Thanks to the economic crisis, there are few of us who haven’t cut back in our spending and many of us worry about our financial future. This jolt to our buying patterns is very likely last into the foreseeable future. We are weary and credit is harder to come by so most of us plan to spend less. At the same time, we are being influenced by a confluence of other factors that are causing us to change our buying patterns and in some cases pay more for new desires and priorities.
As a society there is an increasing concern about the environment [1] and our personal health [2]. These concerns are being taken seriously and are causing many people to reprioritize where and how they spend. It might seem like a paradox that in tight economic time many willingly spend more to achieve new lifestyle considerations.
Yves Chouinard, CEO of the outdoor clothing store Patagonia, recently unraveled the paradox. He said “people want to consume less but consume better.” I think he is on the money.
Let’s have a little deeper look at this statement. Advocates of a focus on the customer experience, like me, have been arguing for years that people increasingly value outcomes more than products. That is, it is not the product per se, but whether it becomes part of a solution to a personal or business challenge or is a compelling experience. Products are commodities; the value comes when someone helps the person see the solution. Similarly, many brands are seen as undifferentiated means-to-an-end. In this case, they are bought on the best trade-off better price and convenience. Interestingly, the recession [3] seems to have increased this undifferentiated view of brands. Desire, on the other hand, comes from the expectation or experience of an outcome that is emotionally gratifying. The experience becomes and end-in-itself.
But, can people who consume less and consume better be profitable customers?
Yves Chouinard shows that they can be. For environmental reasons, he told his marketing people to lose the packing on their underwear products. The reaction was that sales would drop by 30%, after all packaging attracts attention. Chouinard told them to do it anyway. This forced them to rethink the concept of underwear, what caught people’s attention and especially how people consumed it. Patagonia’s underwear no longer comes in packages; it is openly displayed in stores. It has actually become fashionable and multi-functional. Take a look at this video [4] where Chouinard makes the point. He is wearing Patagonia underwear, the Men's Capilene® 3 Zip-Neck. On their website the description says “Stay dry and warm in this versatile baselayer ideal for moderate exertion in cool or cold weather” But as you can see, it is fashionable enough to be worn as outerwear.
Rather than dropping, sales of Patagonia underwear increased 30%. People will pay a little more for products that are well-made, minimize the impact on the environment and, result in a fuller consumption experience.
This not the first time Patagonia has illustrated this point. On October 31, 2005 USA Today had this to say about Patagonia.
The weaving together of such imagery and practicality became a Patagonia hallmark, most obviously displayed in the popular catalog, which has adventure stories, pleas to register to vote, and environmental essays alongside gorgeous action shots of people in Patagonia apparel. The ideal balance is fifty-five percent product content and forty-five percent message—any more product presentation has actually resulted in decreased sales.
A visit to www.patagonia.com [5] will show you the carry the same marketing philosophy online.
Recently, Staples, the office supply retailer, announced they will be partnering with OXO to market their stylish and hyper-functional office products. The greater functionality comes with a slightly higher price. But, as customers reset their definition of value, the companies expect they will willingly pay-up.
So what is the take-away? People will scrimp to splurge. Splurge, that is, on products they find meaningful and lead to compelling experiences. The question is “What plans does your company have to encourage customers to splurge on your offerings?”