Hans browses around an upscale department store
searching for a gift for his wife’s birthday. He looks at this and at that and,
after two hours of searching, he finds something that he thinks his wife will
like to receive as a gift. The price is a bit “spicy”, but it’s a gift for his
wife’s birthday and there is no price for their love and (life) partnership.
Hans buys the gift and goes back home and hides
it in a place he knows his wife will not look. (or at least she will not say
that she found it before time).
While savouring his evening beer, Hans
remembers that during his shopping trip he spotted a nice watch he would like
to have. Naturally he doesn’t need a (new) watch. He has two already and he
always has his mobile phone with him; in addition he spends most of his day in
front of a computer. Hans realizes that, in fact, these days no one really needs a watch. However, he can’t
take his mind off that watch. He only got a glimpse of it, but it was enough to
realize that it was very beautiful and elegant. If he remembers right, it was
the same brand as the watch his grandfather had (too) many years ago, when Hans
was only a young boy.
A few days later, Hans is again in the upscale
department store and just for his indulgence he goes to the watch shop to take
a better look. He remembers seeing a tiny price tag and it was something like “2**
Euros”. Hans goes to the shop and asks to see and try on the watch he saw a few
days ago. It is truly superb and the sales-lady tells him it has a golden case,
but Hans can’t fully hear what she is saying since he is absorbed by the grace
and elegance of the watch. He was right. It is the same brand as his
grandfather’s watch.
After a few seconds of having the watch on his wrist,
Hans takes another look at the price tag. It was almost as he remembered: “2890
Euros” … he only missed one digit the first time. The sales-lady tells him that
the case is solid gold and weights 19 grams. For a second, Hans realizes that
he has on his wrist a watch that is worth about half of the car he and his wife
have. He simply cannot afford it and he thinks that it would be insane to even
consider buying it.
He gives the watch back to the sales-lady and, with
a bitter smile, tells her that the watch is very beautiful, but way out of his
league. She replies that there are other more affordable models and encourages
him to take another look at the display. Hans spots another watch that looks
similar to the golden one, though not as elegant and gracious, but still very
beautiful. He asks to see it. This time Hans is careful and takes a look at the
price tag first. It says “198 Euros”. Hans is relieved and tries it on.
Although it is not a gold watch, it is still very beautiful and elegant and it
looks great on his wrist. Moreover, this one too is the same brand as his
grandfather used to have.
Hans, proudly leaves the shop with a new watch
that is very beautiful, quite expensive and that he didn’t really need.
The (not so fictional) story of Hans and the
unnecessary watch holds many lessons about value creation and doing business in
the XXIst century. Here are some of them:
First, a 200 Euros Watch looks like a bargain
when compared to a 3000 Euros one.
Second, we buy things that we don’t need (also)
because they hold emotional and or status value.
Third, context is (almost) everything!
Glimpsing and getting an elegant watch makes perfect sense in an upscale
department store after buying something elegant for your better half. It might not have been so, on a casual Sunday walk in
the park.
Fourth, when selling status goods to men, it is
better to have ladies who sell.
All of these lessons are grounded in the
insights of Behavioral Science.
Established thinking (based on insights from
normative Economics) would suggest that only moderately rich and snobbish people
would buy expensive watches. However, Hans does not necessarily fits the
profile… in fact he doesn’t fit any profile since you don’t really know anything
about him.
Market research based on this “established
thinking” would have asked several hundred Hanses to say how much they would be
willing to pay for a watch… and the huge majority of answers would have been
below 200 Euros.
Behavioral Science, however, holds many insights that are not really
intuitive
and that go far beyond understanding (and
manipulating) the context of purchasing.
Behavioral Science can give insights into
creating value that both clients and companies need.
In a world where functionality is incorporated in most goods and
services, it is very difficult to create value by being even more functional.
Moreover, Behavioral Science holds several (potential)
answers to the question:
“How do we get out of the Price War?”
In a highly commoditized market and with an
increasing price sensitive target audience, functionality and (low) price are very
important. However, not the entire market is looking only for functionality and
not the entire target audience wants only small prices.
Businesses which acknowledge that the quality
(functionality) and price battlefield is not the only area of competition, can
break the deadlock and generate value for both their customers and themselves.
Just before the end… you should know that a
people better remember stories than anything else… this is why I wrote the story
of Hans and his new (unnecessary) watch.
Here’s the main lesson you need to learn from Behavioral Science:
First We Feel and only after (if at all) We Think!
Hurry up! Registration Ends on June 18
