Thursday, July 06, 2006
A swift and deadly undercut
On a trip to Xian the other weekend I saw a Chinese undercut in action. We were on a complimentary bus from the airport into town. It was a very kosher operation but there's obviously some sort of kick-back scheme ongoing on because the conductor spent her time with her captive audience undermining their choice of hotel in many different ways. It was poetry in motion. The bus takes you to two unspecified city destinations so people have to ask where they should get off and so volunteer their hotel choice innocently. That's the cue for lines as, "do you have an internet booking? oh, those never work!" and "that's so far away from all the sights!" and the hardest hitting of all:
"Oh, you're staying there? Oh, that's so expensive! Are you sure you want to pay so much? There's a much cheaper place we know..."
Stealing away trade with a price cut is an old standard but I particularly like the way she compounds that by implying that your current choice is pure folly.
Many international brands go for the price premium in China as it fits their often better performing product and strong brand image. It also fits wth prevailing trends as the majority of Chinese middle class consumers now say that they are more willing to pay for quality than ever before (thanks CMMS for the data). So it's often confusing and hurtful for marketers when their customers stay thinking highly of them but buy less well thought-of local brands instead. Yes, its price undercutting but its also that little voice of doubt about the validity of a price premium. Brands need strong arguments or prompters about value for money at point of sale to silence those little voices and close the deal.
In the end we changed to their suggested hotel because the location was actually better and yes, it was about half the price of our original choice. On the way out later we hailed a taxi and as we got in the driver exclaimed, "You're not staying there are you? Its far too expensive!" .
You can't win.