Research

Why do customers buy? Or not buy?

All companies face this question as they seek more customers and higher revenue.

  • Engineering-Driven companies – the majority of tech companies – believe the right feature set will compel customers to buy and unfortunately pay relatively little attention to other issues.
  • Customer-Compelled companies are obsessed with simply giving customers what they say they want.
  • And Followers believe that emulating the market leader will generate success.

Our experience and that of the most successful companies over time is different.  Each of the above mindsets may work for awhile, but it will not produce a winning strategy over time.  And when customers don’t buy, we often hear “they just don’t get it”.  Yet it’s the Provider who often doesn’t get it, lacking a real understanding of the motivations and perceptions that drive customer behaviors.

Customers decide based on comparisons of their various options – Our offerings, our competitors’ offerings, do-it-themselves or do nothing.  And they assess which alternative will make them better off – which will provide them the most value.  That’s value as they define, experience and perceive it, not necessarily as we define it.

There is a wide range of dimensions involved. Here are a few examples:

  • Amazon.com cares plenty about computers and associated software that is always up and available to keep their virtual storefront open.  When the storefront closes, they lose big money – around $100,000 of revenue per minute.
  • When things go wrong with any product or service, the treatment you get from customer support can either generate long-term loyalty or disdain, either of which will affect future purchase decisions.
  • And of course everybody in the internet age is concerned about the security of the personal information they submit just to do business with you.  Getting that information stolen can wreak havoc on customers’ lives and on your business.
  • Many people simply want to be “cool” (or “rad” or “bad” or “far out”, depending on your generation – these aren’t all teenagers, by the way). Apple has played to this for decades.  One look at an iPod ad makes this very clear.

IPod adEach of the above examples is about customers’ experiences and the impact of those experiences, much more than being about your offering itself.   The features of what you offer are enablers of some experiences, to be sure, but many critical customer experiences have nothing to do with your primary offer.

Customers compare the experiences that you offer them with those of their alternatives.  In some cases, you might be superior to any given alternative while in others you might be inferior.  These experiences, as the customer perceives them, are the heart of the customer value proposition.

Customers typically pay for your offer, so they compare costs as well.  Of course, if they don’t pay, in an ad-supported model, your customer is really your advertiser and your user is the product.

Customers must act in order to get the experiences above.  Those actions may be minimal (e.g., one-click purchasing on Amazon), or they may be very significant (e.g., distasteful price negotiations to purchase a car).

So, in summary, there are three primary components to customer decision making:

  • The experiences you offer, whether superior or inferior to their other alternatives.  These experiences span from initial discovery of your company through purchase, use, troubles (if any) and finally disposal.
  • The price you charge, as compared to their alternatives.
  • And the actions they must take to get these, as compared to their alternatives.

It is our job to understand what experiences are critical to customers and how they perceive us and others.  From this understanding we can create plans – products, services, go to market – that will inspire customers to do business with us.  A robust strategy should be built upon the foundation described above, for each segment of your market.

Listening as a Strategy

How comfortable would you be if you were asked to drop into character and be interviewed as one of your customers? You would be asked a variety of questions, including some that you’ve never discussed with that customer. Do you believe that you could answer as your customer would? It can be done. And its value is huge.

We conduct many paired interviews with our clients and with their customers. In these, we discuss the same subjects with our client that we expect to discuss with their customer. This helps to establish a baseline hypothesis for validation and it provides a great assessment of value alignment. We have found that in the majority of cases, companies have inaccurate impressions of their customers that can be dangerous to their bottom line.

Here’s a rather extreme but impactful real-life example: A client of ours had a 20-year, $50M/year relationship with a large customer, and we were asked to talk with that customer on their behalf, as part of a broader engagement to gain actionable customer insights. In order to prepare ourselves, we discussed the customer at length with our client, interviewing them as if they were the customer. This was a tough customer, we were told, that valued price and price alone. Although our client had plenty of other value to bring to this customer, we were told that this wouldn’t matter. We then spent most of a full day with the customer, discussing a broad range of subjects regarding their business – we were not there to sell. There is one quote from this customer that I will never forget: “If the only thing you present to me is your price, how can I judge you on anything else?” Our client’s pre-conceived notions about this customer had colored their thinking so heavily that they created a self-fulfilling prophesy. Once they got past this, an unexpected and incremental $50M revenue opportunity quickly materialized.

“Becoming the customer” is how we describe learning so much about your customer that you feel you could accurately represent their interests in any discussion. What are the customer’s goals? What keeps them from reaching those goals? What support systems do they have? Describe the various relevant processes in the customer’s business. What works and doesn’t work in each of them? What are the customer’s perceptions of your company and of other alternatives they have available?

These questions and others provide far more insight than a dim-the-lights experience where a company presents its wares and asks then asks them what they want. We already know what they want. Your customers want better products for free. Unfortunately, that’s not very helpful or actionable, so you need to learn far more.

Rather than asking your customers what they want, ask them what they do and how they’re impacted in their own lives. By spending a day in their lives and “becoming” these customers, you will become much better informed about how to gain their preferences over time. This type of conversation will develop true innovative insight that can lead to disruptive change.

Some of the best companies in the world listen to their customers in this way. When P&G execs travel, they regularly get off the plane and go to the home of a P&G consumer to watch how they use their products. Additionally, P&G sends new recruits to live with families in new market areas in order to understand them better. This “day in the life” experience is terrific and far better than just asking customers what they want. There are lots of ways to achieve it.

If companies such as P&G believe in listening as a strategy, could you?