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Does Price Matter in Competitive Industries?

It is a common notion that price is the main driver of choice in most industriesDoes price matter?  It is a common notion that price is the main driver of choice in most industries. However, the GlassTalk  Survey, which focused on the glazing industry, challenged this preconception.

The GlassTalk Survey examined the link between price and supplier choice in the Windows and Glazing supply chain. Commonly viewed as a very competitive industry the survey uncovered a number of interesting facts about the mechanism for supplier choice in the supply chain.

It would be reasonable to assume that the windows and glazing industry is exceptionally price sensitive. However, a detailed study looking at decision drivers across the supply chain found that price was far from the most important driver of choice, begging the question, what is?

The study unmasked the decision drivers across the industry, offering real insights and actionable conclusions that have relevance in this, and most other, industry business-to-business settings

The Importance of ‘Lowest Price’ The GlassTalk 2011 survey unearthed some surprising result, with price actually ranked fourth out of eight when the glazing industry was asked what was most important for customers.  Most critically for anyone concerned with pricing:

“Fewer than 10% of customers purchase from retailers with ‘lowest price’ as the primary decision driver”

Why is Price Considered so Important?

In practice, price is rarely the main driver of choice – because it is often the last topic in a sales conversation, everyone involved easily remembers it, so inflating the perception of its importance. Manufacturers were asked what they were doing to expand their business, with ‘Offer Lowest Price’ as the first option. Despite this, price was not the significant factor when asking retailers how they choose suppliers. ‘Fair Price’ in fact wast 4th out of 8 factors and ‘Lowest price’ was a distant 8th.

The Most Important Driver of Choice is Trust

GlassTalk Survey disproved the notion that lowest price is the most important part of an offer. Instead, it is more valuable to create a truthful and sincere customer relationship. Once this trust is created, customers are searching for the company that provides the best service and support, product quality, and innovations.

Fair Pricing and the Value of a Good Customer Relationship

An honest and fruitful customer relationship, rather than price, is the most important for success. The GlassTalk 2011 survey showed that ‘fair pricing’ was an important factor. The most successful method is to communicate openly with customers when a price change is going to take effect. This builds a good customer relationship, so that any change in price alone will not necessarily force customers elsewhere.  Likewise, maintaining a price structure that offers fair value demonstrates commitment to a fair customer / supplier relationship.

Proactive Communication to Manage Expectation

The glazing industry is dealing with significant price inflation. The GlassTalk Survey showed that only 50% of participants manage this by communicating to their customers in a proactive manner. They did this by explaining increases in advance to avoid surprises and maintain the best customer relationship. With data showing that 80% of customers buy because of trust and quality of service and support, a good customer relationship is crucial to maintaining sales. Being upfront about inevitable price changes maintains trust and this relationships.

What Else is Important to the Glazing Industry?

Product quality is crucial, with 70% of customers buying because of this. Customers are willing to spend money on something that has good value, and will do a better job than something that is just the lowest price. 60% of customers buy from the glazing industry because of innovations and features provided.

Key Learning Points:

 

– ‘Lowest Price’ is the least important to supplier choice.

– Relationship and Trust are the key drivers of choice.

– ‘Fair Price’ came 4th out of 8 and forms part of building trust.

– Fair Price, Proactive Communication and Great Service are key to customer loyalty.

This case study covers findings and insights highlighted by the GlassTalk Survey conducted by BBPN in support of the GlassTalk. Copyright BBPN Ltd © 20111-13. Findings and insights can be reported with clear reference to BBPN and the GlassTalk Survey.

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