From cost-effectiveness to quality-price ratio: How can brands win the favor of consumers?

Nowadays, consumers are becoming more cautious, from cost-effectiveness to quality-price ratio. So, how can brands win the favor of consumers? What is the difference between quality-price ratio and the commonly mentioned cost-effectiveness?

Today, consumers are becoming more and more wise and cautious when consuming, and rational consumption has become a trend that cannot be ignored.

This trend is clearly reflected on social media platforms. According to a report by QuestMobile, rational consumption received a lot of discussion on Xiaohongshu in 2023, with more than 760,000 related notes recorded in October 2023 alone. Consumers share their shopping experiences of careful budgeting and comparison shopping.

Consumers consume rationally, but they do not blindly pursue low prices.

According to the same report, consumers are now more concerned about product quality, price, brand and experience, with attention rates reaching 60.5%, 60.1%, 59.8% and 34.2% respectively, which is an increase compared to 2022.

This shows that consumers pay more attention to the comprehensive value of products when shopping and are willing to pay for high-quality products and services.

The concept of quality-price ratio has emerged in recent years and is closely related to this background.

The quality-price ratio refers to the ratio of the quality of a product or service to its price. In simple terms, it is the quality of the product divided by its price to get a value. The larger the value, the higher the quality-price ratio.

According to the 2023 Consumption Trend Observation by China Business Network, "quality-price ratio" is becoming a new consumption concept recognized and followed by a considerable number of consumers. They do not consume on impulse, reject unreasonable premiums, and do not like low-priced consumption without quality. They hope to get better products or services with less money and pursue a real consumption experience.

So what is the difference between quality-price ratio and the commonly mentioned cost-effectiveness, and what does it mean to the brand?

01 What is the difference between quality-price ratio and cost-effectiveness?

As mentioned above, the quality-price ratio is the ratio of product quality to price. Its core is "quality", that is, how high the quality of the product consumers get within a certain price range.

The price-performance ratio is the ratio of a product's performance to its price. Its core is "performance", that is, how much functions and performance the product can provide within a certain price range.

For example, buying a Xiaomi phone is about quality-price ratio. Although the price is higher, it is not as expensive as Apple and the quality is also good. Buying a Redmi phone is about cost-effectiveness. The price is much lower than Xiaomi, but it has all the necessary performance. If you want to spend less money to buy a feature-rich phone.

From the perspective of market positioning, products with good quality and good price are usually positioned in the mid-range market, and their main target group is the middle class. Therefore, although the pricing of such products is not as high as that of the high-end market, it is definitely not cheap. In many developed regions, products with good quality and good price occupy the largest market share.

In contrast, cost-effective products are more targeted at the mass market, which includes a large number of low-income people, so their prices are lower.

From a functional perspective, products with a good quality-price ratio are often more powerful and comprehensive in terms of functions, while products with a good cost-effectiveness focus more on practicality.

Taking Xiaomi and Redmi as examples, Xiaomi phones are usually equipped with high-end processors, better cameras and more innovative technologies, meeting consumers' demand for high quality.

Although the core performance of the Redmi phone can meet daily usage needs, it is suitable for consumers who want more functions within a limited budget.

Products with a better price-quality ratio also tend to perform better in terms of design and after-sales service.

Xiaomi phones are usually more sophisticated in design, use higher-quality materials, and provide more comprehensive after-sales service and support. In contrast, Redmi phones are more cost-effective in design.

Quality-price ratio and cost-effectiveness are two different markets, however, the boundary between the two is not absolute. In some cases, the two may penetrate each other.

In theory, quality-price ratio has the largest population base, but it is not without risks. Once the market changes and the wealth of the middle class shrinks significantly, cost-effective products may erode the market share of quality-price ratio products. For example, the rise of Pinduoduo is related to this.

In order to gain access to the lower-tier markets, quality-price ratio brands may also launch lower-priced sub-brands or product lines, which will have an impact on cost-effective brands. For example, when Xiaomi launched the Redmi mobile phone, it had a huge impact on the copycat phone market at the time.

The following are the main differences between quality-price ratio and cost-effective products:

02 Which brands emphasize quality-price ratio?

Price-quality ratio is a relatively new concept. Although many brands can be classified as price-quality ratio brands, there are not many brands that publicly position themselves as price-quality ratio brands. After observation, I found two brands, one is the platform brand Douyin e-commerce, and the other is the mobile phone brand Realme. We can see the trend from them.

Douyin e-commerce upgraded its positioning to "super heartbeat quality-price ratio" through its mall Super Brand Day event. The action is to cooperate with multiple brands to provide a competitive price mechanism while ensuring the quality of the products.

For example, in cooperation with brands such as Tineco, Anessa, and Printin, Douyin Mall launched hundreds of high-quality and cost-effective products on Super Brand Day, and through the micro-variety show "Super Heartbeat Quality and Price Ratio" and other forms, it truly presented the price mechanism negotiation process, allowing consumers to buy high-quality products at affordable prices.

The reason why Douyin e-commerce emphasizes quality-price ratio is that in the current fiercely competitive environment of e-commerce platforms, several major e-commerce platforms such as Pinduoduo, Taobao, JD.com, and Douyin are all engaged in fierce price competition, forming a "bloodbath of prices."

In this context, relying solely on a low-price strategy is no longer enough to create a differentiated competitive advantage, and in the long run, this strategy will also bring a series of problems.

