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You have no idea why your products are bought

I dare to say that the vast majority of all companies have not a clue about why their products are bought. Or rather what perceptions about their company, product and brand actually drive sales.

Ask practically any CEO, and he or she will probably tell you that ‘quality’, ‘technology’ and ‘service level’ are the key factors.

But as a rule, it is not superior quality, revolutionary technology or ridiculously high levels of service that attract more people to buy – or even to justify paying a higher price.

For we buyers, it is most often sufficient that product or service quality is good enough. We actually make our choices based on entirely different parameters – at least if we are to believe the research into sales drivers carried out by John Anselmsson and Niklas Persson.

For nearly 15 years, John Anselmsson has researched marketing and purchasing behavior at Lund University School of Economics and Management, and the last five years he has been joined by Niklas Persson. Together, they have examined the purchasing behavior of both consumers (B2C) and companies (B2B).

The results of their studies show that the factors driving sales in B2C and B2B are more alike than different. And much more alike than I had previously believed.

Allow me to generalize.

Quality is an overrated concept. In most mature industry categories, given ‘ripe’ buyers who understand why they should buy a product or service, quality is considered a hygiene factor. A minimum level must be achieved, but not much more.

The same is true of recognition. That a brand is well known in the industry is important to a certain degree, but not more. Once that level is reached, the degree of ‘celebrity’ status has no further bearing on sales.

However, concepts like genuineness, authenticity and status, or prestige, are often high on the list of factors that actually drive sales. That the buyer (consciously or unconsciously) feels that the brand has a real purpose or an authentic foundation and that it raises or confirms the buyer’s social status (the person’s or organization’s) is far more important than such sales-promoting parameters as specific product features or quality and service parameters, whether you’re selling machines or marmelade.

A simplified but actual example, B2B, showing the difference between criteria customers say are important in the choice of supplier (Y axis) and the criteria that actually determine the choice (x-axis).

But even more important seems to be the sense of belonging – of being rewarded – the highly irrational experience of the brand’s ability to give the purchase some form of meaning in a social context.

Successful brands have understood and applied this. They establish psychological ties with their customers by offering the buyer a little help to build and consolidate her own identity by offering a form of social security in the choice of brand, for instance by showing that others have also made the same choice.

After all, we often buy the same things our friends buy, listen to the same kind of music, see the same movies and read the same books. Or as advertising guru Rory Sutherland recently wrote in a very readable blog post (slightly paraphrased):

“Most people, most of the time, are not using insane amounts of mental energy to attempt to optimise every decison. They are instead simply trying to avoid making a decision that is actually bad or which might cause them to look or feel foolist. For those people, good enough generally is. […]

They are not using their brand choices to compete with their fellow man, or to draw distinctions between them and their peer-group. They are using them to fit in. To conform, not to outdo. […] And, when making a purchase, what most people want, most of the time, is not the best they can buy: they want something that’s very unlikely to be crap. […]

Regret is a huge emotion, and people will pay huge sums to avoid it.”

In addition, far from all decisions are decided on an individual basis. In many cases, the choice of both product and brand are a compromise – a kind of “the group’s lowest common denominator”. The choice falls to the alternative that everyone can accept, rather than the choice that one or a few people in the group prefer. And it probably applies just as equally to household purchases as company investments (more on this subject here, in Swedish).

So much for generalization.

More specifically, the dilemma is that companies are seldom aware of the connection between people’s knowledge, views and feelings, and what actually stimulates them to want to buy or pay a higher price. Put another way: Companies know perhaps if the brand is well-liked or not, but not if it is popular for the right reasons.

Almost all traditional brand studies therefore deliver irrelevant results. They cannot show why the brand is purchased or not purchased. Which in turn makes it totally impossible to prove that the branding work actually contributes to the company’s business performance.

Johan and Niklas have a cure for this. Their research has resulted in a study model which, with a high level of certainty, can identify what sort of parameters actually drive sales in a given industry and in any given market. And what associations with a particular brand are most beneficial to build on, or consolidate, to maximize market share and/or justify price premium.

Unlike traditional customer satisfaction and image measurements – which basically only identify what people know and what they think – this enables you to identify which, of all these thoughts and feelings, are most important to maximize your sales.

But be prepared to be surprised.

The factors that drive sales are, as mentioned, rarely product-related.

Niklas Persson’s doctoral thesis, “Tracing the Drivers of B2B Brand Strength and Value”, willl be published May 11. You can pre-order it now by sending me an email. (This post was originally published in Swedish on the blog The Brand-Man.)