Digital technologies claim to make selling things easier than ever. But what if you offer a product or service that nobody is really excited about? Partner and pricing expert Maximilian Biesenbach looks at the different triggers encouraging us to buy and shares a simple way to understand customer needs.
Why do we do the things we do, or buy the things we buy? There are a wide range of complicated answers, but most of our activities in fact have a very simple explanation: we want to feel good. People are in constant pursuit of more and are always looking to gain value. We seek out positive experiences, and avoid negative ones.
That’s why companies today are investing a lot of time, effort, and resources into improving the customer experience. For business to succeed, it’s crucial to keep existing customers happy and to attract new ones. In this digital age where the internet allows customer feedback and opinions to rapidly spread around the world, even one happy customer has the power to influence millions of people. And interestingly, our latest global study on the “rating economy” shows that the biggest trigger for giving ratings is a very positive experience.
How do you create a positive experience, especially when your product or service isn’t all that exciting to customers? Simon-Kucher recently developed a quick and easy method for identifying where and how value can be created by focusing on just three key factors that affect buying decisions.
Completing an activity comes down to several decision-making questions:
- Do I have to do it? (Is the activity compulsory or optional?)
- Do I have the means to do it? (Is the activity accessible or inaccessible?)
- Do I like to do it? (Is the activity enjoyable or unenjoyable?)
In the perfect situation, you offer a product or service that ticks all of the boxes: people need to buy it, they can buy it, and they want to buy it. But even two factors are enough to trigger a purchase. I like going to the movies and the tickets are within my price range. So it’s something I happily pay for on a regular basis. However, there are other products with barriers, such as a lack of accessibility, which mean I couldn’t buy things even if I wanted to. For example, most people would enjoy owning a Lamborghini, but few can afford it.
Then there are the products and services I simply don’t enjoy. You’ll have a hard job convincing me to part with my hard earned cash to pay for them, and I will even go as far as paying to avoid some experiences.
So by better understanding the difference between what customers enjoy, need, and afford, companies can shift activities from one category to another to generate value. Here are a few immediate action points where understanding decision-making processes can help you to maximize the value you offer to customers.
1. Remove the barriers to purchase
Shift products from category 1 to 2
One way to generate value and increase the likelihood of a purchase is to remove barriers surrounding accessibility, such as price. The average customer shouldn’t expect luxuries like a private jet to fall into their price range anytime soon. However, there are many products where adding a lower cost alternative to the assortment would be just the right move to nudge customers into the second category. While I might not be able to justify such a high investment in the Lamborghini I have my eye on, I might be more willing to go a step down. For example, Porsche include more accessible options in their range of vehicles. Drivers who are on the fence with an extravagant purchase like the Cayenne have the option to opt for the Macan, which might be more suited to their practical everyday needs.
Many industries have been doing this for some time now. Let’s look at some examples from the media industry. Netflix captures the budgets of a wide range of customers with its three plans (Basic, Standard, & Premium). Spotify’s Family Plan reduces the cost of its product for individual users by allowing shared access to members of the same household, and some online newspapers are allowing access to articles only on certain days of the week to increase conversion and expand accessibility for a diverse customer base. In the digital world, nobody is out of bounds.
2. Solve the pain points
Shift products from category 4 to 2
Even with all of the advanced technology we have today, many unenjoyable activities are still part of every daily life and can’t be avoided with a swipe or a click. No, it’s not much fun to visit the dentist, but the majority of us still attend our annual checkups because skipping could lead to illness or suffering. Some tasks are just necessary evils. But do they really have to be evil after all?
No product or service is immune to the power of a good customer experience. For example, one of the annoying aspects of going out to dinner is waiting in a telephone line while trying to make a reservation. Google Duplex is a tool currently under development that aims to solve this problem. By calling businesses on behalf of customers to check availability and make bookings, this service frees up the user’s time for more valuable activities, overcomes language barriers, and ensures information on Google is accurate.
There are other experiences that we can’t completely avoid or automate. But companies can gain a competitive advantage by changing how customers interact with these experiences. Even if there is no option to evade the purchase, customers will choose the companies that make tasks fun by offering attractive rewards and integrating gamification elements. Fitness apps and devices like the Apple Watch motivate users to exercise regularly. Some even provide information on sport locations and training videos, and gamify the experience through the use of leader boards and goals, such as the cycling app Zwift.
While physical activity is for many people something enjoyable, the same principles can could be applied to mundane tasks, such as online banking. In Germany, we have helped several banks inspire customers through digital tools that incorporate an easy-to-understand story around financial needs. These tools include both psychological and monetary incentives (e.g. refunds on account fees) to encourage customers to select and use more products. You can read a case study here.
3. Highlight the need and generate awareness
Shift products from category 3 to 2
When it comes to something we neither enjoy nor are obliged to do, then where is the incentive to pay for it at all? What if your product is your industry’s equivalent of cod liver oil? The good news is that the modern human has very advanced needs. These range from basic requirements like shelter, food, and water (essential for survival) to other aspects of life we consider essential for avoiding loss or pain. A person who has just spent 30 minutes reading about the health benefits of cod liver oil is more likely to be convinced of the need to take it than a customer who hasn’t, even though in both situations the taste is exactly the same.
Retail banking is a prime example of an industry that is constantly having to shift products from the third to the fourth category by bringing need into the spotlight. To convince customers of the value of their products, advisors are often supported by digital and individualized sales argumentation. They receive specific sales prompts related to the customer’s stage of life and recent milestones. In addition, more and more banks are applying insights from behavioral psychology to their sales approach. Customers are more likely to see a need for a product if it appears alongside products they already own, or if they have to knowingly remove it from a preselected list.
Key to attracting and keeping customers
- Understanding how your business creates value and identifying ways to add more value are essential for building a competitive advantage and should be part of any customer experience strategy.
- While the customer experience can attract customers, it can also drive them away. Start by looking at the hidden reasons why customers might not buy your products. Identify access barriers, review your product portfolio, and consider new sales channels.
- Unavoidable tasks also represent a fantastic opportunity to solve customer pain points, meet customer expectations, and boost customer loyalty. Make it enjoyable to use your products or services and ensure your customers know why they need them in the first place.
In the words of Peter Drucker, “the purpose of business is to create and keep a customer.” In today’s customer-centric culture, this all lies in the power of a positive experience. Think about where your product or service falls on the matrix – there may be hidden reasons why customers buy or don’t buy your products.
In the meantime, while writing this article, I’ve signed up to Zwift in an attempt to better stick to my fitness regime. I’ve managed to solve the pain point of boring sessions on my home trainer. Instead, I am about embark on an exciting virtual bike race against a Simon-Kucher colleague. Then there’s just the remaining problem of how to afford a Lamborghini. I still haven’t found an app for that yet... but I am still looking.