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January 2008
Prices everywhere are
escalating. Produce, dairy, and gasoline prices are just the
tip of the iceberg. This, of course, is not news; rather,
this is life. But how sensitive are consumers to price
elasticity as it relates to brand loyalty? The answer to
that question lies in boundaries that marketers have
attempted to successfully toe for decades. Obviously, many
factors are involved, but this article's focus will be competition as it
relates to the level of consumer loyalty.
Competition within the
category is one such factor. For instance, my all-time
favorite frozen pizza (Stouffer's French Bread) continued
it's price escalation reported in November--rising nearly 14 percent within
weeks. Subsequently, they lost me as a customer after 19 years. Despite
being very loyal to the product for nearly two decades (and
the price increase being only 30 cents), it was cut from the
ole shopping list because there are simply too many other
options to satisfy that late night pizza craving. Jeno's
Pizza Rolls and other frozen pizza and french bread frozen
pizza products all fit the bill quite nicely for less. Would
I still be a loyal Stouffer's customer if that increase
would have been steady with inflation? Yes. But despite the
price increases in the various categories which affects the
manufacture of that product, I saw no double-digit
percentage price movement--at least nothing to justify a 14
percent hike.
Meanwhile, Blockbuster
Video's price increase for their on-line rental program
survived the cut. Blockbuster upped the ante by more than 10
percent, which amounted to a couple of dollars per month. My
loyalty to Blockbuster is shaky at best and would gladly
move to a competitor if one were to make a similar offering.
However, because of a lack of competition based on their
offering, they are still on the list.
There you have it: two
interesting cases in which I've delivered actions quite
opposed to what the laws of consumer loyalty would seemingly
call for. With Stouffer's, one would think that high consumer
loyalty would see me paying 30 cents more per week for a
pizza that I've been loyal to for years. On the reverse
side, one would also think that I would dump Blockbuster
Video, a company that I have been less than satisfied with
in recent months for their price increase. However,
competition is, indeed, a major factor in price elasticity
and the battle for brand loyalty. Yes, I'm a price conscious
consumer and have been since my days of eating on a budget
of $10 per week as a skinny student at the University of
Tennessee. I also greatly value loyalty in the products that
I have built relationships with over the years. Quite
simply, competition is one factor when considering price
elasticity between toeing that line and crossing it.
© BrandVision Marketing.
2008. Matthew Scott Trueblood. All rights reserved.
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