Grudge Purchases – Value, Discount, and Experience

It’s hard to get consumers fired up about products that are grudge purchases. There may well be a momentary flash of enthusiasm around buying a gym membership or an exercise machine but that vanishes once the cold reality of the situation sets in.

Things like power and water, insurance, petrol, tyres, bus tickets and the like generate no enthusiasm whatsoever, which means they generate zero brand loyalty and the cheapest option on the day will usually be the one chosen. There are websites specifically designed to tell consumers which power company will give them the best rates, and any real cost reduction is enough to promote a switch because electricity is electricity. Petrol also happens to be petrol, no matter who sells it, and the price is the driver, not the brand.

A tyre company may well be the choice of the Formula One world champion, or might even supply the only tyre in the entire field but only fans of the sport will notice or care, the rest will phone around and put on the cheapest tyre in the specific product segment they need for their car. A twenty-five-year-old runabout may well get off-brand Chinese rubber but the driver of a five-year-old Audi will likely be happy with whatever he gets from the name brands, after all, can anyone really pick the differences between a Bridgestone, Pirelli, Dunlop or Yokohama tyre at similar price points?

This buyer apathy makes it tough to market grudge purchases or to get them to stand out from the competition in any meaningful way but it can be done. Discounting isn’t really the answer because having the lowest price is only a matter of willpower – if a competitor is willing to haemorrhage more margin than you are, well then you’ll be hard-pressed to sustain a price war. Adding value is one key concept, improving the shopper experience is another, and if these approaches work in the grudge world, they’ll work in the ‘normal’ world too. 

Take five tyre brands, each with family car offerings at a similar price point. The tyres are all much of a muchness and they’re priced within $20 of each other. However one offers a warranty that replaces the tyre in the event of damage – hitting a pothole, smacking the pavement, or a rogue bit of metal on the motorway are all covered. I know which one I’m grabbing, even if it is at the higher end of that narrow price band because I’m buying peace of mind that might just make future dealings with this grudge purchase less onerous. Yes, I'm getting a free grudge (insurance) with my grudge (tyres) but it's better than the poke in the eye with a sharp stick that I'm getting from the rest of the usual suspects.

Consider five car insurance policies. Anyone who’s called around to get quotes on car insurance knows that the rates are often pretty darn close to each other and the call centre experience is exactly the same regardless of which company you call. However, let’s say one insurer offers free roadside rescue to policyholders. That’s compelling. Or a ten percent cash-back offer at the end of the year if you don’t make a claim – not as compelling perhaps, but still a step up from the three-eighths of nothing you get from the others. 

There are problems with value-added solutions though – first, they cost money, which has to come from somewhere and second, they’re easily copied by the competition. As soon as one insurer offers a cash-back scheme, the rest follow with a similar deal. Offer a free 20-liter chilly bin with your product or service and your opposition might well up the ante with a 36-litre model. This is where improving the customer’s experience makes more sense. 

For example, an insurer who guarantees to answer all inbound calls about claims in under three rings would stand out more than either of the two previous examples because they’re promising to reduce the pain their customers feel when dealing with the stress of a claim. No more “your call matters to us so please continue to hold while we show you how little it actually matters to us” on-hold marathons. That would definitely work for me and even though this option would be pricey and hard to implement, it would be both effective and tough for the competition to replicate in a hurry.

How about a tyre store that offers a premium service with a classy lounge, tasty coffee, piles of good magazines and even a plate of fresh pastries? That would attract a snobby Audi or Volvo driver’s attention in the same way that friends of mine won’t shop at “Pak and Scrap” because it’s just not as good an experience for them compared to their nearby local flash New World. Again, this type of premium service wouldn’t come cheap but it would be perfect for a select market, especially if the high-end tyres they were after cost the same as they do at the opposition down the road.

I find buying casual clothes to be something of a grudge purchase – it’s tough to find stuff that fits well and I’m not a brand junky at all. So why do I shop for casual gear at Farmers? It’s not because of the wide range of products, or the sale prices (although the latter surely has a lot to do with it). It’s because Farmers behaves more like an American company than any other in NZ when it comes to returns. Swapping items, exchanging gifts or getting credit notes is as easy as pie and this enhanced part of the customer experience makes me inclined to keep shopping there because it reduces my potential stress (again, I’m buying peace of mind).

Take any product that doesn’t genuinely have the marketing built into it. Picture it as a grudge purchase and imagine that you have to sell it to people who don’t want to buy it. Then find ways to sell it that don’t rely on the lowest price or the biggest advertising budget – ramp up the value in an innovative way or even better, improve the customer experience and you’ll sell more than the competition who’re just doing the same things they always did. 

That’s bloody obvious I hear you say, surely everyone in marketing looks beyond the basics? Well no, because this approach relies on an awareness of the big picture starting from the time the product and packaging are designed, and running right through to the way the consumer buys and uses the product. Many agencies can’t see the wood for the trees in this regard.

In the next post in this series, I’ll go back to the gym example and look at how that game has changed over the years, and what we as marketers can learn from it.