From the perspective of merchants, the continuous price war has squeezed their profit margins and affected their sustainable development. Some merchants have sacrificed product quality to reduce costs, which has affected consumers' shopping experience and trust, and ultimately affected the platform's reputation.

From the consumer's perspective, over-emphasizing low prices ignores the needs of a group of consumers who demand quality of life, and may easily cause them to turn to other platforms.

Douyin e-commerce proposed the concept of quality-price ratio, attempting to achieve differentiated competition by providing high-quality, cost-effective products, enhance the overall market competitiveness of the platform, and prevent users from blindly pursuing low prices.

Realme was initially positioned as a mobile phone brand with high cost-effectiveness, similar to the positioning of Redmi, but this year it began to emphasize cost-effectiveness.

In this regard, it places particular emphasis on the combination of design and quality. The most eye-catching is the Master Series launched in collaboration with internationally renowned industrial design master Naoto Fukasawa. The products in this series have reached the flagship level in terms of performance and also have their own aesthetic concepts in design.

For example, the Realme GT Master series, inspired by its suitcase design, provides an excellent user experience while also achieving a certain improvement in price.

realme’s emphasis on quality and price is also related to the current market environment.

The cost-effective mobile phone market has now become a red ocean with fierce competition. The profit margins of mobile phones are getting lower and lower. It is becoming increasingly difficult to make money by maintaining low prices. In the long run, brands will become losers.

In order to stand out in this environment, realme chose to move up to the mid-range market and strive for a higher market share and profit margin by improving product quality and brand value, which will also help realme break away from the homogeneous competition in the low-end market.

03 What inspiration can quality-price ratio provide to brands?

Quality-price ratio is a new concept and a trend. Facing this trend, what should brands do? Here are some of my suggestions.

1. Determine whether the brand is suitable for the quality-price ratio?

Quality-price ratio is one of the current consumer trends, but it is not the only one. When considering whether to use quality-price ratio as a brand positioning, brands need to first clarify their own market positioning.

If the brand positioning is luxury and high-end, then the quality-price ratio is not a suitable positioning strategy. High-end brands rely more on brand premiums, and consumers are willing to pay a higher price for the brand's symbolic meaning, design sense and uniqueness, rather than just the quality of the product. If the quality-price ratio is overemphasized, it may lower the brand image.

For brands focusing on the low-end market, emphasizing quality-price ratio may lead to a situation where the brand is "unworthy of the position", that is, the brand cannot actually provide products that match the quality-price ratio it claims, and may eventually face backlash from consumers and negative feedback from the market.

The quality-price ratio is mainly aimed at the middle-class market, and the target group is consumers who pursue quality and quality life. These consumers hope to buy high-quality products at a reasonable price. Therefore, if the brand is positioned in the mid-end market, the quality-price ratio is an effective competitive strategy.

Take Xiaomi as an example. It owns two mobile phone brands, Xiaomi and Hongmi. If Xiaomi plans to expand into the high-end market, such as competing with Huawei's flagship products, then its high-end product line may no longer be suitable for emphasizing quality-price ratio.

High-end products need to emphasize brand value, technological innovation and unique experience, rather than just quality and price.

For the Redmi brand, its main task is to consolidate the mass market and provide consumers with cost-effective products. The Redmi brand exists to satisfy a wider range of consumer groups, especially those who are more price-sensitive. Therefore, the Redmi brand should focus on cost-effectiveness to ensure that users can get products with good performance within a limited budget.

2. Improve product quality and experience

No matter what group of people the brand targets, it is always a good idea to improve product quality and brand experience.

Improving product quality and experience is the core means to achieve quality-price ratio, which can not only cope with different market environments, but also enhance the brand's market competitiveness.

In the era of consumption upgrading, consumers will pay more and more attention to product quality and user experience. They are willing to pay higher prices for higher quality products. By improving product quality and experience, brands can not only keep up with the market rhythm and meet user expectations, but also enhance brand value.

Huang Taiji Pancake was eliminated from the market back then because it failed to do this well.

In the era of consumption downgrade, although the overall consumption level has declined, consumers still hope to purchase high-quality products within a limited budget.

By improving product quality and experience and adjusting prices appropriately, brands can make middle-tier consumers feel that they are getting great value for money and build a good reputation. This will not only help brands gain market share in the short term, but also help them gain a favorable position when the economy recovers.

3. Continue to enhance brand power and respond to market changes

Product sales are not just about selling features, but also about selling brands. Brands represent image, quality and trust, and are the main source of product premium sales.

By continuously improving product quality and effective brand building and communication, the brand image will become better and better, which can not only enhance the trust of existing consumers, but also attract new potential customers.

The market is changing dynamically, consumption downgrade will not last forever, and the economy will always improve. By preparing in advance by enhancing brand power, brands will be able to quickly move up when the market recovers and attract a wider user group.

Take Xiaomi as an example. It initially sold smartphones at a price of 1,999 yuan and was called a "diaosi phone" by the market. However, through continuous research and development to improve software and hardware performance, and through long-term marketing activities to enhance brand power, Xiaomi successfully achieved brand upward exploration and gradually entered the mid-to-high-end market.

In the era of consumption downgrade, cost performance is king. The quality-price ratio cannot be regarded as consumption upgrade, but only as an upgrade of cost performance.

As an emerging consumer trend, the quality-price ratio reflects the market's pursuit of high-quality life and consumers' consideration of price rationality. However, this does not mean that all brands should blindly follow this trend. Brands should deeply understand the needs of target consumers based on their own market positioning and provide products and services that match them.