In A Tough Economy, What Do People Want?

The October 13, 2008 issue of TIME Magazine reports…

U.S. Cheap Food Gets a Boost
As the economy tanks, companies that specialize in inexpensive food products see an opportunity:

MAGICALLY DELICIOUS!
General Mills recently announced that cereal sales were up 10% in the last quarter, a boon that the company attributes to more Americans’ eating breakfast at home to save money.

OH, YEAAHH!
Kool-Aid’s most recent TV ad ended with the tagline “Delivering more smiles per gallon.” Second-quarter sales were up, which “speaks to the value that Kool-Aid represents,” says a spokeswoman.

MMM, MMM, GOOD
A new Campbell’s Soup and Kraft Singles marketing campaign is coming soon, with the slogan “Warm hearts without stretching budgets.” Campbell’s stock rose on Sept. 29 as the Dow Jones dropped 778 points.

In addition, supermarket chains such as TESCO in the UK report higher sales due to people opting to eat home rather than go out to restaurants.

But does this then mean that companies should stop producing higher-value items to focus on low-cost ones? The simple answer is, it depends.

To remain successful, businesses must know where they fit in and how to do well in a struggling economy. Not all companies should offer low-cost goods just because it is assumed that people are cutting back on spending. For example, it is quite common for people to turn to entertainment as a form of escape when the economy does poorly. So, a cinema might do well to offer higher-value products that better serve market needs and that will boost their bottom line.

In an economic downturn, businesses often make the mistake of thinking that customers only want lower prices. It’s not as straightforward as that. What people really want these days more than ever is great value. Food-wise, as in the examples above, people are happy to go with lower-cost, low-value products – perhaps because the utility of food is less lasting than entertainment. But, if customers have a premium perception of the utility of your products and/or services, you’ll find that they will still be willing to dole out whatever it takes to make the purchase.

So remember, simply finding ways to cut prices may not be the right answer to boost your company’s bottom line. Make sure you have a keen understanding of customers’ perceptions towards the products/services you provide, then plan strategically to offer them the best value ever.

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