18 months ago, US retail giant Target stopped selling Amazon’s Kindle e-reader at its 1,800 stores. Why?
Because Target was, to put it politely, immensely irritated with a new Amazon promotion offering 5% off anything at Target if was scanned with Amazon’s Price Check app in-store, and then purchased on Amazon instead of at Target. Target was retaliating against technology helping shoppers maximise value.
Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information is a book about how marketers should respond to more savvy shoppers making smarter decisions because they have access to more information and more options than ever before.
Penned by two thought leaders in marketing, Emanuel Rosen and Itamar Simonson, Absolute Value is essentially a manifesto for marketing to the new smart consumer empowered by technology and information (including, and importantly product reviews)
- Research done for Google in 2011 found that the average shopper now consults 10.4 sources of information prior to purchase— almost twice as many as in the previous year
- Consumer confidence in reviews around the world is increasing. In 2012, 70 percent of consumers surveyed online by Nielsen indicated that they trust online reviews—an increase of 15 percent in four years.
- Thirty percent of U.S. consumers start their online purchase research with Amazon.com, which, with its wealth of reviews, has become a clearinghouse for product information.
The underlying argument of Absolute Value is that technology has changed how shoppers go about “value-maximisation” – the fundamental modus operandi of shopping behaviour – which simply means in plain English trying to get the best bang for our buck. Note that value-maximisation does not imply always going for the lowest price; we are are often willing to pay a premium for service, experience and image that are just as much part of the value proposition as perceived quality, performance and features. Instead it’s about choosing the option that provides the best subjective perceived value (influenced by cultural, social, personal and psychological factors) for the money paid.
Now, consumers have been traditionally hampered by two barriers to value-maximisation; imperfect and partial product information – including price information, and patchy product availability. With only partial information to inform a purchase, our value-maximisation will be sub-optimal. Likewise, if a value-maximising option is on the market, but not available to us at the point of demand, then time and space constraints further compromise value-maximisation.
However, technology is changing all this – making value-maximisation a whole lot easier through potentially perfect and unlimited information available on-demand and on-the-go, and a buy button that lies in the palm of every hand. Better informed with more buying options, the connected consumer is no longer held hostage to local monopolies and partial information that can create price and perception distortions in consumer markets. The practical upshot is that technology is making consumer markets increasingly rational – people are value-maximising better. To back up their point, the authors point to a number of studies showing that ‘irrational’ consumer behaviour (not value-maximising) noted in artificial lab conditions often disappears in real world, information-rich situations. Armed with technology and information consumers behave increasingly rationally.
Much of the Absolute Value is devoted to discussing the implications of this insight about market rationalisation to marketing, including a useful discussion about brand loyalty. In rational markets with near perfect information, we no longer need to be held hostage to a logo, or to our prior experiences as a signal or proxy for product quality. So brand loyalty – our propensity to repurchase – is eroded. Instead, and thanks to near perfect product information, we can now buy based on the actual ‘absolute’ value delivered by the product itself. Bottom line; if you want loyalty today, get a dog.
Absolute Value suggests instead that marketers should focus on communicating the “Absolute Value” of what we are promoting – the experienced value of the product itself, rather than building brand image or brand loyalty. The practical upshot of this is that in a world where consumers choose based on absolute value rather than brand spin, the central role of marketing changes from brand marketing to product marketing. The authors sum up their view with a nifty quote by serial innovator James Dyson
“There’s only one word that’s banned in our company: brand. We’re only as good as our latest product. I don’t believe in brand at all”.
The implication is clear for marketers – we need to focus on delivering the best value proposition – clear, distinctive and desirable – for our target markets. In essence, what is needed is a good dose of rational marketing.
Whilst Rosen and Simonson caution against throwing the brand baby with the brand marketing bathwater, especially for branded ‘low involvement’ consumer staples such as groceries, they suggest marketers should shift focus from persuasion, brand positioning and brand loyalty to informing, building awareness and generating interest in the absolute value of their products. To do this, they propose a new “Influence Mix” POM – Prior Preference, Other People (Reviews, Opinions), and Marketing – where the O plays an increasingly important role in marketing. Specifically, five implications for marketers emerge from Absolute Value
- Less focus on branding, more focus on product
- Less focus on nurturing loyalty, more focus on innovation
- Less focus on the “irrational consumer”, more focus on the rational consumer
- Less focus on “choice overload”, more focus on empowering choices
- Less focus on brand positioning, more focus on product value
So what to make of Absolute Value? Absolute Value is a smart, incisive and compelling must-read for marketers who want to understand how technology is making shoppers more smart and savvy. And loaded with examples from Asus, Amazon, Google, Kodak, Sephora, Hyundai, Samsung, Sony and others, Absolute Value provides a useful new framework for marketing to the smart consumer. Don’t be fooled by the cautious and tempered tone of the book – Absolute Value is a radical wake-up call for marketing and marketers: You absolutely need to get your absolute value proposition right.