Sales

Make it easy for customers to evaluate your product

James Thomson /

feature-compairson-shopping-200A crucial part of marketing is to make it easy for the customer to undertake an evaluation of your product or service.

We need to answer this question: ‘What information can we provide or what mechanisms can we employ to enable the customer to more easily evaluate the degree of fit of our products or services?’ We actually want to be excluded if we don’t have a good fit as a poor customer experience can have long-term negative consequences on our reputation and referral sales.

The amount of time and expense a customer expends on evaluation prior to purchase very much depends on their perceived risk, which can be highly personal. Depending on their prior knowledge, net worth, sensitivity to external opinion and so on, the perceived risk will vary greatly from one person to the next.

Perceived risk itself is thought to be composed of a number of components:

a) Financial Risk – the likelihood of a financial loss due to selecting the wrong product or service, as well as hidden costs, cost of maintenance or lack of full warranty in the case of faults.

b) Performance Risk – the chances of the product or service failing to meet the anticipated or expected performance requirements.

c) Physical Risk – the probability of the use experience resulting in physical harm or injury.

d) Psychological Risk – the chances of the product or service being inconsistent with the personal or self-image of the consumer.

e) Social Risk – the likelihood of external parties thinking less favourably of the consumer.

f) Convenience Risk – the probability of the consumer wasting time due to delivery delays, downtime, maintenance or repair time or time to customize.

g) Dissatisfaction Risk – an overall measure of the likelihood that the product or service could result in dissatisfaction with the purchase.

While these are stated from a personal consumer perspective, the same elements apply within a commercial purchasing process. We may be talking about an individual manager, a business owner or a committee making the decision, but the same considerations will apply to a greater or lesser extent.

What is apparent from this list of perceived buyer risks is that the vendor is able to influence some of these elements more than others. What we have to do as a vendor is to work through each of these elements and put in place development, marketing and support processes to lower the perceived risk. Clearly the lower the perceived risk, all other things being equal, the more likely the customer will buy from us and buy sooner than later.

One of the reasons why ‘brand’ is so important in marketing is that it conveys information to the consumer of selective characteristics of the product or service that impacts on their evaluation of perceived risk.

For example, if Toyota has a long history of quality cars, I will have less perceived risk on a number of these elements, especially if others around me recognise this factor in my decision and they value that dimension of a purchase. However, if Toyota suddenly experiences safety problems and then recalls large numbers of cars, my perceived risk will increase causing me to spend more time on evaluating this aspect of the purchase and leading me to choose another car.

The power of the brand extends across products I have no prior experience of. So if a brand releases a new product or service, I will use my knowledge or perception of the brand as an input into my decision process. If, historically, all Sony products performed to specification, I can expect a newly released product to do so as well.

However, brands take time to establish themselves and so an emerging company needs to look at other methods of conveying the message of low perceived risk. The customer will receive many inputs into their decision process, some of which emanate from the vendor. Others will come from family and friends, peer groups, reference groups, articles, product reviews (of varying levels of quality and independence) and social media. The customer has to weigh the reliability, independence, bias and accuracy of each source in using the information.

The firm has a great opportunity to be part of this information gathering process and can have a greater or lesser impact on the final decision depending on how they present the information and how it is received. To get the message right requires an understanding of the influence each item of information has and how it is perceived.

In essence, we need to take each of these elements of perceived risk and design programs to address each one.

To begin with, we want to have the highest chance of being evaluated because we can solve the problem or need. This goes back to getting the message right. We must have a clear understanding of our ideal customer and a process that puts our message in front of them.

Once in the evaluation box, we need to convince the customer that we have the best fit and the lowest perceived risk. These are mutually supportive as the best fit will normally result in lowering some of the elements of perceived risk. So our first task is to establish fit.

This is a good place to start as many firms fail to do so. They spend their time putting out content about features and functions and technical specifications without building a case for solving the problem as seen by the customer.

We can demonstrate fit by showing how others have used the product or gained appropriate outcomes of the service. This can be done through case studies, testimonials, reference group endorsement and so on. We can also develop our goodness of fit through demonstrations, whether on video or live. In other words, if I can see it working, I may have a much better idea of how it works and whether it will satisfy my requirements.

