This is the fifth part in our series of marketing articles, if you missed the first, second, third and fourth ones you can find them here: Marketing Series: An Introduction to Marketing, Marketing Series: Customer Orientated Marketing, Marketing Series: Determining what your customers want and Marketing Series: Market Research – How do we know which plan is the best?
Consumers make their purchasing decisions based on a variety of reasons. Sometimes these are obvious, such as cheapest price or best value, but more often than not, their decisions are made from areas of the subconscious they may not even be aware of. Psychologists have spent a lot of time developing theories in order to understand the depths of human psyche that influence consumer choices.
The hierarchy of needs
One of the most influential thinkers was a psychologists called Masloff who came up with what is known as “The hierarchy of needs”. Much like a computer game, it works from the bottom up, as once that criteria of needs are fulfilled, they can then go up to the next level.
These are in reverse order:
- Personal Self-actualization needs (self-development and realisation) Related products: Open learning, New age self help books, Religious affiliation.
- Esteem needs (self-esteem, recognition, status). Related products Luxury Brands, attend exclusive venues
- Social needs (love, sense of belonging) Related products: Music, Fashions, Sports clubs.
- Safety needs (security, protection). Related products: Insurance, Income protection, Household alarms, fire detectors.
- Physiological needs (hunger, thirst, and sleep) related products: Social security, Samaritans, Roadside recovery, medicines, Food.
From this simple list we can see what would influence a person’s buying behaviour.
Making a statement
The function of a watch is to keep time regardless of the make. The reason people pay extra for luxury brands is partly due to the quality of materials and distinctive design, but more important is that it makes a personal statement of one’s status or position. If you can afford this, then you are of certain income, have a successful career and hold a position of responsibility. In this case the substance of the product is virtually irrelevant compared with what it represents.
At the other end of the scale, most people in developing countries are more concerned with meeting their physiological needs, such as food and water, rather than make an individual fashion statement.
Interestingly enough, researchers believe that only 2% of the population reach the “Self Actualisation” stage. So for all you Opera loving viewers of BBC 4, you may think you are intelligent individuals, but you don’t have the critical mass for marketers to be bothered with.
Buyer decision making
For most people, they will not make a purchasing decision in isolation. They are influenced by what others think or simply just follow the horde for a sense of belonging. Their buying habits are often be formed by their family up bring. This obviously reaches a divergence when it comes to teenage fashion, as no girl would be seen dead in clothes that their mother would wear. They are very much influenced by their peer group and wish to be seen as independent from their parents.
The peer group will:
- influence self-image and attitudes;
- expose individuals to new behaviour;
- Create pressure to conform.
Capturing Customer Loyalty
As buying habits are life changing, an enormous amount of effort is placed on capturing consumer loyalty as early as possible. The potential income from a loyal customer over their lifetime can be quite substantial.
The trick is for a business to enter the consciousness of the potential consumer, entice them to purchase and then retain their custom by continually meeting their expectations. Companies always need to evolve to meet the changing nature of the customer’s environment.
As creatures of habit, a consumer will continue to buy from that brand, unless there is dissonance which leads them to consciously revaluate their purchasing habits. They may become dissatisfied with product and switch to a rival or a substitute (play computer games rather than watch TV), or their circumstances change which affects their priorities or purchasing power (loss of job). Once the consumer swaps allegiances, they settle into the new habits and it is very difficult to coax them back.
Below are some facts that shed light on this dynamic.
- Dissatisfied customers will on average express their dissatisfaction to nine other people.
- Attracting a new customer costs approximately five times more than retaining an existing one.
The more adept a business is at maintaining their relevance to a customer’s changing requirements, the more likely they will have a sustainable business model. This means being aware of the some psychological influences that are behind the consumer buying positions.
Try this exercise
As an exercise compare your products and services on offer and sees which of you customers’ “Hierarchy of needs” is being met. This will help you understand why they are buying from you.
Next in the series we will look at how all these elements come together in our case study on the rise of the worlds most valued brand. Apple.
Malcolm Ford has had 25 years business experience and has been involved conducting marketing campaigns for companies both in the UK and in Australia. He currently resells and implements Enterprise software systems.
