If you want to compete with startups like Instacart, Uber and Etsy, there’s one aspect of your product or service that you might want to re-evaluate: your price.
As we revealed in The New Rules of the Collaborative Economy, a report I co-authored with technology strategist Alexandra Samuel, cost savings is a key driver in the growth of the collaborative economy—the economic phenomenon where people get the products and services they need from each other instead of buying them by traditional means.
The report, based on a study by Vision Critical, the leading customer intelligence platform provider, shows that price is a significant driver to the growth of the collaborative economy. We found that a great majority of sharing transactions are at least partly motivated by price. Our study shows that getting a good price is an extremely or very important factor in 68 percent of sharers’ latest sharing transactions.
In fact, we found that more than half of traditional purchasers—those who choose traditional ways of buying instead of using a sharing service—will consider the collaborative economy if it means saving 25 percent. Cost is an even bigger factor among younger customers like millennials and Gen Zs.
For traditional companies that want to win back customers who are now participating in the collaborative economy, price is a critical competitive tactic. If the buying option were less expensive, an overwhelming majority (70 percent) of sharers would consider buying instead.
How to tap the power of price to compete in the collaborative economy
So what does this mean for established brands that are in the crosshairs of the collaborative economy movement? These tactical considerations are a good start:
- Lower your price, if possible. Financial savings is a big motivation for sharers in the collaborative economy, and your customers will switch from sharing to buying if it means more cash in their pockets. Offer other value-added services, such as on-demand services, insurance, and more.
- Reduce cost of ownership via rental. For companies that sell expensive, infrequently used products, enabling access via rental models to your products could be an easy way of participating in the collaborative economy. We’ve shared some real-world examples in our recent webinar.
- Empower your customers to sell back pre-owned goods. Establishing a used goods marketplace could make sense if your customers are already buying or trading your pre-owned products. Not only does this prove product durability, a commitment to the environment, it also provides an opportunity for upsell later.
Watch this Vision Critical webinar for a deeper dive on how to use price as a competitive tactic in the collaborative economy.
Note: A version of this article first appeared on Jeremiah Owyang’s blog.