One of my university classmates was the son of a fertilizer billionaire. We were in a marketing case class once, and we were delving into the issue of a particular denim brand whose pants cost more than $300.
This wealthy friend informed me that anyone who spends $300 on pants genuinely needs anything besides jeans. I would never pay so much for just a pair of pants.
It tickled me that this phrase came from a billionaire. The point, however, was valid. Nobody wants a piece of clothing when they pay 900% more for a pair of jeans than any other high-quality competitor. You may already have a few theories about why people spend their paycheck on a jacket, pants, or watch. Quality, durability, design, and customer service are just a few examples. They aren’t all of them, though.
Understanding why people buy ultra-expensive goods assisted me in understanding my own customers: budget backpackers. It will also help you with your marketing efforts.
Customers are aware of their problems, but not always of the solutions.
Henry Ford, a founder of Ford Motor Company, shared a remark made during a disagreement with a customer-research professional, frequently cited (with varying degrees of veracity).
If I had asked what they wanted, they would have said faster horses. In reality, the point he made (if he said it) is verifiable.
A shoe is a type of footwear that protects and supports the human foot. A $40 mass-produced but high-quality shoe could fill this role. On his wedding day, a junior diplomat meeting with a prime minister, or a young lawyer meeting with potential clients, on the other hand, may choose to invest in expensive, branded, or even handmade shoes.
Why do they pay 100 times more for a nearly identical product? In the preceding example, the response could be validated. Confirmation is required by politicians and economists, for example. As a result, high-end accessories assist them in projecting a successful image. Will a Wall Street trainee reveal that he bought something to gain approval from his peers? Unlikely.
The (supposed) quotation from Henry Ford was helpful in this case. How can we know what the client wants if we can’t always rely on their responses to our questions about what they require?
We must examine deeper into the human psyche.
Unusually, what we’re selling is in demand by customers. It’s a byproduct of what we’re selling. Although at first glance, they seem to be the same, there is a significant difference. A person purchasing a $4000 pair of shoes expects more foot protection and shelter than the $40 discount-store shoes provide. That, as well as something else, is what they seek. Something to compensate for the $3960 price difference.
My first offering in one of my businesses (a consulting firm) was consulting sessions for expatriates in Europe and South America. After a while, I noticed that clients were concerned about wasting time and money by hiring a consultant hourly without knowing if we could solve their problem.
As a result, we revised our proposal. Rather than selling consulting hours, we started marketing the guarantee that we would solve our clients’ problems or they would not have to pay us a dime. Not only did this make our offer more appealing, but it also allowed us to raise our price. Our customers didn’t want a consultant; they wanted peace of mind, which we now provide.
This development was a watershed moment in the history of our company.
How to Make the Most of Scarcity’s Luxury Aspect in Your Business
One of the most appealing – and contentious – reasons consumers buy expensive products is that they are scarce. Scarcity creates two consumer hooks at the same time:
First, there is a sense of impending doom. Customers have little time to consider their options because the number of products available for purchase is limited. Before we spend money or resources, we fail to ask basic questions. This rush encourages people to shop on the spur of the moment, making less rational (but more emotional) choices.
The second impression is one of exclusivity. The Veblen Good is an economic concept. Because of its one-of-a-kind nature and appeal as a status symbol, demand rises as prices rise. Unlike average items with a downward demand curve, Veblen goods have an uphill demand curve (where rising prices decrease demand).
- Scarcity, on the other hand, must serve a purpose to entice customers.
- Handcrafted shoes or purses as opposed to mass-produced in automated factories.
- Cosmetics are made from unusual materials.
- Concerts for a small number of people.
- Doctors, lawyers, and other specialists only have so many hours in the day.
Limited editions of automobiles were created to commemorate specific events, such as the Aston Martin created to celebrate the 25th James Bond film.
- Make it clear to your customers if you have limited stock or hours of operation. It will work to your advantage (and theirs). My consulting firm’s calendar, which shows the hours available for consultation sessions, emphasizes this scarcity. The website of my tourism hostel displays the public rooms, which are limited during peak season.
- Clarifying that your products are limited will assist clients in understanding your availability and will benefit your marketing efforts.
Conclusion: How the behaviors of premium clients can help budget backpackers and others understand themselves.
Understanding why people buy expensive items is helpful for more than just selling costly items. In reality, it is a game-changer for any marketing campaign. It was for both of my businesses, an ex-pat consulting firm and a tourist hotel.
The hostel case is intriguing because it shows how subtle customer decisions can be. It’s a tourist in close to the airport. Many of our clientele consists of lay-out tourists who want to rest before their next flight or visit the city’s old town. Our initial offer was for clean accommodations in a pleasant and relaxing setting.
However, I quickly discovered that this was not the case for all of the customers. They also wanted to know that they wouldn’t be late for their next flight, which we couldn’t guarantee. This was a secret that neither our competitors nor we knew about.
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We’ve added a free airport shuttle to our standard package, ensuring that our customers arrive on time in comfortable automobiles for their next flight. This increased our appeal to the point where we raised the price by more than the “free” transfer cost.
Consider the following: what are your clients’ hidden desires? Rather than asking what customers want, inquire about the outcomes of their purchases. Nokia was defeated in the war against Samsung and Apple because it failed to recognize this.
People do not purchase Disneyland vacation packages; they are buying the smiles on their children’s faces. The general public does not purchase insurance. They function as a type of insurance. People do not buy Volvos; instead, they buy a vehicle with a better safety record.
Fill in the blanks with the best answers you can.
What is the most significant benefit that my customers get from the products I sell? The advantage of staying in an airport hotel, for example, is not to sleep in a room but to arrive refreshed on the next flight and destination, ready for a relaxing vacation.
How can I create a sense of scarcity given my business constraints? For example, during peak hours, my consulting firm’s online consultant calendar is disabled. Is there space available at my hostel, for example?
What are my prospects’ grievances, and how will I respond to them? One of my consulting firm’s customers, for example, was concerned that we wouldn’t be able to solve their problem and that they would be wasting their money.
What is the craziest offer I can make (with a guarantee)? It’s critical to remember that offering something unique from your competitors makes you more appealing. For example, I devised a promise for my consulting firm that we will not charge any fees until we can solve the problem.
After you’ve answered them, use the data to exceed your customers’ implicit desires, and you’ll most likely be able to raise your prices.