Recently, one of my colleagues on Linkedin posed the following question:
Do customers know what they really want?
One of the beautiful things about a free enterprise system is that an appropriate value becomes associated with a product or service, along with its features and benefits, over time. This is how consumers express their needs and wants, even if it is subconscious. Customers frequently know what they want in a well-established marketplace. But when new markets, products, services and features arise, consumers might not be aware of their wants and needs. Price becomes a mechanism to articulate those wants. If features and benefits are "free", consumers will often overstate their needs and wants, and overconsume (witness, for example, the environmental issues that we confront every day - or indeed the vagaries of the Canadian Health Care system),
So, if a price is set on a particular product, feature or benefit, the customer becomes obliged to make a decision and evaluate that product in terms of its value: does this product meet or surpass my needs or wants given that I have to part with some of my hard-earned cash to obtain it?
An adjunct to this occurs when marketing comes into play: through advertising or other forms of promotion or endorsement, demand is actually created (marketers will deny to outsiders that demand can be created, but it can be). Consumers had no idea that they actually wanted or needed a product until the Paris Hiltons of the world told them that they need it. If the marketing effort is compelling enough, the need-want cycle starts to spin and a high price can be set. Would teenagers collapse 'en masse' in the streets if we confiscated their cell phones? Some behave as if they will. But thirty years ago, the human race was quite happy to do without.
So, my answer to your great question, is an unambiguous "yes, and no." And in that lies one of the great beauties and wonderful challenges of life in a free market system!
Do customers know what they really want?
One of the beautiful things about a free enterprise system is that an appropriate value becomes associated with a product or service, along with its features and benefits, over time. This is how consumers express their needs and wants, even if it is subconscious. Customers frequently know what they want in a well-established marketplace. But when new markets, products, services and features arise, consumers might not be aware of their wants and needs. Price becomes a mechanism to articulate those wants. If features and benefits are "free", consumers will often overstate their needs and wants, and overconsume (witness, for example, the environmental issues that we confront every day - or indeed the vagaries of the Canadian Health Care system),
So, if a price is set on a particular product, feature or benefit, the customer becomes obliged to make a decision and evaluate that product in terms of its value: does this product meet or surpass my needs or wants given that I have to part with some of my hard-earned cash to obtain it?
An adjunct to this occurs when marketing comes into play: through advertising or other forms of promotion or endorsement, demand is actually created (marketers will deny to outsiders that demand can be created, but it can be). Consumers had no idea that they actually wanted or needed a product until the Paris Hiltons of the world told them that they need it. If the marketing effort is compelling enough, the need-want cycle starts to spin and a high price can be set. Would teenagers collapse 'en masse' in the streets if we confiscated their cell phones? Some behave as if they will. But thirty years ago, the human race was quite happy to do without.
So, my answer to your great question, is an unambiguous "yes, and no." And in that lies one of the great beauties and wonderful challenges of life in a free market system!
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