How do consumers make purchase decisions? What really matters to them when they buy? What leads them to choose one brand or product over another, particularly in competitive markets? After having done consumer research in all sorts of markets for all sorts of clients, I see the same answers time and time again. Everything consumers say drives their choices and everything they do can be classified into one of 4 areas - Price, Product, Customer Service, and Brand (image and reputation). Everything.
- Price: Between 40-60%* of purchase decisions come down to price (and price related attributes like discounts, free trials, payment terms etc). This is the reason we hear so many consumers say, 'look, the only improvement I can think of is that it should be cheaper'. They are telling it like it is. However not all consumers think and behave the same way. Some are more price driven than others. Plus some markets foster more price sensitivity than others. It will be up to the organisation to find out what pricing considerations matter the most to consumers in their markets. But price isn't everything. The other 40-60% of purchase decisions come down to the other 3 factors that relate to the quality and performance of goods and services.
- Product: Features of goods and services drive purchases. If you sell perfume then consumers will be considering the way it smells, the shape and size of the bottle, whether it is solid or liquid etc. If you sell insurance then consumers are considering the type of cover being offered, the coverage period, the coverage amount etc. Similar to how price sensitivity differs, product sensitivity differs among consumers and categories.
- Customer Service: The type and quality of customer service also drives purchases. What is the in-store experience? What about the online experience? What is your return policy? How quickly/well do you solve customer problems? How often do you keep in touch with customers and through which channel? What sort of customer feedback or reviews are available online? Some consumers are more driven by customer service than other consumers. Millennials may be more comfortable getting queries answered via a social media bot compared with an older generation who may prefer face to face or telephone based service. If you are a wholesaler then the retailer will be largely responsible for this part of consumer's purchase decision.
- Brand: The image and reputation of your brand also drives consumer purchases. Are you a local or overseas brand? How long have you been in business? Are you trusted and reliable? Do you have verifiable credentials? What brand messages are conveyed on pack or in marketing communications? Does your organisation support any social causes or align itself with any celebrities? Once again, some consumers are more brand driven than others. For example, some consumers will only buy local if given a choice.
Consumers weigh up what they pay against what they get to determine whether something is going to be value for money. Depending on the individual and the market, these decisions might be deliberate and logical or they might be spontaneous and emotional. Both types of decision making should be explored.
This 4-part model is useful to guide exploratory research in understanding what factors are involved in each of the 4 areas when consumers make a purchase decision. Then once all factors have been identified, the 4 part model can guide quantitative survey design in determining the relative importance of these factors.
This 4-part model is useful to guide exploratory research in understanding what factors are involved in each of the 4 areas when consumers make a purchase decision. Then once all factors have been identified, the 4 part model can guide quantitative survey design in determining the relative importance of these factors.
*Managing Customer Value: Creating Quality and Service That Customers Can See (1994), Bradley Gale. The Free Press, NY.
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