Which way are your customers gravitating?

A customer’s desire for as many product attributes as possible will be balanced by their willingness to pay. For most products there is a wide range of customer sensitivity. At the low-end are price-sensitive customers. They seek out the lowest price and are ready to compromise on many attributes. At the high-end are relatively price-insensitive buyers, provided the product matches all their preferences. Often there is a large mid-value segment of customers. This large middle group seeks a reasonable level of product attributes and will pay a moderate price.

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Pictured is an overview of the distribution of customers by price sensitivity in a typical industry, with the majority of customers in the middle and the distribution narrowing towards the upper and lower ends. Customers will gravitate down towards the price-sensitive end unless they are attracted upwards by the added value of the attributes being offered. e.g. in a commodity and convenience industries, like mobile broadband services, there would be a larger concentration of customers at the bottom. In a superior product industry, like luxury sports cars, there would be a larger concentration of customers at the top.

PROFITABILITY: The price sensitivity of customers is critical to profitability in an industry. Price sensitivity is a pivotal issue for companies to consider, when positioning themselves within an industry and the extent to which they can or should offer more value. Getting this mix right for clients is at the core of HCG’s mission. Is it time for your company to get it right?  If so, give us a call soon on 0407 301 200.