As we start 2012, it’s wise to consider what’s motivating the average consumer’s purchasing decisions beyond
the current economic conditions or buying season. Whether they are shopping for their new spring wardrobe, or investing in the latest crop of electronic gadgets, the fundamental question to ask is this:
“Are people buying what they love, or what they value?
After further thought, I believe the question transcends time of year or state of the economy. The real question is whether this is the new decision criterion for consumers.
Consumers have so many more choices these days. As we look around the retail world, there is a vast set of choices within any given product category, from smart phones to running shoes. These products also come in a broad array of configuration and colors.
So the question is: “what is it that makes consumers pull the purchasing trigger and open their wallets or click the “buy” button at checkout?”
Do people buy what they love? The instinctive response is, “of course”. If someone doesn’t love a product, then why would they buy it? Look a little closer, however, and you can see many examples of where this does not hold true.
Have you ever known someone who is buying something they don’t like as gift for someone else? They might say to themselves, “I would never buy this for myself, but it is what they want.”
Perhaps you have been in this position yourself, the last time you bought a gift on someone’s wedding registry, for example. Or maybe you were offered a car you would never considering buying for yourself at an incredibly low price. You might be persuaded to buy on the basis that you could always sell it and make a profit. And I know very few female shoppers who’ve been able to pass up a deeply discounted designer handbag at Macy’s. During my many years as a retailer, I have even heard people say, “at that price, I can use it as a rag!”
Of course, these are extreme cases. At the end of the day, most people buy the product they love… as long as they can afford it.
Which brings me to the other end of the spectrum. Do people buy a product they “value”? It seems that each product has an intrinsic value associated with it. Regardless of the item, people seem to set a price in their heads that they are willing to pay. Keep in mind that the price they are willing to pay can change drastically depending upon many external and internal factors, including, but not limited to, employment, status, influence from peers, society at large, timing, needs, wants, or desires. All of these factors, along with the actual product, itself create that subjective sense of value.
When considering that value, we have to ask ourselves: “Would anyone pay more for a product than the value they attribute to it?” Ultimately, I don’t think so. The old adage that everything sells for a price seems to hold. Each person values each product differently, but all of the value is embedded in the price someone is willing to pay for that product.
Do you remember when the iPhone (a product many of us LOVE, myself included) was introduced at $599? Sales fell far short of what Apple expected. Apple eventually lowered the price and had to refund the balance to the early adopters. Sure, people loved the product… but not everyone loved it enough to spend $599.
Having said that, of course the best case is when a great product is offered at the perfect price, which matches customer demand with supply.
Consequently, I believe that in looking at whether someone buys what they value or what they love, the conclusion is that people attribute a higher value to products that they love. Therefore, the expression of their love for a product is related to the price they are willing to pay for it in the marketplace.
But there is one caveat to this love/value rule: it does not take into account the supply side of the equation. Which brings us to our next question:
Can a manufacturer make a product that people love, sell it at a price so that people will value it, and still reach their targeted profit? We will look at this in a future post.
