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Trade-offs: What's a nice to have vs. must have?

Posted by Tara Lasker on Tue, Mar 29, 2011

M  CMB Photos and Stock Photography Stock Photography Objects ScaleAs researchers, we move through life a bit differently than other people.  We can’t watch television commercials without thinking about how well the spot tested (or if it was tested at all).  We’ll pause in front of an in-store display and carefully consider whatever’s at eye level.  We spend so much time helping clients understand consumer behavior that it really becomes impossible to turn that perspective off in our personal lives; in fact, in many ways that 24/7 perspective is arguably what makes us good at what we do.  And it can work to our advantage in our personal lives as well.

Recently, I bought my first house – a big decision for anyone.  As I was thinking about the kinds of things most people consider while house hunting (new versus old, proximity to the city, layout, price, school district, commute, etc), I naturally moved in to “research mode” and ran my own mini discrete choice.  I was thinking about all of my options in a way that gauged my purchase interest.  In many ways I was simplifying the “product” (in this case, my house) and my decision by separating “must haves” from “nice to haves.”

When you think about it, discrete choice is everywhere, especially in situations where the “product” has a high value – and therefore more risky. Take another big purchase like an engagement ring, for example. What matters most in the purchase process? What are the “must haves” and what are the “nice to haves”? Once a company understands what the consumer values most in their decision making process, the rest of the story becomes so clear.

We worked with a well-known national jewelry company to understand the value of a branded diamond. Does the brand of a diamond fall on the “nice to have” or the “must have” side of the purchase decision? How much would brand ultimately stand up to the 4Cs (cut, clarity, color, and carat weight) in an engagement ring purchase? The research showed that consumers were far more driven by the 4Cs and confirmation of the stone’s authenticity than they were by the brand name.  Consumers have been “trained” to value those 4C’s as the most important decision factors when purchasing a diamond. In this example what really mattered was value, defined not just by the cost of the investment but also by the return.  What are you really getting for your money?  Unless money is no object, isn’t that what you want to maximize when purchasing a home or any big purchase?  

Investing in, asking, and understanding what moves the customer through the purchase process is far more critical than guessing or assuming an investment is worth making, because guessing wrong can cost way more in the long run.  Whether we realize it or not, we are constantly making trade-offs, in our purchase decisions and in life in general.  We have to.  But for companies, understanding what those trade-offs are and how they differ by customer segment can unlock tremendous value.

 

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Tara Lasker, Director of Project Operations, is currently knee deep in renovations but a proud new owner of a 130-year-old Victorian home.

Topics: advanced analytics, methodology, path to purchase