Understanding customers and connecting with them is the essence of marketing. Such understanding is hard to come by since human beings are complex creatures. They say one thing and do something else. They think one way and act another. I always smile when students, dressed in fancy jeans and snazzy sneakers, carrying the latest iPhones, lament their limited means. The reality is that people, including seemingly impoverished students, will always spend money on things they find of value.
What is Value?
You buy a watch to tell time, right? Casio and Rolex both tell time. Which one would you buy and why? Why does somebody buy a Maserati? It does go fast - very fast - but almost any car can go fast.
Let's take something more basic. A meal at Chipotle costs about $10 and approximately $6 at McDonald's. Are the ingredients at Chipotle that much more expensive? Unlikely. Then why are you willing to pay so much more?
The price of a product represents a bundle of value. What then is the bundle of value of Chipotle that allows it to sell for almost double the price of McDonald's?
Why are people willing to pay $10,000 for a Rolex or $100,000 for a Maserati?
Beauty is in the eyes of the beholder. Value too is in the eyes, mind and heart of the beholder: the customer. How do you go about understanding a customer's bundle of value?
In the December 2005 Harvard Business Review, Harvard Business School Professor Clayton Christensen and his colleagues, tackled this subject in an article titled "Marketing Malpractice."
They suggested that the dry statistics of demographics and psychographics could not fully capture human behavior and motivation. Rather, they posited that each product or service had a "job to do" and understanding this job was the key to making the product successful.
We will look at this more deeply in my next post.
Verinder Syal, Author: Discover The Entrepreneur Within