All those familiar with police dramas like CSI will be familiar with the Prisoner’s Dilemma – “To confess or keep schtum?” The rational thing to do is to confess. The problem is that if both prisoners apply the most rational strategy, they both end up in prison. Price wars follow a similar pattern – the rational thing to do seems to be to discount, regardless of what the rest of the market does (in Game Theory-speak, the “dominant strategy”). The problem though is that, again, if all firms apply the same strategy, they will be worse off than if they had not discounted…

As everyone knows, price wars produce a transfer of value from the industry straight to the consumer. The problem is that this transfer of value comes at a high cost, and there is a question mark over the sustainability of this strategy in the long term. In the end, it depends on your bank balance.

In negotiation we talk about trading Low Cost – High Value, with the result that both parties can end up better off than when they started. So, WHAT ELSE does the consumer value, apart from low prices? What else will bring them through the doors and spend more, rather than less? Isn’t it interesting that the discounters have been operating in the UK for three decades, but their performance has only really taken off in the last few years? Their strategy in relation to Price hasn’t changed, but they started focusing on other sources of value…

This is not to say that Price is not important – it’s just not enough.

There are some good current examples of retailers delivering new sources of value, such as Sainsbury’s trialling slow shopping sessions to help the growing number of elderly customers, or Tesco introducing Same Day Click & Collect in 300 stores. These initiatives are intelligent demonstrations of retailers seeking to add value to customers’ lives, beyond just lowering retail prices.

So… how well do you understand what represents Value to your customer? When was the last time you asked them?