Seven reasons why we make purchases

Whenever you make a purchase, there are seven elements that determine how you will make a decision. These seven elements explain our behaviour and importantly help a marketer consider how best to communicate to us. We explain them one by one and show how they can be applied to any purchase type or size. Before we do so, let’s set the scene. In a business environment, it is easy to lose sight of a customer’s true motivations.

After all, you quickly spend every day focusing on business goals, profits, strategies and tactics. Rarely, do you consider the behavioural context in which a person makes their decision. You may think you are by looking at website traffic or speaking to people in a focus group, but both are loaded environments, where you naturally focus on insights that you can commercialise. We are also often biased into making decisions based on data that we can collect. If a shop records the amount of times a salesperson’s intervention results in a sale, then they will find it extremely difficult to evaluate the opposite impact.

Many customers don’t want to be hassled when they enter a store. Further still, the better the store is designed, the fewer questions people will have. This is why these seven elements are so important. They give any business the opportunity to take the customer’s point of view and thereby create a marketing strategy to suit it. This video is brought to you by Posito.

To learn more, visit Posito.co.uk. Whenever you decide to make a purchase, top of mind is whether you’ve heard of the company before. The more you have seen it and the more places where you’ve seen it, the more accustomed to it you will have become.

Exposure is a quick way for you to make a decision about a business’ credibility. It is not necessarily a perfect way, which is why you don’t rely on it entirely, but it does give you some sense of whether a business is firmly established or not. This is of course an element that newly established businesses do their very best to develop as quickly as possible. This can be seen in our other videos, and particularly the one of the similarities between 100 fast growing businesses.

Whenever you make a purchase, you will always be interested in how old the business is.

This doesn’t necessarily mean you need to know when it was founded, but it does mean that you will want to know that it is sufficiently established to provide what you require of it. This assessment depends on the nature of the business. For low value purchases, it may often take you a while to pick it up off the shelf, or consider a friend’s recommendation. For higher value items, you may only decide to purchase once you’ve received sufficient media information about the company’s founders, profits, or corporate structure. This process happens naturally as we learn.

It also shows exposure alone may not be sufficient as time is also required for a person to make their decision. When we consider value, we consider how useful a purchase is. And this means thinking about value very differently from price. It may be easier in most instances to determine the value of smaller purchases, although it is not always the case.

For example, a person may agonise about the cost of a beer or a new dress but not consider the cost of a tank of petrol.

This is because transport is considered essential, which makes the purchase extremely high value. In the same way, a high value product such as an iPhone can be deemed as an easier choice to make than many smaller items. Further still, this is where the business model a company selects becomes crucial. We are all used to making one-off purchases for goods and services. This is because they are easier to determine the value off than subscribing to a service like Netflix or signing a contract with a gym.

This also applies to business to business offerings. Software as a Service has grown quickly as it is easier to its value. Trials provide a perfect opportunity for the customer to see how useful the software is, and how much they are likely to need it. Conversely, if a business charges by the hour or through a retainer, then inevitably this requires greater explanation.

It is also interesting to consider the growth of social media.

We were all taken in by it to begin with. All we needed to do was sign up and get going, but with time, our understanding of what we give up in return has grown, which has made us more wary when deciding to download new apps. As a consequence, they now never go viral in quite the same way. Every brand creates an emotional reaction, and one that is rarely describable. This is because it is our way of instantly sifting through all the information we have on them.

To develop a strong brand equity, a business must implicitly understand the value of branding. By this, we mean that a business’ brand must be amasse to much more than the sum of its parts.

It should be seen consistently in every area that it operates. For example, it is a natural assumption to think that Apple’s innovation applies to all its products, when in reality, Apple often launches new products which it has no experience of creating. And this is why exposure plays a key role.

The more we are exposed to a brand’s activities in one industry, the more we believe that its skills relate to that industry.

And further still, the more difficult it becomes for us to believe that it can operate in other industries. This is why the most successful brands align with very lofty aims such as tech innovation in the case of Apple, Microsoft, Google and Amazon. We may be interested in their tech products, but may raise an eyebrow at the thought of them creating a new beauty product or a chain of restaurants. That said, their brands are so strong, that you wouldn’t put it past them.

Impulsivity is an essential element as it leads us to believe that that a purchase is so aligned with our needs that we don’t need to think about it. And yes, that is exactly what every business tries to achieve. It is just that some purchases are unlikely to ever truly become impulsive, whereas others are perfectly suited to it. Take buying a Ferrari for example. There are many people that gain a windfall and suddenly believe that they must buy one.

It is a sign of their success, and well, just really fun at the same time. If you are wondering how they achieve this, it is because brands like Ferrari realise the impulsive potential of their product for a certain type of buyer. They then set about creating a marketing strategy that appeals implicitly to them. Fast fashion has also become so impulsive because of the power of social media and the fear of missing out that it creates. Innovation is a term that has grown very popular with tech businesses over the last few decades.

Like any business term that has positive connotations, it is liberally slapped on new products whether there is any true innovation happening. Taking a step back, in a buyer’s eyes innovation is a genuine thing as opposed to a marketing slogan. Wherever you decide to buy something, you will think carefully about how uniquely different it is from the competition. You’ll also consider how much those differences are aligned with current and future needs. This is a judgement about innovation and it’s real.

This means that any purchase can be innovative. It could be eating an Impossible Burger at Restaurant, buying a Tesla or being impressed by new types of biodegradable packaging.

Every time you make a purchase, you’ll instinctively consider loyalty. You’ll know that you need to buy bread today and also in a week’s time, you’ll know that the car you’re buying will not last forever and that the clothes you buy have a lifetime value of a few years. And whether you decide to buy again from the same company will depend on your use of the product taking into consideration the six other factors that we’ve already considered.

This is a loyalty judgement that we all make. As a result, each category of purchase is likely to have an achievable level of loyalty. All this leads us on to why so many businesses get this wrong. If they simply evaluate their own loyalty, they miss out on a key question, which is how the customer perceives loyalty. Brands can easily be caught out by this.

Take banking for example, many highstreet brands were focused on their loyalty without realising that for certain customers there was simply not enough choice. New entrants like Monzo quickly changed this perspective. Apart from a few clear exceptions, no customer is truly loyal to a business. They have no reason to be. This is why a business must maintain its exposure to both new and existing customers, continue to innovate and realise the achievable loyalty and impulsivity of the category.

If you are an entrepreneur watching, then you’ll be looking for practical advice that you can apply to your business.

You may therefore want to consider the following seven questions. How much exposure do we need? How can we use our age to our advantage? How clear do we need to make the business model?

How strong a brand do we require? How impulsive can the purchase become? How innovative is what we’re offering? And, how much loyalty can we realistically expect? And once you have, you’ll need to consider how they link to an appropriate growth strategy.

To learn how, check out our video, which describes eight growth areas. We hope you’ve enjoyed watching, subscribe to watch related videos and give it a like if you want other people to discover it. And head over to Posito.co.uk if you’d like to read the associated posit and accompanying evidence.

Until next time.