I can also use a ‘try before you buy’ process. Whether this is a rental, loan, trial or sample, a complimentary period of use or experience, or a brief exposure. Can we put the customer into a brief user experience? It is the perception of risk we seek to change and if a user experience will substantially lower that, then how do we create one? You also see this process demonstrated with digital products. I can download a chapter of an ebook from Amazon or download the first song on an album. I can often download a trial version of a product with limited capacity or for a limited trial period.

We also want to know the metrics the user will employ to judge the suitability of a product or service. Can we provide the necessary information or data to allow them to self evaluate? Can we provide a simulation tool or diagnostic that will allow the customer to discover whether an item will satisfy their needs? For example, can I upload a photo of a painting and try out different frames? Can I estimate my mortgage repayments using a mortgage calculator?

We should not underestimate the value to the customer of participating in the choice of what they will buy. Can I choose my own seat in a theatre or on the airplane? Can I specify various characteristics of the hotel room or car interior colours? Can I try out different colours on my walls before I buy the paint? The activity of participating in the decision process brings value in its own right but also tends to gain higher commitment and satisfaction.

Where the item is an intangible, which must be experienced or consumed before it can be partly or fully evaluated, we are at a definite disadvantage. I can tell you all about it. You can talk to prior users and I can load you up with testimonials and references, but until you have the experience yourself, you will not be able to judge the outcome for yourself. The more confidence I can build, the more likely you will be to buy.

One technique used by service providers is to focus on the process of delivery or engagement. If I show you how I will deliver the service, I am hoping I can lower your perceived risk.

Example – Software implementation

I was involved in the sale of a complex enterprise-wide solution to a corporation, which required the system to be implemented into 23 factories across the USA. Our firm was the owner and developer of the software and had a number of existing satisfied clients. Our salesperson presented a very professional Powerpoint presentation outlining our expertise and experience. As a relatively large firm with our prior experience we believed that we had the contract in the bag.

Our competitor was a small firm of consultants who had implemented several successful sites. What they did was to show the documented process they would use to ensure the project managed risk and timescales and controlled the expenses of the implementation. They won the contract. They had understood more than us that the client was very concerned about the risk of lack of staff support for the project and the risk of delay and cost exposure.

Example – Consulting Project

In one consulting project on customer service we estimated a cost of $100,000 spread over a twelve-month period. To a small firm, this was a large expenditure as they were not sure of the outcomes. Rather than confront them with a ‘take it or leave it’ agreement, we broke the project down into several stages with each stage having measurable outcomes, a review process and a go/no go decision. We effectively reduced the risk to one stage at a time, which reduced the perceived risk to the customer. They felt much less exposed and much more in control.

I also have to work on perception. If my input into their decision process leads them to an incorrect assumption, I may well be at a disadvantage relative to my competitors.

Example – Setting the Price

Each piece of data the customer receives can impact their decision. At one stage, my firm sold a suite of corporate financial applications into the SME market. Because several of the developers were trained in accounting, the functionality was very deep and the product was exceptionally easy to use. However, we kept losing sales to less functional but more expensive products. When we finally had the opportunity of talking to those customers who bought the competitive product, we discovered to our dismay that we had been dismissed due to our low price. In their words ‘we could not possibly have the level of functionality needed in a product at that price’. We trebled our price and found we could more easily win business in that sector of the market.

It is important that you discover how information on your product or service is received and interpreted by those who buy your product or service and those who do not. Selling to the wrong customer simply leads to disaster, so it is important that those who do buy from you do so for the right reasons. Equally, it is critical you do not lose customers who should have bought from you and for one reason or other, did not. Only by talking to customers and lost prospects about their evaluation experience will you have the information with which to refine your impact on this element of the buyer decision process.

What we often forget is that this information search and evaluation process is a key part of the buyer experience and may have a significant impact on the overall experience of the customer. I may end up with the right product but it may have been through a frustrating and exhausting process. I may decide next time to look elsewhere rather than deal with the same vendor or even compromise my desired outcome to avoid some part of the prior experience.

On the other hand, an evaluation experience which was efficient and even pleasant or enjoyable may well encourage me on the same journey again. How easy we make the evaluation and how enjoyable the experience, relative to other purchase decisions, will influence whether I buy again from the same vendor and whether I recommend the firm to others.

In early stages of the buying decision process, our task is to make it easy for the ideal customer to find us and evaluate our offering and to do so with the least effort and perceived risk.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia. A series of free eBooks for entrepreneurs and angel and VC investors can be found at his site here.

 

 

 

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James Thomson

James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review's companies & markets editor, and a former BRW editor.