Back in the late 80’s and 90’s discount marts and big box stores raced to the bottom of retail pricing. Still the retail world is still trying to get its bearings. Walmart, the movement’s juggernaut, innovated supply chains, distribution, inventory management, and operational execution to constantly reduce prices, and did it so well that it became a de facto strategy. Retailers across the US, as well as suppliers and manufacturers working to meet the new demands of retailers, had adjust to this race-to-the-bottom, as consumers then came to expect ever decreasing prices.
The race-to-the-bottom only got worse in the 2000’s and 2010’s as Amazon and other online retailers used digital efficiencies and self-serve business models to increase selection while decreasing prices. Once again, discount pricing became a de facto strategy online, and consumers were habituated into expecting lower and lower prices.
Students of business, however, are taught that Discount Pricing is not a long-term business strategy, but rather a medium-term business tactic. You can win over customers in the medium-term by reducing costs and lowering prices, but eventually competitors will be able to copy what you do, and there is a limit to how many expenses you can wring from your operations.
Discount Pricing as a strategy or tactic
Discount Pricing as a strategy or tactic is a debatable point, but what is not debatable is that the end-result of solely competing on price leads to smaller margins and profitability. As companies cut ever more non-essential expenses from their operations to continue competing on price, eventually will run out of those expenses and will have to turn to essential expenses. What are those essential expenses? (i) Value-adding operations and (ii) margins. Cutting value-adding operations turns a business into a bland, vanilla commodity with only price as a source of differentiation and only volume-growth as a success strategy. And cutting margins, well that’s no business at all.
Because of Amazon’s online success, digital commerce to date has focused on web technologies that boost efficiencies. Such as eCarts, aggregated reviews, community support pages, chatbots, and other tools to make self-serve the driving force in eCommerce. ECommerce has thrived under this self-serve paradigm, growing exponentially in the last 20 years. But, like the Big Box trend before it, self-serve eCommerce has led to commoditization, low quality products and services, and increasing customer frustration.
How do you get out of the online race-to-the-bottom?
How is a company that offers Premium Customer Service supposed to compete on the web? Do complex products with fine and detailed sales benefits processed online? How do you extend your luxury brand to the cloud, maintaining that sense of luxury as a point of differentiation?
In other words, how do you get out of the online race-to-the-bottom? The answer, of course, is a platform that reimagines the warmth and dynamism of a face-to-face experience and applies it to the cloud. A platform with instant video communications, showing faces and imparting emotions; a platform with video-and-presentation sharing for maximum impact. A platform with on-the-spot quotes and contract eSigning for instant gratification; and more.
The answer is a platform that allows well-trained representatives to show off their smiles, their knowledge, and their competence to their customers to create a unique, differentiated, and ultimately brandable experience. The answer to the tactic that races prices to the bottom is a strategy that elevates the customer experience to the top. A strategy brought to you by WebToq!
