Coming as I do from a a background as a small business owner who manufactured and marketed a tangible custom-made product, I know a thing or two about the way consumers perceive products as commodities: to be bought primarily on lowest-price criteria. I ran a small cabinet-making business in Los Angeles; small meaning basically me, and Los Angeles meaning I was competing against craftsmen from Mexico who usually marketed on the seductive premise of “real cheap price”.
Cabinets are basically just boxes and you can get them at Big Box stores or have them custom-made in L.A. by the Mexican guys pretty cheap. The challenge of doing the business as a job (as in I personally did much of the labor) was that to most customers the end-product was basically the same – a box with a door on it.
I had some success in the business, actually, but exhausted myself in the process. Primarily I would win jobs based on a combination of personal charm, ability to write articulate bids representing intelligence to my mostly college-educated clientele, and a balance between price and speed of delivery. While my portfolio of work no doubt played a role in my landing some jobs, inevitable I would hear something along the lines of “we aren’t looking for a work of art,” – which translated means, “we’re already over budget on our remodel and we’re praying we can get this done right without going broke,”.
I am no stranger therefore to the insidious dual forces of commoditization and marginalization, which affect nearly every business under the sun.
Despite the exciting opportunities presented by the internet, the reality is that with opportunity comes competition… and with competition comes commoditization. This is an understandably confusing and distressing issue to businesspeople, both the experienced in the “old marketplace” and the newcomers, because the challenges of competing in such an open and crowded marketplace are unprecedented in history.
Offline the convenience of your location is a factor. Online it is less so – though a lousy buying process can cause a high rate of “shopping cart abandonment” where people get confused or frustrated and just give up and buy elsewhere. This is one way the tight-ship of a good e-commerce business can have a massive leak.
Price is actually about number 5, on average, on the list of what people look at when making a buying decision. I don’t have the list handy – but quality, service, convenience, confidence in the product – these things are important to people too.
We’ve all had the experience of being unable to distinguish qualitative differences between commodity items.
Have you ever heard the Neil Young song “Piece of Cr@p”? Try to find it if you haven’t.
We may lack the knowledge, for instance, that Chinese wrenches are made from brittle metal while American made ones last and last. So we buy the China wrenches and when put to heavy use they break – then we have to go buy another set. Lesson learned.
Having had that experience, that low price sometimes denotes poor quality we become skeptical of bargain-basement deals.
In fact – low prices can turn-off buyers who like your product but assume that because it’s cheaper it must be inferior.
Perception, in selling, is everything. People want more, they want better, and they want what other people want or have, and they want what other people don’t have so they can feel good about themselves.
A big driver in sales is self-esteem. Buying is empowering. The boost in self-esteem we get from spending money is short-lived and, well, not very authentic, but as a marketer you’ll do better if you embrace the dark side of the issue. People spend money to help themselves to feel better. Happy people don’t spend money – they’re already satisfied, they don’t need to add to it. The unhappy people (and most folks are unhappy about something in their lives) are the ones you sell to.
Today more and more people buy the Experience – they will pay more, sometimes much more, for an experience they perceive to be superior. Buying superior things makes the owners feel superior. It raises their feelings of self-worth. They’re going to engage in this behavior of spending to feel good, sometimes called “retail therapy”, so why not put yourself in place to receive their money when they do?
Fortunes can be made exploiting this factor in how people buy. People buy not only to get the thing itself and what using it does for them – they buy because the product carries embedded perceptions about how owning it furthers their social identity.
Why do you think people buy Lexus? It’s not that different from a Toyota… and parts are much more costly.
But the experience… ah! The experience at a Lexus dealership is undisputably superior to the experience at a Toyota dealership. It’s a luxury experience (notice how “Lexus” shares sounds with “Luxury”) compared with what the riff-raff get at the Toyota shop; the ordinary.
There are many powerful motivators people consider, many of them subconsciously, when they make a buying decision -
- “what will owning this say about me to other people?”
- “how will I feel about owning this brand?”
- “will I regret buying the off-brand even though I’m saving money?”
- “When I give this as a gift will the recipient be impressed?”
Collectively all this stuff contributes to the consumer’s story about himself; his identity. Identitification is what sells Nike shoes. Of course younger consumers are tremendously suceptible to building their own self-images around products they own, brands and labels – but as we grow older and our incomes increase identification is still a massive factor in purchasing decisions. Do you think when a rich man buys a yacht, the brand name on it doesn’t matter to him? Of course it does! Because he may buy the yacht to enjoy boating for himself, the reason he buys a bigger, newer, nicer-looking, more feature-rich one than he really needs is because he wants to show both his peers and himself that he is powerful and abundant. Cars, jewelry, vacations – the luxury end of the market is as rife with selling to consumer’s self-image as any other part. The selling at the high-end is often done with more subtlety, but the psychological principle is the same.
In short: we buy not only because we want the product for what it does, but also because of the way possessing the product bolsters our feelings of self-worth. Furthermore it matters to most people that other’s are impressed, so the perceived ability of the product to impress others is vastly important too.