Can value perceptions be separated from price?

John: just when I think I've garnered a shred of understanding about the precursors required for a customer to say "yes, I'll buy," something comes along that changes my perspective. So your blog has me thinking . . .

Is the question you're recommending realistic? Would a consumer say "yes, I find this valuable," without saying relative to what (i.e. price)? I (hazily) recall learning about Pareto efficiency, in which for a transaction to occur, a buyer recognizes that he values a given product or service more than the money he spends to get it . . .

Two Value Systems

Andy,

People use two different values systems in making purchases. When we are seeking a means-to-an-end, we are looking to fulfill a specific need, we want utility. In this case we can compare products in there ability to fulfil the need and we can make price comparisons. Since products are in abundance, we can shop on price and convenience.

It is quite different when we want or desire something. In this case we are pursuing an end-in-itself. Sure an Alpha Romeo is desirable automobile even though it is less reliable than a Honda. Owning it is an emotional experience, so is driving it when it is not in the shop. Interestingly, Alpha owners accept going the shop and actually like interacting with other Alpha owners.

Certainly there are circumstance where things are grey. As a passionate cook I might be in the market for a new sauce pan. A perfectly functional one might cost $25. The one I desire might cost $100. If I buy the expensive one, I might rationalize the pruchase based on life-span, features etc. Most often, I buy for emotion reasons, I like the way it looks, I like owning it and cooking with it. It makes me feel good.

So, if you sell expensive sauce pans, make sure the potential experience is clear and compelling. If you sell on price, be prepared for customers who buy on price and are indifferent to brands. This means they will not be loyal.

John

John I. Todor, Ph.D.

Investigating the Drivers of Customer Behaviour

I think we have to be somewhat careful to avoid the halo effect in simply making the judgement that because there is a difference in a methodologically suspect (three questions and 100 responses per company does not equal a strong correlation and most certainly does not equal causality) measure at two different points in time and assuming that the recession (a very complex thing in itself; just ask any politician to explain it!) must be the reason.

Teasing out the real relationships between what customers' need, their circumstances and external factors like the recession is rather complicated. I rather think that we do not really understand how customers are reacting to the twists and turns of the recession as yet. We have to be careful in not leaping on any data that seems to support a tentative relationship without it being adequately investigated.

Graham Hill
Customer-driven Innovator
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