214-Reliability in the Purchase Decision

In our StrategyStreet analytical framework, a customer subjects a potential supplier to two levels of elimination: invitation and evaluation. With “invitation”, the customer decides who he will spend any time considering in the purchase decision. In “evaluation”, the customer eliminates potential suppliers on its most important purchasing criteria. Then, the customer analyzes the remaining potential suppliers in detail in order to make his final choice. At both levels, the customer is looking to eliminate suppliers, not to choose one. (See the Perspective, “The Tallest Dwarf” on StrategyStreet.com.) In the final analysis, most buying decisions are the result of the elimination of all other competitors, rather than the positive choice of one of them.

McKinsey & Company used a construct similar to our approach of “invitation” and “evaluation” when looking on consumer decisions in the mobile phone market. It considered three stages of the customer buying decision: initial consideration, active evaluation, and moment of purchase. McKinsey, then, looked at how consumers made their choices at each stage in mature markets and in developing markets. What we see in the McKinsey statistics is the paramount importance of Reliability in getting to serious consideration, even in a relatively fast-growing market like mobile phones. (See “Audio Tip #95: The Customer Buying Hierarchy” on StrategyStreet.com.) The three most important criteria in the initial consideration in a mature market were advertising, previous usage and word-of-mouth. Previous usage and word-of-mouth are indications of Reliability concerns. Advertising can be either Reliability or Convenience. It is Reliability when the consumer looks to advertising as a sign that someone is a serious, reliable competitor. It is Convenience when the purpose of the advertising is to let the consumer know that the company can provide the product. In a developing market, the top three criteria are the same in a somewhat different order. (See “Audio Tip #70: Several Rounds in Evaluation Failures” on StrategyStreet.com.)

The mobile phone market is fast-growing. Differences in Function are important differentiators among competitors in this market, more so than in very difficult, hostile markets. But if the company can not convince a customer that it is a reliable supplier, it will never get the chance to demonstrate its superior Functions.

Posted 8/25/10

Update:

As you develop your plans for product innovation, first eliminate the reasons for your company’s failure. See HERE and HERE for an explanation. Then, develop your innovation program. See HERE for more perspective on developing new products and services.

10/22

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