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How Buyer Perceived Risks (BPR) Affects Buyer Behavior and Purchase Decisions

"Risk"Image by IceSabre via Flickr

The notion that perceived risks influences purchasing behavior has been around for quite some time.  As we have seen an increase in the complexity of the buying process, we are seeing a correlating increase in Buyer Perceived Risks (BPR)© associated with purchase decisions.  Compounding perceived risks is the increase in choices as mentioned in my previous article as well as new social channels to explore.  This new mishmash of complexity, choices, and new channels causes a much higher degree of uncertainty on the part of buyers.

What does understanding choice have to do with Buyer Perceived Risks (BPR)©?  It comes down to two general areas:

Buyers are dealing with the uncertainty and the risks of making a bad choice

Buyers are dealing with the unknown consequences resulting from a bad choice

These two general areas of perceived risks are not necessarily new however the degree of impact has expanded significantly as a result of the convergence of the Internet and Social Technologies.

Bpr impact

Variables that are affecting the degree of impact include speed, awareness, chance, and reputation.  Put more simply:

The impact of a bad choice is happening much faster, more people as well as organizations are aware when they happen, there are fewer chances to recover, and more damage to individual as well as company reputation.  The end result being that buyers are perceiving risks to be greater than ever and making the right choice more challenging than ever. 

Previously, I had written about Buyer Perceived Values (BPV)© and the need to understand how buyers prioritize values.  The other side of the coin is to understand Buyer Perceived Risks (BPR)© and to understand how buyers see the degrees of consequences that can result from a bad choice.  This calls for senior executives and strategists to increase their understanding through what I call Buyerology© -  which represents a deeper qualitative level of buyer intelligence.  Gaining deep understanding of complex perceived values and risks provides a window into the mind of the buyer as well as the business culture of an organization.

What research with C-Suite executives has borne out is that this understanding arrives too late when it comes to new services, products, and strategies.  Oftentimes, learning the hard way why a new product launch, a new service capability, or a much hyped strategy implemented fell flat on its’ face – and both seller and buyer reputation bruised and battered.  To prevent their own consequences, selling organizations will need to improve their early-stage buyer intelligence capabilities and make the investment upfront as opposed to investing in post-failure debriefings.

Improving buyer intelligence in Buyer Perceived Risks (BPR)© can lead to being informed on important decisions related to:

Pre-Sales Content: Providing knowledge and information that instills confidence in choice and reducing perceived risks.

Sales Interaction: Enabling sales to engage in conversations and interactions that authentically confront perceived risks and brings them to the forefront of the sales process as opposed to last minute barriers.

Post-Sale Implementation: Content, implementation services, and interaction can all be used to enhance a buyer’s perception that adverse risk has been avoided and value gained.

There is a given in all this.  The given is that a selling organization truly has the quality and the confidence that it can deliver for the buyer and that it has assurances in place that they can reduce Buyer Perceived Risks (BPR)© significantly.  No amount of content, smooth talking, and excuses will make up for poor quality and capability of a product or service.

Understanding perceived risks today through deeper qualitative buyer intelligence (Buyerology©) can go a long way towards organizations standing out from the pack of options that can exists.  Insightful understanding leading to helping buyers to make choices that are made with more ease, confidence, authenticity, and affirmation that ultimately results in hard sought loyalty.

 

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Buyer Perceived Value (BPV) Scorecard: Qualifying and Quantifying Value

ScorecardImage by J. McPherskesen via Flickr

As a follow-up to the article Influence of Buyer Perceived Value (BPV) on Buyer Behaviors and Decisions, offered is a perspective on how to implement a scorecard approach.  The Buyer Perceived Value (BPV) Scorecard combines both a qualitative as well as a quantitative approach to understanding the influence of buyer values.  An important disclaimer here is that there have been many scorecard approaches for measuring customer value over the past two decades.  My point is not to endorse any particular one but to endorse the notion that values are rapidly changing and that buyer perceived value is critical to understanding buyer behavior.  The understanding of buyer behavior is the central focal point of Buyerology© and understanding Buyer Perceived Value (BPV) is one key aspect.

Before jumping into a quantitative approach, it is important to emphasize the need for reaching an understanding of Buyer Perceived Value (BPV) qualitatively.  Perceived values are changing rapidly and will continue to do so as new buyer behaviors are formed – changes driven by the introduction of new technologies and business models.  Multiple and varietal forms of qualitative methods help to provide a unique articulation of value criteria that buyers may formalize or internalize for decisions.  Qualitative understanding is essential due to buyers, common to human behavior, having difficulty in offering a clean series of statements that accurately reflect their value sentiments.  Multiple qualitative methods assist in identifying un-articulated patterns of thinking and behaviors that can be translated into value attributes unique to your industry, markets, and organization.  Basing a scorecard approach on a generalized and presumed sense of buyer perceived value attributes mitigates the usefulness of a Buyer Perceived Value Scorecard severely for informing buyer strategies.   Now let’s take the academic speak out of the above and simply say that if you base the scorecard on what you think buyer’s value versus actually going out to talk to buyers and using qualitative methods to uncover values – it will be of no particular use.

As mentioned in the previous article on Buyer Perceived Value (BPV), value has been viewed conventionally around product and service.  The convergence of the Internet and the Social Age is resulting in new as well as evolving values that we may not fully understand at the moment.  Calling for qualitative means of discovering exactly what these values are and the meaning behind them.  This is the primary reason why I advocate strongly the need for qualitative research to understand Buyer Perceived Value (BPV) meaningfully.

