Thai Consumers: Pricing Strategies for New Brands and Purchasing Habits for Digital Products

A recent HKTDC study has identified product features for which middle-class Thai consumers are willing to pay extra, offering tips on pricing to businesses attempting to enter the Thai market. The study also reveals the highest prices that middle-class Thai consumers would be willing to pay for some common products and services, and analyses their purchasing habits for digital products. 

Desirable Product Features 

Most businesses could benefit from incremental efforts that add consumer value to their present products. The trick is to determine what elements to add in order to boost the perceived value of the product. Businesses do not want to waste resources adding features that consumers do not care about. Generally, appealing features and benefits of consumer products fall into the categories of either rational or emotional attributes, addressing two basic consumer needs. 

Rational benefits of a product provide the customer with functional attributes, which include comfort, convenience, economy, quality, durability, efficiency, and performance, etc. Think of the technical specifications of a computer, for example. 

Emotional benefits of a product appeal to consumers’ feelings and perceptions rather than logic or reason. These might relate to the consumers' social and psychological needs, which include the pursuit of love, friendship, freedom, happiness, joy, self-esteem, and the avoidance of sorrow, fear, and grief, etc. 

In a recent HKTDC study[1], middle-class Thai consumers were asked if they were willing to pay extra for some product features and benefits and what price would be acceptable. Some of these product features were rational and others were emotional. 

One powerful emotional attribute is the “feel-good” factor when people purchase or use environmentally friendly or biodegradable products. Consumers are increasingly embracing social causes, and seeking products and brands that align with their values. The survey found that 94% of respondents were willing to pay a premium of 10% or more for an environmentally friendly or biodegradable product, while 91% were willing to pay a premium of 10% or more for an animal-friendly product. 

Another emotional attribute is the “self-expression” factor when using a customised product. 80% of respondents are willing to pay a premium of 10% or more for a product customised in a unique way.

Examples of rational features or benefits are energy efficiency, and warranties and after-sales services. Rational features are easy to understand but they can be easily copied so that the competitive advantage may disappear more quickly. Emotional benefits are more abstract and harder to duplicate. Once a strong emotional connection is built with a brand, loyal customers will feel little need to check out the competition. 

Business should not think of this as a choice between one type of benefit or the other in brand strategy. Emotional and rational benefits are inextricably linked. When determining what the rational and emotional attributes are most important to their target customers, businesses have to understand how they are intertwined. 

By city, Bangkok and Chiang Mai respondents seem to display different preference profiles. Bangkok respondents are more willing to pay extra for a product that offers organic ingredients, energy efficiency, environmental protection, and animal-friendliness. The Chiang Mai respondents are more willing to pay extra for a customised product with a unique touch or a product with licensed characters.

According to the HKTDC trade interviews, Hong Kong exporters who attempt to enter the ASEAN generally believe that they cannot compete with local competitors on price. They also feel that they cannot compete with international designer brands on luxury appeal. Most exporters are still adopting cost-based or competition-based pricing and their products are not well differentiated. When a product is commoditised, customers can shop around for the cheapest price. 

Pricing for New Brands 

In order to analyse middle-class Thai consumers’ views on pricing, respondents were asked to indicate the highest prices they would be willing to pay for some common consumer products and services, assuming those products and services are of good quality.

Findings from consumer focus groups indicated that middle-class Thai consumers are willing to try products from a new or less well known brand if they have a good design, useful features, and suit their style. “I follow many shops on Instagram and they are not mainstream brands. I like them because they might offer unique items with exquisite design that cannot be found in the shopping malls,” said a respondent in Bangkok. “I look on social media not to find the cheapest price but to source something different. The types of products where I might choose new brands include apparel, cosmetics and home decorative items.” 

When something does not sell, it may be that the price is too high, but there are other possibilities. The products or services may not have the right features, or may not suit the customers’ lifestyle. The brand values may not resonate with the target audience. 

“I stopped purchasing a brand I used to like because it was convicted of using forced labour. The values, actions, and beliefs of a brand affect its image too. My friends and I tend not to purchase from a company whose core values do not align with ours,” said a 25-year-old respondent. 

The value-based pricing model assumes that a customer is willing to pay a certain price when the perceived value exceeds that cost. To be effective, businesses need to recognise the customers’ emotional drivers – their views and beliefs. This allows businesses to market their brands around the ethics of their target customers that go far beyond demographic and geographic factors. This seems particularly true when reaching out to younger consumers. 

Purchase Habit for Digital Products 

Companies who sell physical products have to account for complexities like shipping and returns, inventory management, packaging, manufacturing costs, and so on to facilitate their sales. 

Digital products, on the other hand, are easier to take to market. A digital asset or piece of software can be reproduced easily and sold repeatedly without manufacturing. Customers can easily access products by downloading the digital files. 

Advancing technology has created a variety of digital products – from music to videos, ebooks to online learning courses, and more. Taking ebooks as an example, readers no longer need to carry around bulky physical copies of their favourite books. They can open an electronic version on their phone or notebook anywhere, anytime. The growing adoption of ebooks presents a unique opportunity for emerging authors. It does not matter if they produce research reports, travel guides, or yoga courses, the digital format allows them to self-publish their works without having to partner with a publisher. 

Digital products cannot be held or touched, but many entrepreneurs build entire businesses around these intangible goods, due to their popularity and ease of distribution. It has never been easier to sell a digital product than today. The challenge is knowing exactly what to sell in a given market. 

The HKTDC consumer survey indicated that the most popular digital products for the Thai middle class over the next three years are movies or videos, e-learning or downloadable courses, e-books, and music. With a computer and some online marketing skills, entrepreneurs can transform their passions, talents, ideas, and expertise into a potential source of revenue.

[1] The HKTDC conducted a consumer survey and four focus groups in the cities of Bangkok and Chiang Mai in April-September 2020. 1,004 Thai consumers aged between 18 and 60, with a monthly household income of THB30,000 (US$930) or above, responded to the survey. The participants in the focus groups were in the same age and income groups, and also had to be internet and mobile phone users, and to have travelled abroad at least once in the past year.