Customer Experience Vs. Price – Which Drives More Loyalty?

Does price influence consumer behavior?

Brand loyalty shouldn’t be influenced by price, brand loyalty ensures that there’s demand for a product regardless of changes in price or competing product offerings.

But it’s not always true.

When customers buy a product on a regular basis or in bulk, a drop in the product’s price will result in them buying more of it, and less when the price is on the rise.

Also, when the price is expected to increase, customers will try to purchase more of it before the increase.

But does it mean that they’re more loyal as a result? In this post, we’ll answer this question once and for all.

Prices do not influence emotions

What triggers customer connection to a product or a brand?

There are three answers:

1. The way the product makes them feel.

Customers connect to the intangibles; customers like to imagine themselves using the product before they purchase it. This image in their minds is a powerful emotional connector. With brands, its status, or actually feeling the product like at the Apple stores.

These feelings are images in our mind’s eye that excite us by stirring our imagination.

2. Emotional connection through personalization.

Personalization helps customers connect to the brand or product because they answer a very specific or personal need.

When customers feel that a product was made just for them, or with them in mind, they experience a “someone was thinking about me” moment.

3. Emotional connection via values

Customers feel a strong connection to a brand via the values it represents. Values give customers a purpose, and purpose is one of the strongest motivators there is according to Dan Pink, author of Drive: The surprising truth about what motivates us.

There are brands who mastered the art of connecting to their customer emotionally.

Brands like Apple, Zappos & Patagonia that connect to their customer’s values, personalizing their customer experience and stimulate their customer’s imagination with possibilities.

For customers of these brands, it doesn’t matter if they changed their price tags, they will show support because they’re connected emotionally.

Loyalty can be formed only via emotional connection; the customer experience these brands provide creates that connection and solidifies a positive brand image in their mind.

The purchase decision process

The customer purchase decision process is divided into five stages:

1. Need recognition – the phase in which the customers identify that they need a certain product or service.
How do people recognize that they have a need? Someone tells them about it or they see it in a commercial.

When need recognition is triggered by ads or someone who visited your stores, your customer experience gets an opportunity to shine.

2. Information Search – in this phase, customers are searching for products, where to buy them, how much they cost, etc. If a customer can easily find the product because you invested in search engine marketing for instance, it can improve their customer experience.

At this stage, both customer experience and prices are important, 89% of shoppers do online research before purchasing an item in-store. We’re sure that the other 11% do it somewhere else.

3. Evolution – at this stage, customers soak it all in. Since purchase decisions are mostly emotional, customers are highly influenced by emotional connections they’ve made and price.

4. Purchase – This is where the customers come in with all the information they gathered. Last minute changes in price and customer experience can still influence the customer’s decision at this point.

5. Post-Purchase – Once customers own the product, the only factor that matters is customer experience, in fact, 55% of customers would pay extra to guarantee a better customer experience according to Defaqto research.

That’s why responsiveness, attention and focus are so important in preserving loyalty and providing an excellent post-purchase experience (more about it below).

While customer experience influences all five stages, price influences only two or three. Price, as it seems, doesn’t have that much effect on loyalty, but it does affect the purchase decision process and should be considered.

That’s why companies changed their approach and they’re now treating the five stages above as one experience dubbed the customer journey.

In our previous post on the subject, we explained that focusing on the entire journey helps to interact with the customer on all the above stages, and not on discrete touch-points.

Price and customer experience are a part of the customer journey, they both influence each other and they both influence loyalty.

What causes customer churn, experience or price?

Let’s take the opposite approach, instead of finding what drives more loyalty, let’s find what causes more churn.

According to a study conducted by Accenture, customer experience, not price is the main reason for customer churn. According to the study:

“A majority of respondents (59%) report having switched from at least one provider in the past year due to poor service. In the United States and the United Kingdom, this percent reached a record high (53%) according to our annual survey. Overall, service outweighs price by 20% points as a reason for switching. In some countries, the impact of poor customer service is even greater. In Brazil, for example, 75% of respondents report switching providers due to poor customer service.”

When asked what mattered to them, customers said:

  • The ability to resolve an issue by speaking to a single service representative rather than being forwarded to multiple representatives (43%)
  • Fast resolution of problems (28%)
  • High-quality response (27%)
  • Customer service agent’s manner and approach (23%)
  • Speed of response (22%)

These are all connected to customer experience, not price. To support the above findings, Bain & Company found that customers are four times more likely to go to a competitor if the problem is service-related than price- or product-related.

Customers bump into price and customer experience on their customer journey. While price is perceived as an obstacle, it’s not something that prevents customers from buying a product if they’re emotionally connected to it.

Customer experience, on the other hand, is how the customer connects (and stays connected) to the product emotionally. The better the experience, the more loyal the customer will be.