Price is more than $$ and cents cents.
Customers are sensitive to the cash price once they are in the store, but they decide on what store based on emotional likes or dislikes. All things equal, a customer will choose the product with the lowest cash price. Yet in real life customers make decisions on how they feel about the store, the products or services.
A customer's emotional desires can overrule the pure economic interest for lowest cash price. We'll call these desires the non-monetary value of price. Non-monetary price are all of the aspects of acquiring a product or service that require the customer to exert time, effort, experience an inconvenience or disruption to their normal activities. If any aspect of the acquisition process causes a customer to seek an alternative then the non-monetary price exceeds the economic interest of actual cash price.
One example of extreme non-monetary price was on the news the other night. In this case, the customer's desire for the product was so strong hundreds were willing to wait hours on end for a token that would allow them to come back later, waiting a second time, to buy Seahawks tickets. That's an extreme example of emotional desire worth any inconvenience. We'll call that strong brand loyalty.
In a more day-to-day situation, emotional pleasures include buying from a specific store, a specific style of clothing or a favored brand of any merchandise. These desires increase the willingness to pay a bit more and go a bit farther out of the way to get the satisfaction of the preferred product. Starbucks is an example of playing to emotional desires through delivery of a combination of product, service, setting and rewarding loyal customers to create a very strong customer base.
Test your own responses to the non monetary price on your daily activities.
Consider how long you are willing to wait in a drive-up line to obtain a latte. Will you stop at a store if you find a parking space in front, yet pass that store if you have to walk more than a block? Why do you shop at the stores you frequent most often? Is it sticker price or something else?
For business, minimizing the negative non-monetary price and maximizing the positive emotional desires is a case for understanding your customers. As consumers, we are not logical. We often make emotional decisions about which store we're going to before considering the cash price.
Jim Fletcher Small Business Development Center
Jim Fletcher has been helping business owners improve business performance at the Wenatchee Small Business Development Center for 11 years. His office is supported by the Port of Chelan County and the Port of Douglas County in a cooperative effort of Washington State University and the U.S. Small Business Administration. He can be reached at 509-888-7252 or email@example.com.
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|Title Annotation:||BIZ BITZ|
|Publication:||Wenatchee Business Journal|
|Date:||Aug 1, 2015|
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