People have way too much going on in their lives to anguish over simple purchase decisions like buying toilet paper or a bag of onions, so when we go shopping for these mundane products we tend to buy what we’re used to or whatever is on sale. This makes sense because they are low-stakes purchases. But, counterintuitively, we behave in the same simple way when making most of our purchase decisions, whether or not they should be more complex. Human psychology and clever brand marketing play a role in the way we make purchase decisions, but the way we perceive value is changing in favor of the consumer and brands have some catching up to do.
Humans just want to make satisfactory decisions.
It’s actually in our human nature to conserve cognitive effort, opting to expend only the amount of effort necessary to make satisfactory decisions, rather than optimal decisions. A study covered in the Journal of Consumer Research found that, when comparing two equivalent products at different price points, consumers were willing to pay a premium for the product that required the least effort to evaluate. In any given decision, we tend to accept the limited set of options that are available to us at a specific point in time. The thing is, there’s very little coincidence here, because the products and services that are readily available and easy to find were put in place by brands that understand human nature.
Brands exploit decision-making flaws and establish an illusion of choice.
Leading brands, whether they sell to businesses or individuals, understand that humans are potentially subject to two main categories of decision-making flaws: informational issues and cognitive biases. Businesses exploit these realities and use a broad range of techniques to make their products more desirable and more available, such as promotional offers, celebrity endorsements, distinctive packaging, and government lobbying. So, unless they make a conscious decision to delve deeper, buyers are typically making purchase decisions under the illusion of choice. This has always been a great advantage for business, but the scope of that advantage is shrinking.
The consumer has more options than ever, and perceptions of value are changing.
Modern consumers are getting so many options for any given product that they are no longer limited to shopping based on decision factors companies have traditionally manipulated such as Price (many vendors compete at the same price point); Brand Awareness (buyers are learning to ignore pervasive just-in-time ads); Quality (many vendors now offer 100% money back guarantees); and, Availability (many vendors offer near- instant delivery).
Tomorrow’s buyer will have so many good options for any given purchase, the way they make decisions will naturally place more weight on emotional factors.
Growth-oriented brands must offer logical and emotional value.
If simple decision factors are neutralized, how will buyers make purchase decisions? Logical parameters will always play a role, but leading companies understand the power of building emotional connections. Patagonia, the clothing company, stands out as a particularly well-positioned player that sells products which carry a high value for both logic-based and emotion-based decisions. Patagonia stands behind every product it sells by offering the logical consumer free repairs or product replacements through its “ironclad guarantee,” and it gives the consumer emotional value by leading the apparel industry in supply chain ethics by enforcing fair wages and sustainable material sourcing. Patagonia will see long term success because it’s already catering to the consumer that knows they have a lot of options.
From an economics perspective, when consumers have the upper hand (supply exceeds demand), they are able to demand more value from suppliers; and with the same utilitarian conditions met by multiple suppliers, consumers will shape the definition of “value” so it aligns closer to their subjective emotions and ideals.