A good way to start the business year is to remind ourselves of how unpredictable consumer behavior is. The more we understand about why people purchase what they do, the better we can design our marketing messages. There are 10 basics of buying behavior that can help you make money, in today's post I'll cover five of them, and in Part Two I'll talk about the second set of five.
Understanding why people purchase when they do is no easy task, however. The field of behavioral economics indulges in marketing research and can give us some insight. Here are ten things we know about consumer behavior, and how you can put them to use as a small biz owner.
Tenet One: The need to express one's individuality is a critical factor influencing the choice of brand that someone will buy. What does this mean? Well, if you've got this type of consumer on your hands, you want to offer a product or service that seems unique and very individualized to the person. If you are selling braided leather bracelets, for instance, this person is going to want a leather bracelet that isn't braided, or a colored leather, or a braided bracelet with a customized charm at the end. If you are selling your cleaning services, offering a menu of tasks you do and asking this person to personalize it to their own home will make them feel they are getting a unique “brand.”
Tenet Two: Keep it simple. Too many choices confuse a buyer, and as I've preached for years now, a confused mind does not buy. If you offer 17 different products and services, simplify it down to no more than three. Group your products and services by broad category and let the buyer choose what she most needs. A few weeks ago, I met a concierge service owner and asked about her business. To my horror, she enthusiastically told me “we can do anything you need.” That doesn't help most buyers, who will quickly glaze over and not be able to think about what they need at that particular moment in time. A better answer would be, “We handle shopping for gifts, office organization, and party planning.” The buyer's mind will then sort and land on something she recently needed that falls into one of these large categories. Give a buyer a place to land and you'll do a better job of selling.
Tenet Three: Use decoys when you package your options. Let's say you are offering three different options for house cleaning. Make the middle option the package that you really most want to sell. Most people will select the middle option, not wanting to go with the absolute lowest cost option but then not being willing to spring for the very highest, either. So make the middle option the one you really want to sell, the one that is the most profitable for you. The others are, in essence, decoys.
Another way to use a decoy is to actually use a competitor's product or service up against your own. Point out the added value or benefit that you have, and that your competitor doesn't have. For instance, you may sell a face care product not that different from another product – but yours may offer 20% more product for the money. Or, it may have an added benefit that the “decoy” competition doesn't have.
Tenet Four: You set the anchor for your price. In retail operations, the suggested retail price is the anchor, the price at which you want a buyer to compare your goods with others they may buy. In nonprofit organizations, you set an anchor by suggesting levels of giving in a campaign. It's also possible to re-anchor prices and change a buyer's expectation. One of the most familiar and successful examples of re-anchoring is when Starbucks began. Starbucks re-anchored the price of a cup of coffee much higher than it was in any other coffee establishment by convincing buyers that the coffee and the experience was of much higher value than in a McDonald's or a Dunkin' Donuts.
Tenet Five: How you package what you offer makes a big difference. In marketing research, this phenomena is called sensation transference. It means that buyers will transfer the sensations they have about the packaging of a product or service to the actual item itself. For instance, people will report that the food served on a paper plate doesn't taste as good as the very same food served on a china plate. The “packaging” of the china plate transfers a better sensation. Brandy and perfume manufacturers heavily depend on sensation transference. You've probably heard before that the design of a bottle of perfume is often more expensive than the actual design of the perfume itself. The packaging makes all the difference in the success or failure of that particular scent.
There are many ways you can use packaging to help your sales. If you are a residential developer, packaging may include a fancy entrance to your neighborhood. If you are a coach, packaging might mean the extra little bonuses you offer people to work with you – things like a personalized planner, a private forum, a special event offered at no charge as part of the “package” of the coaching offer.
Think about how you can put these basic tenets to work for you, and in Part Two you'll discover the last five tenets.
(c) Sue Painter