People shop Wal-Mart. Many believe that the reason people shop at Wal-Mart
is because they have very low prices. While,
lower prices may motivate many people, Wal-Mart founder, Sam Walton had ten
rules for his business and none of them include having the lowest prices. Sam Walton valued things like exceeding customer
expectations and appreciating both suppliers as well as employees.
People do love
value but value doesn’t mean cheap. Value is most often defined as the
correlation between quality and price. Most people have had the experience of buying
something at an incredibly low price only to find that the product
underperformed or often failed completely.
Remember that
when it comes to price, price is more often considered the best indicator of
quality.
Studies have
shown, including a popular study at the University of Michigan, that
when consumers have some uncertainty concerning a product's quality, the consumer
often assumes that a higher product price indicates a higher level of quality. Even more importantly, consumers trust brands
and will pay more for products and services that are associated with brands
that are well known and trusted.
When consumers do
not have all the available information on a product, a significant input into
their evaluation is price. A high price may indicate either bad value or good
quality, whereas a low price may indicate either a good value or poor quality. Notice that with a higher price, poor quality
is typically not one of the expected outcomes.
