In my last column I had spoken about some of the systems around which sales and distribution were built over the last couple of centuries and how this structure is now changing. Similarly let us review the reasons why people buy.
Some of the basic principles that have long been accepted as the bedrock of business are:
· People are rational, and make their decisions based on reason.
· Customers buy benefits, not features.
· People buy to fulfil their emotional needs (Maslow’s hierarchy).
· Buying gives customers a sense of freedom and liberation.
· People want to get the latest and best version.
Over decades, retailers and marketers have built strategies on these and similar ideas across geographies and backgrounds employing permutations or combination of them. But in today’s market any retailers worth the salt know that when they display the four letter word — SALE — feet miraculously turn towards them like bees being drawn to honey.
Okay, we understand that people are always looking for deals. But take the argument a bit further.
Observe the growth of “outlet” stores which are popping up like mushrooms not just on high-streets, but also in specially designed malls. And even more so, let’s understand the phenomenon of retailers who have created a business model of offering huge discounts (70-80 per cent) continuously.
They are growing both in terms of sales and size of network.
I did a small dipstick study trying to understand this phenomenon. I asked a number of people who I know are regular shoppers in sales or from outlet stores —
o Are you happy with what you have bought? “Yes”, they said.
o Are you aware that what you are buying on these fabulous offers are either old, out of style, or damaged? “Yes”, they said. “I don’t really care as long as the price is good.”
o Why did you buy the products? “Some for myself, and also for gifts,” they said.
o Have you used all the items that you bought in the sale? They said, “I take out the items to use when I feel that I need to.”
o Have you used all the items that you bought in the sale? I repeated. “Actually, I still have a lot of things I bought in the last three-four sales which I will use when the right occasion comes,” they said.
Besides chasing sales, a growing percentage of customers today trawl the net to find best prices. One of the growth areas on the net is aggregators who give comparative prices for products from different suppliers. Checking the aggregator prices for a few categories where each supplier was vying with the other to offer the same product at a lower price, I found better prices for the same product in brick-and-mortar stores in the city.
Sometimes, of course, with a little negotiation, but still a better price. So the question that arises, is where have all the other buying principles — rationality, benefits, emotional fulfilment, latest versions, freedom, etc gone? Has price become the only deciding factor?
A friend of mine always reminds me that the joy is in the hunt, not in the achievement. Are people today driven by this need to catch the best deal? Or are there new principles driving buyers in the post-modern world?
· People buy, because they get comfort in acquisition.
· People buy because they love to surround themselves with things.
· People buy because they feel they can.
It is interesting that on the other side, the desire for acquisition of stuff is being progressively devalued. There is a counter movement — still small but growing — promoting living more with less. The futurist James Wallman suggests in his book “Stuffocation” that “materialism is making millions of us feel joyless, anxious and, even worse, depressed.”
Some people are now adopting a lifestyle which is based on reducing things around them. For some, experiences are more valuable than things, while for others, it is better to buy one good item, rather than a pile of poor quality soon to be disposed products.
The changing motivations of buyers and consumers is partly driven by the digital world, where many physical products have suddenly disappeared (Music records /CDs / DVDs), to be replaced by digital versions. And miniaturisation is making things smaller and smaller. This will only increase with time.
Retailers and marketers need to work hard to understand the new principles for their existence. As Marshall Goldsmith said, “What got you here, won’t get you there.”
— The writer is a senior executive with a leading retail company in Dubai. These are his own views.