When it comes to understanding consumers it’s always important to consider the issues from a rational perspective, and then completely ignore what you conclude.
Because consumer behaviour isn’t, for the most part, rationally based.
Recently I happened across a great example.
The UK supermarket chain Waitrose has always operated at the higher end of the market, catering to customers who are willing to pay a little more for higher quality produce. Waitrose’s marketing makes much of the fact that they source their products carefully; some of their packaging will state which farm meat has come from for instance.
With the economic downturn all of the supermarkets have been keen to communicate low price messages; which isn’t easy since most of them operated on a low price platform anyway. Indeed, the big two supermarkets (Asda who are owned by Wal Mart) and Tesco frequently squeeze suppliers brutally hard in order to drive down prices. With such large shares of the grocery market, an efficient supplier has to decide between saying goodbye to most of their profit, down-grading their product, or losing a large proportion of their sales in an instant.
With most suppliers already squeezed the supermarkets have created new products, sometimes positioned below their already lower-priced own-label offerings, to sell more cheaply. Sometimes they create new brands for these products, and sometimes they package them as new own-brand offerings.
Waitrose introduced an ‘Essentials’ own-label range and it seemed to be selling well.
I looked at the pizzas.
The ‘Essentials’ pizzas were more expensive than the regular own-label equivalents!
Looking on the company’s website I also notice that, even when the per pizza price is lower, the price per kilogram is higher on their ‘budget’ pizzas.
But they still sell.
Because customers buy the concept. If the first instance primes them to believe that the product is cheaper, and in particular if that first experience isn’t bad from a quality perspective, then future purchases are made as an emotional reaction: seeing an ‘Essentials’ product is an opportunity to make a worthy purchase – a purchase that feels like a good, money-saving decision in these difficult times.
Few people will check what the actual cost is or how it lines up against alternatives – let’s face it that would make shopping extremely time-consuming. And so the company can make a greater profit from a lower-priced product!
And to add to their prize the supermarkets, having drawn people in with the promise of lower-priced options, have the opportunity to influence the customers visiting their stores. Feeling good about the money they believe they’ve saved, some customers will indulge in small ways elsewhere in the store.
Multi-buys will feel like great value, but lead to more products being purchased and, once sitting their on the shelf, the likelihood of their being consumed is high. Consumption increases because of the constant visual prompt and feeling that a plentiful supply is available. It may even lead to feeling that a similar quantity of purchase is required next time, even if the offer is no longer present.
I’m not suggesting that such practices are admirable, desirable or morally justifiable. But they provide a useful insight into the workings of the consumer mind.
P.S. If you want to learn more about consumer behaviour take a look at my eBook, The Secret of Selling: How to Sell to Your Customer’s Unconscious Mind.