October 25, 2008

Risk aversion or Brand Promiscuousness?

How willing are you to take a risk when it comes to the purchase decision?

Let’s take a situation I have come across so many times in my last job.
Say I am an average customer in the market for a brand new TV. I know little about technology and the merits of LCD or Plasma. I have heard about HD TV but I don’t really understand it. I do know that I will be watching DVDs, that I watch Satellite TV, and that I would like it to fit in my existing cabinet. Considering the average price ticket of the item I want, I want to make an educated purchase.

What are the means of information available to me?
  • My own knowledge & experience: I already have in my mind a series of conceptions about TVs and TV brands. This is an eclectic mix of what I have been exposed to recently and through past experiences. Advertisements, sponsors, signage, etc have familiarized me with a bunch of brands I am more or less attracted to for various reasons.

  • New media and the web: I can google HD TV or LCD TV or PLASMA TV; I can read blogs and forums posts from consumers; I can visit manufacturers’ websites; I can read the blogs and website of Technology specialists (CNET, etc.)

  • Magazines, TV, brochures, retailer catalogues and other traditional media: I will probably end up buying a couple of consumer technology magazines with reviews in them and watch some technological TV shows in my quest.

  • Friends and relations: I will talk to people around me, particularly to those who have recently changed their TV and get their opinions.

  • Stores: I will browse stores, look at designs, deals, ask the sales persons what is good and why, and I will begin to short list what I like.
In fact there are only three categories of souces to making a decision. Personal Beliefs / Trusted circle Beliefs / External insights and perceptions. These are key touchpoints a marketer will have to make sure are covered.
Presented with choices, the brain will start filtering all of this information and will push me towards what feels like the right balance or satisfactory state for me. The left and right brain will interplay to reach a conclusion I am comfortable with. The conclusion that is finally reached will ultimately depend on risk aversion – this to me is the real criteria.

How risk averse are we in a given situation? Early adopters for example are clearly less risk averse to technological innovations than consumers whose attitude towards technology is more traditional.

Buying a new brand is a bit like sleeping with a stranger (!) Sorry for the metaphor, but getting a new brand home is a bit like starting a new relationship.

Otherwise buyers turn to known brands for the reassurance of a continued happiness and the comfort of an existing relationship.

How “promiscuous” are we with a new brand?

That depends on risk aversion. Which is to use another metaphor a bit like finding out how many boxes you need to tick on the rational decision making side vs. the emotional decision making side. The more emotions involved... the more pleasure involved, the higher the risk. If you are willing to surrender to your emotions then you are less risk averse.

Instinctively our brain knows. “Where we have strong emotions, we're liable to fool ourselves.” Carl Sagan, Cosmos (Blues for a Red Planet), US astronomer & popularizer of astronomy (1934 - 1996).

“The degree of one's emotions varies inversely with one's knowledge of the facts.” Bertrand Russell

Brand marketing academics often refer to the brand pyramid.
I have used this myself in Brand research surveys. It is a very common way to measure Loyalty levels and attitude vs a given brand.

The Brand pyramid gathers at it’s base “Aware” customers and at the top “Loyal” customers (indicating a higher emotional relationship) with different steps like “familiar” or “most preferred”.

But on those aspects not all customers are born equal.
Some “fall in love” faster than others. They are simply more promiscuous.

Pic Credits from Flickr Creative commons: in order Zach Manchester UK, Fusion 2005 and cbcastro.

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