By John Hennessy
Two-thirds of American consumers are willing to pay more for selected services in exchange for better service, despite lower prices being a primary reason for switching service providers.
That paradoxical conclusion is from a survey of 1,000 U.S. adults conducted by Accenture.
Better service is a motivator for switching for 27%. Yet when asked about factors that would have them switch providers, 24% emphasized lower prices.
According to John Freeland, global managing partner for Accenture's CRM practice, "Clearly, a correlation exists between the services that consumers value and what they're willing to pay. Not all things are equal, and consumers may be willing to make trade-offs for low-value services."
Moderator's Comment: What is service worth in keeping existing and getting other customers to switch to you?
Winning the hearts, minds and wallets of shoppers isn't easy. Lower prices beat better service 3 to 2 as a decision for switching, yet 65% say they are willing to pay more for better services.
One of the keys to the seeming inconsistency in these findings is that consumers are not willing to pay more for services with which they are the least satisfied. It pays to periodically survey your shoppers to understand how they perceive the services you are offering.
So, do you focus your efforts on lowering prices or improving service? Unfortunately, the correct answer is both, "It depends," and "Both."
If your service is lousy, your prices are high and you're not the only game in town, your business cannot sustain the higher prices. You need to get your prices down. You then face the difficult challenge of intelligently improving your service level to justify higher prices. Lower margins during your service rebuilding make this a tough proposition.
If your service is terrific, your prices are low and business is good, consider raising your prices. This is your reward for the services you are offering. It's also a way to generate the margin improvement you need to continue to improve your services. And you've demonstrated that you will wisely spend margin on service improvement.
If your prices are low, your service is good but shoppers are not responding, find out why. What are you doing that you think is valuable but shoppers don't? What do shoppers want and value that you could offer but haven't considered?
If your prices are low and your service is low you may be surviving, but you're probably not having much fun. - John Hennessy - Moderator