Once value attributes have been identified, monitoring and using a scorecard approach can help to inform how an organization can improve as well as build new strategies to better align with buyers.  To make a scorecard purposeful for informing strategies, there are several key elements to incorporate:

Priority: Not all values are perceived equally.  Determining through qualitative means how much weight buyers place on certain value attributes is essential.

Ideal: After values are weighted, what do the values look like in a perfect world to buyers?  The goal becoming how to score a perfect 10 on all value attributes.

Perceived: Once value attributes have been identified and established, a combination of qualitative and survey methods can help in discovering how buyers perceive the organization abilities in measuring up to the ideal.

Differential: Using the scorecard approach can help in identifying the largest differentials between what buyers consider of high value and where the organization is falling short in the minds of buyers.

Below is a simplified version of such a scorecard:

Bpv scorecard

In the example below, you will see a red flag around implementation support suggesting improvement.  You will also note that 24 hour turnaround is prioritized highly and this can include the use of social networks.  The meaning behind each value attribute listed should be supported by qualitative interpretation.  For example, what exactly do buyers’ value in implementation support?  How much of a factor is social engagement behind 24 hour turnaround perception?

Bpv scorecard example

By combining the use of multiple qualitative research methods and quantitative analysis, an organization can begin to get a realistic handle on how well they measure up to the perceived values buyers base decision-making criteria’s on.  We are at a point in marketplace history where uncertainty reigns.  The importance of refreshing, qualitatively, the understanding of exactly what buyers perceive as values and how much weight is put on each is critical to being on the buyer’s radar of choice.  What we can count on is that new technologies, services, and business models will cause shifts in what buyer’s value.

How do you plan to stay informed of these shifts in buyer perceived values?

 

Creative Commons License
Buyer Perceived Value (BPV) Scorecard by Tony Zambito is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.
Based on a work at www.goalcentric.com.

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Influence of Buyer Perceived Value (BPV) on Buyer Behavior and Decisions

value, not controlImage by Will Lion via Flickr

In my recent article, Buyerology: The New Science of Understanding Buyer Behavior, I introduced the concept of Buyerology and the need for a renewed focus on understanding buyer behavior in the Social Age.  A key component of understanding buyer behaviors and decisions is gaining a reality check on Buyer Perceived Values (BPV).  How well organizations; in relations to products, service, and brand; maps to Buyer Perceived Values will serve as the one of the primary influences that shapes buyer behaviors and purchase decisions.

Buyer behavior research, performed through qualitative means, can reveal many aspects of what comprises Buyer Perceived Values (BPV).  Buyer experience is now becoming one of the most important factors that contributes to and influences these values.  The convergence of the Internet and the Social Age, in fact, is introducing many new variables and factors that influence Buyer Perceived Values.  Some of the new variables include:

Buyer Experience: previous as well as in process buyer experience can have an enormous impact on how buyers perceive the value that organizations can bring to their challenges and environments.  This correlation is becoming stronger as more self-directed experiences by buyers evolve.

Engagement: I have written recently about social engagement as well as how buyers are internalizing their own Social Engagement Index.  Evidence is building that how involved and how engaged buyers are is shaping the buyer’s perceived value of making a decision to enter into a relationship as well as make a purchase decision.

Knowledge: shared knowledge related to informative problem solving can help influence positively buyer’s perceived values.  This is an area of improvement for the evolving areas of content strategy and content marketing.  Just as social media fatigue may be setting in, I am beginning to see signs of content fatigue also.  Content creation for the sake of content, especially with dramatic self-promoting marketing flair, is now getting filtered by buyers.  The old adage that too much of good thing can actually hurt you can be true in this case.

Network: a new evolving factor is the growing influence of social networks that extends well beyond peer influence.  A new dynamic that associates peer recommendations with something we can refer to as network buzz.  It is proving to be a tricky formula.  A formula that needs to be organic as opposed to imposed upon.

These are just four new and evolving, of sure to be more variables, that influence Buyer Perceived Values.  Dramatically calling for the need for further buyer behavior research that can help organizations today understand why and how buyers are making decisions today.  This does not minimize nor excludes other conventional type variables such as:

Brand: a strong brand is also a strong leverage point in influencing Buyer Perceived Values (BPV)

Loyalty: the cumulative value of previous buyer experiences and relationships can translate into strong customer loyalty

Quality: no amount of new efforts in social business and content marketing can make up for poor quality and service.  Another old adage applies here: make sure your house is in order before you move on.

Risks:  let’s face it – changing products or services in a B2B market can turn into an agonizing experience for buyers.  Buyers have to see the risks of changing mitigated in order to make a switch.  The degree of risks involved has a direct influence on Buyer Perceived Value.

Price: competitive pricing will always remain a significant variable in determining a Buyer’s Perceived Value.  The positive or negative impact of other variables can influence the tolerance level on pricing and how it directly influences a Buyer’s Perceived Value.

What we do know is that the above mentioned variables or factors, both new and conventional, translate into Buyer Perceived Values which directly affect the buyer’s behavior and decision-making.  How buyers experience these variables or factors throughout the buying process not only will shape their internalized Buyer Perceived Values but also determine how long they choose to stay in the buying process specifically with one organization versus another.

Understanding Buyer Perceived Values requires qualitative research means and constant monitoring as we now live in a hyper-connected and social world.  Not only will values shift over time, but we are bound to witness new factors or variables that evolve and further change the buyer landscape.

One place senior executives can start thinking about Buyer Perceived Value (BPV) in general is by asking: do I have any idea what our buyer’s perceived values are?

 

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