Behavioralists tell us that if you want to know the true nature of a person, observe them in stressful situations. How can we tell when buyers are stressed? More importantly, how can we use that information to our advantage?
In a March 28, 2012 Financial Times article, Britons are buying less but paying more, Sarah O’Connor and Louise Lucas, give us some great insights into these questions. According to the article the British are facing high inflation and weak wage growth which means they’re losing purchasing power every day. If that doesn’t qualify as stress, I’m not sure what does.
What’s intriguing is how the Brits are adjusting their buying habits. They’ve cut out the least important (least valuable) purchases they typically make or at least are reducing the frequency of those purchases in order to pay the higher prices for what’s truly important to them.
How does that help us as business owners? It tells us what’s truly important to our customers. That information allows us to distinguish the must have from the nice to have products and services we offer. Armed with that knowledge we can anticipate and adjust our marketing as well as our inventory levels and staffing to the changing economy.
In periods of economic uncertainty or declining purchasing power we’ll focus our marketing, inventory and staffing on the products and services our customers are most likely to buy. The ones they continue to buy during challenging economic times.
When the economy is stable or growing and buyers have discretionary income, we begin adding inventory of the nice-to-have items and bring in temporary help or independent contractors to provide the additional service our customers desire.
We’ll also shift our marketing to highlight these ‘luxury’ purchases. Why? Because buyers pay more for what they want than what they need. You’ll enjoy significantly higher margins on the nice-to-have over the ‘essentials.’
For those of you who may be wondering whether this is a cultural phenomenon ask yourself these questions:
- How did my buying habits change from 2007 to the 2008-09 time frame?
- What items did I give up completely?
- On which items did I reduce the frequency of purchases?
- What items did I buy as a treat for myself and what did I give up to get them?
The answers to these simple questions will demonstrate the universality of human nature and human behavior. Any variances from one culture to the next are simply a matter of degree.
The moral of this story is simple – pay attention to what your customers are buying during difficult times and you’ll quickly discover what’s ‘essential’ vs. what’s ‘nice-to-have.’ Then adjust your operations accordingly.