In emerging markets, the proportion of price-sensitive consumers isn’t necessarily higher than in wealthy markets.
  • The context in which a product is purchased is one of the most powerful drivers of price sensitivity.

These findings imply that brands shouldn’t define pricing strategies based only on stated consumer mindsets, such as value consciousness. Another key takeaway is that brands need a much more nuanced understanding of how purchasing decisions are made in different markets and categories, as opposed to applying a global strategy.

Consumers trading down in some categories

“As consumers continue to trade down in many product categories in the face of challenging economic times, pricing will figure prominently in the strategic discussions of marketers,” BCG states.

“As our research has shown, however, it is critical that brands gain a nuanced understanding of the motivations that drive price-sensitive purchases in specific markets, categories, and circumstances. Such knowledge can be the key to winning in a market – by being both price competitive and profitable.”

The African-based research for the study was conducted in Nigeria and South Africa. Other emerging markets included Indonesia, India, Mexico and Saudi Arabia.

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    Dr Kin Kariisa

    Group CEO - Next Media

    Dr. Kin Kariisa is an extraordinary force at the helm of Next Media Services, a conglomerate encompassing NBS TV, Nile Post, Sanyuka TV, Next Radio, Salam TV, Next Communication, Next Productions, and an array of other influential enterprises. His dynamic role as Chief Executive Officer exemplifies his unwavering commitment to shaping media, business, and community landscapes.
    With an esteemed academic journey, Dr. Kariisa’s accolades include an Honorary PhD in exemplary community service from the United Graduate College inTexas, an MBA from United States International University in Nairobi, Kenya, a Master’s degree in Computer Engineering from Huazong University in China, and a Bachelor’s degree in Statistics from Makerere University.
    Dr. Kariisa pursued PhD research in Computer Security and Identity Management at Security of Systems Group, Radboud University in Nijmegen, Netherlands. As a dynamic educator, he has shared his expertise as a lecturer of e-Government and Information Security at both Makerere University and Radboud University.

    Dr Kin did his PhD research in Computer Security and Identity Management at Security of Systems Group, Radbond University in Nigmegen, Netherlands. He previously served as a lecturer of e-Government and Information Security at Makerere University in Kampala, Uganda and Radbond University in Netherlands.

    Dr Kin did his postgraduate courses in Strategic Business Management, Strategic Leadership Communication and Strategies for Leading Successful Change Initiatives at Harvard University, Boston USA.

    • Other current and previous roles played by Dr Kin Kariisa:
    • Lecturer of e-Government and Information Security to graduate students at Makerere University, Kampala and Radbond University in the Netherlands
    • Director of Eco Bank Uganda Limited, one of the largest banks in Africa
    • Chairman of the National Association of Broadcasters, an umbrella industry association for all Television, Radio and online broadcasters in Uganda.
    • Chairman of Board of Directors of Nile Hotel International, that owns the leading hotel in Uganda, Kampala Serena Hotel.
    • Chairman of Board of Directors of Soliton Telmec Uganda, the leading telecom company in Optic fibre business managing over 80% of optic fibre in Uganda.