Thursday, 4 December 2008

Losing control at the car mechanic’s!

Companies that want to gain market leadership understand when consumers want to be in control of their purchase decision process and facilitate this.

We write this as a reaction to two recent purchases. Car tires and a car battery. For the first time in 10 years, we had to do this. It was not pretty; the average car workshop in India is very very ugly. It was not easy; we have little interest in cars, and so know very little about the products we were going to purchase.

It was a very suspicious process; the folks selling to us seemed to know no better than us.

We parted with a lot of money that we cannot justify beyond assuming that the seller knew better.

And in return, along with some tires, we were left with a question. Why do we know so little about this product? And why do we allow a complete stranger to decide how I will spend $250 ?

We thought of our purchase process for various products. Toothpaste, computers, apartment, car, tires….and concluded that our involvement in purchase decisions depended on :
1. inherent interest in a category,
2. the hardship from a bad purchase and
3. The cost of the purchase.

When we bought stationary or light bulbs, we simply accept the dealer’s recommendation. (As long as he offered the low energy technology on the bulbs). This is interesting, bulb makers make us aware that new energy efficient technologies are now replacing traditional bulbs. Did you know that energy efficient tires exist as well?

Why is it that the bulb maker does not leave this to the dealer to explain to me ,but the tire maker does?

Some purchases such as toothpaste/ shampoos/ light bulbs happen very frequently. A consumer shops for these types of products almost every month. (Unless he is a bulk buyer). Consequently, we are open to information about these products.
An advertisement is likely to influence choice (and be remembered) at least till the next purchase which may be a few months away.

For a car tire or battery, however, the purchase cycle if often in years. 3- 4 years sometimes. An advertisement may not necessarily stay with the consumer till his next purchase.

On the other hand, since the need for new tires is not usually evident in advance, the mind is not usually receptive to any information.
And it is only when we are engaged that we seek information.

A number of purchases are made on the basis of “habit”. Here the familiarity with a product category has been built up over time. A toothpaste is bought once a month. Only a very critical piece of research or a very poor product experience can change this habit. Having used both Pepsodent and Colgate, we personally choose Colgate because of its smoother mouth feel. What marketing message talks of this?

(We buy toothpaste for its medical value no doubt, and advertisements continue to emphasise this. But having realized that this benefit is now assured in every tube, we have moved onto other differentiators. A toothpaste manufacturer however is limited by the fact that he must continue to emphasise this medical benefit, less his competitor gets perceived as being better on this parameter.)

Being exposed to Colgate and Pepsodent advertisements on dental hygiene reassures me that my choice is OK.

With a light-bulb, which is less difficult to differentiate, we are more open to a dealer’s recommendation. As long as the “industry standard” technology is being respected. We don’t need to be in control. Again the key parameters:

1. inherent interest in a category,
2. the hardship from a bad purchase and
3. The cost of the purchase.

When the value of good increases, the risk from a bad purchase magnify. Then we ourselves seek for information.

Take clothes. We have some brands in mind as we begin the shopping process and then select based on prices/ designs / sizes. Seldom do we respond to the dealer’s recommendation.
At the same time, with little product differentiation, most companies work on the “qualitative” elements of the brand. The cost of a bad purchase is high and obvious very quickly.

A consumer is evaluating for himself, which category of products he wants information on. And then his level of “education” depends on the interest in the category and the information available.

However, successful companies have helped consumers re-prioritise. Think Intel.

If the information in the “public” domain is limited, the consumer depends on the dealer. When this product is a high value purchase (monetary or emotional), frustration is likely, since the consumer perceives a loss of control on the decision.

Usually, consumers do not invest time in learning about product categories which are cheap (per unit), last only a short duration (and any error can be corrected very quickly at low cost) and do not have a very damaging effect. (Our observation is that women take more time to choose between skin creams than between toothpastes).

So why dont we think about our tires and car batteries?

And hence we are perturbed, and surprised by how little control consumers have on their purchases of tires/ car batteries. There is not much “authoritative” information on these products. The need for them arises at very short notice, so a consumer that has not already made up his mind, often finds himself with not time to do so at the dealer point.

Then, the dealer becomes the decision maker.

Obviously, incentivising dealers to push their brands was cheaper and easier to control as compared to a direct engagement with consumers. More so that in a product seen as a highly technical, the role of the dealer was perceived to be the one of “experienced educator”.

But a dealer incentivised to maximize his gain, may not necessarily give the consumer the best possible advice. Not being in control in this purchase decision, does not amuse us. It’s a lot of money to give away on the advice of strangers. And clearly, in the tire business, we don’t (as consumers) perceive any clear market leader in India.

As in the pharmaceutical industry, it is necessary that companies invest in educating the consumer. If the computer industry has taught me to identify differences in hardware, why cannot the tire industry. It will be expensive, and the industry is not known to be a big cash generator, but then this is a Catch 22 situation. Consumers will pay premiums when they understand the benefits. Only through creating “demand” for their brands will true market leaders emerge. Those that will gain above normal margins. Otherwise this industry will be held captive by intermediaries (dealers) whose interest is not in product innovation and category advancement.

There is no justification any more for why companies will not spend money educating their consumers, if they expect these consumers to remain loyal and discerning. There is no short cut to this. No amount of dealer incentives or original equipment (OEM) recommendations will justify the loss of control that consumers face in these product categories.

Companies that want to gain market leadership, understand when consumers want to be in control and facilitate this.

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