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Excerpt: Why People Buy Things They Don't Need

Introduction

TO ACCURATELY PREDICT THE FUTURE, YOU'VE GOT TO UNDERSTAND WHY

Conventional wisdom in market research circles holds that the best predictor of future consumer behavior is past consumer behavior. In other words, if you want to know what consumers are likely to do in the future, study what they have done in the past and project the results forward. I learned this lesson well in the many years I worked in marketing research for big corporations. But once I founded Unity Marketing and started working directly with client companies to develop marketing strategies that produce results, I discovered the absolute, utter failing of this conventional wisdom. The simple fact is if you study past consumer behavior, all you learn is what consumers did in the past, not what they are likely to do in the future. But many businesses continue working under the erroneous assumption that you can use the past to predict the future, so they study, quantify, validate, and make predictions and projections on historical but ultimately meaningless data.

Another piece of faulty market research conventional wisdom has to do with consumer motivation. Many researchers say you don't need to understand why consumers behave as they do because it is irrelevant. They believe all you need to understand is the what, how, where, when, and how much of the consumer equation. The why isn't really important, it is reasoned, because if you ask consumers why they do something, they really can't tell you anyway. Bunk! Being an aficionado of the murder mystery genre, I know the only way to solve the mystery is to uncover the motive. All the clues at the scene of the crime may point to one or more suspects - usually red herrings - but the mystery is only solved once the true motive is revealed. So too in market research. While the behavioral data is important to understanding the consumer, the real insight into what drives a consumer to buy is the why.

Ultimately, the goal of any market research study is to provide information and insight about consumers to support business decision making. The focus of those business decisions is what will happen in the future, not the past. Market research, therefore, must enlighten and guide corporate future vision. You need to know, or at least have a pretty good idea, how specific marketing strategies and new products and services will impact or change the consumer market. In other words, are consumers likely to buy more of what you have to sell because of your strategies?

Hockey great Wayne Gretzky put it best in his apocryphal anecdote. When asked in an interview what made him so much better than the other hockey players on the ice, Gretzky responded, "Everybody else skates to where the puck is. But I skate to where the puck is going." In business our "hockey puck" is the consumer and rather than trying to catch up to where the consumer is today or was yesterday, we need to get out in front and anticipate where the consumer is going and what he or she is going to want when they get there. Unfortunately, this challenge of gaining future vision of the consumer market is getting harder and harder today because the consumers are moving so much faster than they ever did before. Businesses must keep ahead or risk becoming increasingly irrelevant - nonplayers in the consumer market.

Unfortunately, this challenge of gaining future vision of the consumer market is getting harder and harder today because the consumers are moving so much faster than they ever did before.

In my research work with clients, big and small, over the past ten plus years, I have discovered two secrets of gaining future vision about where the consumer market is going and what companies need to do to be ready for it. The first secret, and the subject of this book, is to understand why people buy. The second secret, and the topic of my next book - entitled Let Them Eat Cake: Marketing Luxury to the Masses (As Well As the Classes), to be published by Dearborn Trade Publishing in early 2005 - is to track changes and moves at the luxury end of the market to predict where the mass market will be in the near future. In other words: First the rich do it, then everybody follows.

WHY PEOPLE BUY: A KEY THAT UNLOCKS MARKETING SUCCESS

Gaining insight into consumer motivation - why people buy - is the best predictor of consumer behavior in a changing, shifting world. While consumer behavior changes as consumers progress through different life stages, the basic consumer personality that guides and directs their behavior is fixed over time. For example, bargain shoppers who religiously clip coupons and are willing to drive 30 minutes to save $5 will always be bargain shoppers - as young adults, as the heads of households of a growing family, as empty-nesters with no more children at home, and as seniors. The type of products those bargain shoppers buy at each of these major life stages will change, the amount of money they may spend will change with changes in income, where they shop will change, but their basic personality as careful, bargain-driven shoppers is fixed. So too for the impulse shopper who gains ultimate satisfaction in the process of shopping and buying. The things he or she buys will change, but the basic motivation and consumer mind-set is fixed.

So by understanding why consumers behave as they do, you have a looking glass into the future. Understanding why helps a company anticipate and prepare for changes in the cultural, economic, and political environment. It provides insight into how predictable changes in consumer demographics will impact consumer behavior. In essence, while the what, how, where, when, and how much of consumer behavior fluctuates, the why remains fixed and can be used to predict how change will impact the other factors of consumer behavior.

"WHY PEOPLE BUY" EVEN MORE IMPORTANT NOW THAN EVER BEFORE

Not only are consumers moving faster than ever before, they are fueled by a new sense of empowerment in their commercial affairs. Most Americans, even the poorest, participate at some level in the twenty-first-century luxury lifestyle. Where else in the world do you find households that live below the median income level owning cars, color television sets, video recorders linked to cable, air-conditioning, and cellular phones? With the infectious spread of discount retailers like Wal-Mart, Costco, Sam's Club, Dollar General, factory outlets, and the rest, consumers everywhere find more and more options for buying everything they need - and don't need - at unthinkable discounts. Their consuming choices have exploded and they don't need to buy your "widget" anymore. They can choose from thousands of perfectly acceptable alternatives sold at any price point in hundreds of different retailers accessible directly from home or within a five-mile proximity.

The fulcrum of power in the consumer marketplace has shifted from the marketer and retailer to the consumer. Too many companies across the commercial landscape have yet to discover that they no longer hold all the cards. Today the consumer, rich and poor, is in control and it is never going back to the way it was before. Just open any edition of the Wall Street Journal and you'll find story after story of companies in their death spiral because they failed to understand the new consumer balance of power.

In only the first couple of years of the twenty-first century, marketers have felt the effects of this dramatic shift in power. The tragic events of September 11 sent businesses into a tailspin and the economy into a mild recession. This was followed by the war in Iraq, which created more confusion and uncertainty in the consumers' mind-set. These events, totally beyond anyone's control, have a dramatic and long-lasting impact on consumers and how they behave. Businesses dependent upon consumers need better tools to help them predict and prepare for the future.

Ever since the unexpected attack on September 11 and the question of what our leaders really knew about the presence of weapons of mass destruction (WMD) in Iraq, we've all learned, thanks to the CNN effect, the critical importance of "human intelligence" in the political and military arena. Many analysts and pundits have laid the blame for the terrorist attack and our subsequent intervention in Iraq on the fact that our country allowed its human intelligence capability to decline, while relying more and more on satellite, communications, and technically oriented data collection.

Like the government, many businesses and marketing executives have let their "consumer intelligence" slide, while relying too heavily upon factual point-of-purchase, real-time, computer-generated and supplied data. They want to see the future, yet they ignore the very information - the consumer intelligence - that will enable them to see it. Why? Because it doesn't graph nicely, and it requires a human being - an expensive, intelligent one with some real-world experience - to process it instead of a computer.

By understanding the why, your business strategy will be grounded and supported by consumer intelligence, not just historical facts and figures.

In this book, Why People Buy Things They Don't Need, you will gain insight and understanding about why consumers behave the way they do. By understanding the why, your business strategy will be grounded and supported by consumer intelligence, not just historical facts and figures. You'll find a lot of statistics, facts, and figures here, but you will also discover a new way to look at your consumers, not as a point on a data graph, but as real, complex, irrational but strangely predictable human beings who love and fear and strive and feel pain. They are wonderful. They are frustrating. They are awe-inspiring. They are fascinating. Moreover, they are our customers. We desperately need them. And we must respect them. That is why you as a business and marketing executive need this book, because without the consumer your business is destined to become history.