Why Your Customers Buy From You

Since (almost) the dawn of time, trade and commerce has flourished on the basis that each party believes that they’re receiving more value than they’re trading away. Today is no different.

Tuesday, January 15, 2019
Rob Di Giovanni

A customer is searching for a new phone. She knows she wants to be able to call and text with it and has a budget in mind. She comes across two different brands, both offering similar phones that solve her problem. One is more expensive but has an appealing and modern design. The other is cheaper but is less aesthetically pleasing. Which one does she choose?

The idea of buying, selling and trading is so fundamentally baked into our psychology that we can no longer have even a simple conversation with another person without subconsciously weighing up the pros and cons of engaging in the conversation, with that person, for that period of time (remember that time you were stuck talking to Uncle Marty about the new sandwich maker he just purchased?). Everything is an exchange and most exchanges have little to do with money.

Whenever we make an exchange with another party for goods, services, favours or money, we are doing so because we believe that the item or benefit that we are receiving in return is worth more than what we’re trading away. Author, educator and marketing guru Seth Godin in his latest book This Is Marketing supports this idea: “Everything that we purchase–every investment, every trinket, every experience–is a bargain. That’s why we bought it. Because it was worth more than what we paid for it. Otherwise, we wouldn’t buy it”.

So if we go back to our savvy shopper from earlier, how can we guess which phone she will choose? Each phone solves her problem and each one adds additional and differing benefits to the equation. If our shopper is fashion-forward, has a keen eye for design and believes in the power of aesthetics, she will most likely choose the more visually appealing item, even though it carries a comparatively hefty price tag. If she was more utilitarian, focused purely on functionality and the value that comes with a low price, we can guess that she’ll choose the second, less expensive phone.

Is she wrong for choosing either item? Of course not. She’s simply weighing up the options and choosing the item that provides her with the greatest overall value. The more expensive item may not actually cost the shopper anymore if the cheaper and less attractive item would invite ridicule from her friends and family. By selecting the more expensive item, she’s signposting her good taste and financial success, something that might be infinitely more valuable to her than the few extra dollars she saves.

For a real world example of how our perception of value impacts our purchasing decisions, let’s dive into the surprisingly logical world of fine art.

An artist, a buyer and $140 million

In 2006, Hollywood entertainment mogul David Geffen listed and sold a piece of art for US$140 million (approximately $240 million in Australian dollars today). The artwork was painted by Jackson Pollock in 1948 and measures a substantial 2.44 metres by 1.22 metres. If you’re like most people, you’re probably reeling at the fact that that much money was being bandied around for a rectangle with colours on it.

There. We just saved you $140 million.

For the buyer and seller though, that was a bargain. The buyer, David Martinez, was a successful financier and had recently been spotted purchasing a wide assortment of modern and contemporary pieces at auctions and private sales. At the time of the sale it was also reported that Geffen was interested in and planning for the upcoming purchase of the Los Angeles Times newspaper. Both Martinez and Geffen had their own unique reasons for engaging in the transaction.

Let’s start with Martinez. While we can only assume what his motives were we do know that he believed the purchase to be a bargain because he agreed to the final price. If we consider his career and recent appearances at art auctions we could come to the conclusion that he had made enough money and it was art, not money, that now excited him. It could also be that purchasing that particular piece bestowed upon him a certain amount of status and respect from the fine art crowd that he was looking to roll with. Of course, the reason might not have been about status or excitement at all. The year 1948 may have had specific significance for Martinez or that the girl who broke his heart as a young man was exactly 2.44 meters tall.

Now what did Geffen get out of the arrangement (aside from a truckload of cash)? We don’t know how many years Geffen had the painting and the reasons why he sold it are surely numerous. Perhaps he was becoming tired of gazing into its overwhelming form each day and was looking for a change. In that case, the US$140 million was more valuable to him than the painting as he could then use that money to purchase another piece (or several million cheaper pieces). He was also looking to purchase the Los Angeles Times during that period and looking for a large influx of liquid capital he decided to sell the piece. Whatever the reason he finally landed on, the transaction was a bargain for him too.

So what does this mean for your brand?

Your customers probably don’t have $140 million (and if they do, don’t forget that we’re for hire). What they do have is a problem to solve and an internal narrative that they follow. Regardless of whether you’re selling clothes, a haircut, financial services or any other desirable good or service, you can use the principles of trade to improve your sales.

The first step is determining what your good or service does and who is likely to buy it. You can do this by looking at the customers who have bought from you in the past and making an educated guess at what their motives for buying could be (or better yet, ask them directly). If you haven’t made any sales yet, you can still do this activity, you’ll just need to make a few more assumptions about the types of people your business will attract until you can secure more concrete information.

Using the information we divined from the first step, our next step is to look for the areas of your business that are generating the highest and lowest amounts of personal value for your customers. By increasing the amount of effort you spend in the high-value areas and reducing or eliminating the activities that add little to the customer experience, your customers will be more satisfied and more willing to make additional purchases in the future.

This enhance-and-eliminate technique can be incredibly powerful after just one attempt, but to get the most out of it you’ll need to return to it regularly. As the needs and desires of your customers change over time, you and your brand will need to change too. By consistently focusing on the areas that are of high-value to your customers and eliminating the low-value areas you’ll not only streamline your expenses but your customers will love you, and your work, that much more.

For more on how to find your target audience, read our piece on positioning your business Stop Competing for Scraps: Five Books to Better Position Your Business.

Modular is a business to consumer brand consultancy based in Perth, Western Australia.