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Affordable prices. Understanding customer needs and wants. Thoughtful and multi-channel promotion. In-demand product. Your own website and top position in search. A selling proposition that is better than the competition. It seems like we have everything we need to grow and develop our business successfully. But it may not be enough.
Consciously or not, we all go through a matrix of thinking about value, implicit and explicit, when making choices. Why does a customer choose a particular product? Did he like the colour? The model? The functionality? Did they like the price? Is it something they can’t live without? Or did they buy it to please themselves? These and many other questions are asked by a salesperson when considering how best to present a product, how to promote his or her business, and what to do to increase sales and keep customers coming back.
The explicit and implicit value of a product
The explicit value of a product is those features and benefits of the product that are easy to identify and measure. These are quality, material, price and function. But the hidden (implicit) value is related to non-obvious emotional, psychological and social needs. Comfort, pleasure, security, status.
Most sellers understand the explicit value of goods, know what to promote and how to influence the consumer. But few know how to work with the hidden value. To increase the value of a product, it is important to know what the majority of customers are looking for.
Hidden value is related to feelings, expectations and implicit psychological mechanisms. Limited editions and exclusive offers can create a sense of scarcity and exclusivity. Personalisation and customisation aim to retain customers by creating an emotional bond. By recognising hidden value, it is possible to increase sales and outperform competitors.
Pilot and autopilot
Nobel laureate and father of behavioural economics Daniel Kahneman has shown that human decisions and actions depend on the interaction of two systems: a fast system, which he calls “System 1: autopilot”, and a slow system called “System 2: pilot”. These two systems play a key role in our decisions and behaviour. The autopilot includes our perception of the familiar and intuition, this system is always active and is designed for fast, automatic decisions. The pilot is a slow, step-by-step system that we use to make conscious decisions.
Choice and commitment
Customers often make choices spontaneously, without considering the pros and cons, based on first impressions that are instantly and intuitively formed under the influence of System 1. At the heart of brand loyalty, the habit of buying what has been researched and tested, is an emotional connection. Famous brands inspire more trust, even if the technical characteristics of their products are similar to those of lesser-known competitors. People are willing to pay more for hidden value, for what they associate with a certain experience, status, an emotional connection.
System 1: Autopilot
Everything we do without thinking, out of habit, such as choosing clothes in the morning, or driving a car and reacting to familiar road signs, is System 1. All the things we do automatically, with little or no effort, and which do not require conscious control and analysis. This system is responsible for performing familiar tasks, recognising faces, understanding language and many other everyday activities. Everything happens almost automatically. Stepping out of your comfort zone” means turning off the autopilot. Once you are in a new situation, you begin to do things in a deliberate and measured way. For most people this is a daunting, stressful and overwhelming task. That’s why it’s so important to retain clients and motivate new ones by using System 2.
System 2: Pilot
Anything that requires thought, mental effort and rational analysis is System 2. Planning long-term goals, dealing with a complex situation, solving unusual problems, choosing a new shop, finding the right product – these are all deliberate and conscious decisions. The ‘pilot’ system minimises mistakes made in haste. System 2 is critical in situations where intuition alone cannot be relied upon.
Systems interaction
- System 1 often makes a quick assessment of a situation, based on intuition and experience, and passes it on to System 2 for more detailed analysis if necessary.
- System 2 can correct or confirm the decisions of System 1, but it is slower and requires more resources.
- System 2 is responsible for advertising perception: a person needs one second to evaluate a banner ad and two seconds to “study” an email ad.
Understanding the explicit and implicit value of a product and the factors that influence customer choice enables Stelvel Ltd marketers to create effective advertising strategies for the trading platform’s business partners. We help identify the rational and emotional needs of customers and develop effective promotional plans.