Jan 30, 2017
The consumer drives the economy. Consumer spending is estimated at 70 percent of GDP.
For the health of the economy, the consumer needs to stay in a buying mood. It’s often said the definition of a bargain is when both parties feel they are getting a good deal. So how do you get them buying in your store on your website? How do people decide where to buy goods and services?
Advertised discounts — This is the traditional American model. You go to the mall. Jeans are on sale. The price is great! You buy a pair. It doesn’t matter if you have a dozen pair already at home. It was a deal. A memorable line from the CBS TV series The Nanny was: “It ain’t half off, it ain’t on sale.”
- Comparison shopping — Finding the best price on the internet has been around for years. People perceive they can get a better deal online because of lower overhead. They will often walk into a retailer and ask them to match the price.
- Negotiated pricing — This is the Asian model. Bargaining is expected. This process takes time. It’s a form of social interchange. Posted prices weren’t always the standard in the United States. John Wanamaker invented introduced the price tag in 1861.
- Promotional offers — These are additional discounts not available to everyone. Car dealers might offer an additional discount for past and current members of the armed forces. Previous owners of the same brand may be offered a discount.
- Private sales — Exclusivity sells. You are given access to merchandise or favorable pricing before the general public. When selection and sizing are a concern, this gets people motivated.
- Free stuff — The most obvious is free shipping. You’ve heard the Wayfair ads (furniture) with the jingle “And it ships free.” Buy a camera and you get the case thrown in. Thank-you gifts fit into this category. Your public television station might offer promotional incentives based on the tier of membership you choose.
- Convenience — Gasoline prices vary across the country and on the same highway. Many people will pay a few cents more for the convenience of pulling in immediately vs. crossing the road at the next traffic light and doubling back.
- Family and relatives — Its assumed friends and family get a better deal. Cellphone companies use this strategy. Years ago, the Lebenthal Municipal Bond firm advertised, “At Lebenthal, we treat you like family.”
- Scarcity — Each Christmas comes with its “Must have” toys. Hatchimals were big in 2016. The deadline is Christmas Day. If a store has it, you will drive a distance or stand in line for hours. Price is secondary.
- Prestige — Why do people pay thousands for handbags? It’s been said 85 percent of Japanese women own a Louis Vuitton item. These items never go on sale. Distribution is tightly controlled. Prices are high. If you own one, everyone has a good idea exactly how much you paid.
- Auctions — Items in short supply turn up on the secondary market. Whether it’s a global firm like Sotheby’s, a rising regional firm like Rago Auctions or eBay, that Hermes handbag will likely be available. The market price is driven by demand at that moment.
- Desperation — When it’s 11 p.m. on a Saturday night and you need a quart of milk, you really don’t care what the all-night convenience store intends to charge.
- Countdowns — These are often associated with “Going out of business” sales, but outlet stores sometimes use the same logic. Prices are 10 percent off this week, but 20 percent off next week. You would like the better pricing, but are taking a risk the same piece of furniture will still be on the floor when the price drops.
- Loyalty — Many people want to recycle money in their own community. They will make a conscious decision to patronize their local hardware store instead of a big-box retailer. Sometimes they might pay slightly more, but a relationship comes with the purchase.
- Donations to charity — Some businesses promote their charitable giving. Others pledge a certain amount of profits to a charity. They might just mention for every purchase made, they will make a gift to XYZ charity. People buy to indirectly support the cause.
People make buying decisions for many reasons. Which can be adopted by your business?