Esp Essay
ESP essay
This is the headline from a just-released report by DoubleClick and the e-tailing group, Inc. What I find most interesting is how this will undoubtedly make headlines among various media outlets without any serious thought into what is going on here.
First and foremost is the question of price and consumer loyalty. The impression given by such a headline is not that most people are price sensitive (we don’t need research to tell us this), but that price is the MOST IMPORTANT factor when deciding which online store to buy from.
Personally, I find this nonsense. It is true that for some people price is the most important factor, but not ALL people. This is simply a matter of segmentation.
I’m always confronted by this question when I work with technology companies, and especially engineers, who tend to think that people are completely rational and thereby purchase based on the lowest price. To confront this mistaken thinking, I ask the company who in their market has the lowest price (which they readily tell me) and then I ask why doesn’t that competitor have 100% market share.
The point is this: You can’t have price be the most important factor in consumer purchase (and loyalty) and at the same time not have the competitor with the lowest price have 100% market share.
Anyway, if the lowest price is the most important factor in consumer loyalty, than you have another problem. All a competitor has to do is come up with an even lower price and consumer loyalty should vaporate (you see, you can’t make someone loyal totally on the basis of something, like price, that can be instantly changed).
Finally, since the study was conducted using an online survey methodology, you run into an additional problem. Consumers are well known to use implicit theories to explain their behavior. So even if they are loyal to a retailer for service, breadth of products and other factors, many will attribute their loyalty to something more easily
This is the headline from a just-released report by DoubleClick and the e-tailing group, Inc. What I find most interesting is how this will undoubtedly make headlines among various media outlets without any serious thought into what is going on here.
First and foremost is the question of price and consumer loyalty. The impression given by such a headline is not that most people are price sensitive (we don’t need research to tell us this), but that price is the MOST IMPORTANT factor when deciding which online store to buy from.
Personally, I find this nonsense. It is true that for some people price is the most important factor, but not ALL people. This is simply a matter of segmentation.
I’m always confronted by this question when I work with technology companies, and especially engineers, who tend to think that people are completely rational and thereby purchase based on the lowest price. To confront this mistaken thinking, I ask the company who in their market has the lowest price (which they readily tell me) and then I ask why doesn’t that competitor have 100% market share.
The point is this: You can’t have price be the most important factor in consumer purchase (and loyalty) and at the same time not have the competitor with the lowest price have 100% market share.
Anyway, if the lowest price is the most important factor in consumer loyalty, than you have another problem. All a competitor has to do is come up with an even lower price and consumer loyalty should vaporate (you see, you can’t make someone loyal totally on the basis of something, like price, that can be instantly changed).
Finally, since the study was conducted using an online survey methodology, you run into an additional problem. Consumers are well known to use implicit theories to explain their behavior. So even if they are loyal to a retailer for service, breadth of products and other factors, many will attribute their loyalty to something more easily