POUR OUT YOUR MIND IN ENGLISH

Five reasons why people don’t buy
(Part 2 – No Need)
By Renzphotography

This is the second part of the essay started by the author in this section last week.
Click this link to read the first part

(2) No Need

There is a saying among salesmen that you know you are good at the trade if you could sell a refrigerator to an Eskimo man.

The paradox highlighted here is, “Why would an Eskimo need a refrigerator when he is surrounded by ice almost all year round?” We could simply imagine the level of selling skills a salesman must have to pull off this feat. This saying also points out the difficulty or perhaps virtual impossibility of selling an item that is not needed.

As we move on and discuss the reasons why people don’t buy, we will now tackle one major stumbling block faced by salesmen—the lack of demand. Or simply put, when customers do not see the need for the product being peddled.

Except for compulsive buyers, people normally give thought to their purchases especially if the transaction entails a large sum of money. If we factor in the economic difficulties of our time, then it makes sense to spend only on items that we need and also to prioritize the purchase of items that are deemed as necessities and to forgo those that are less vital.

But what if you are selling something that is seemingly of less importance, or, worse, useless and unwanted by your target market?

And yet, seasoned salesmen know that if they push the right buttons, they could still manage to sell their wares. The crucial needs that must be served are not the ones on the surface. Salesmen know that there are two types of need, the “stated need” and the “unstated need.”

The stated need refers to the overt need as expressed by the customer; such is the case when he goes to the counter and asks for an item. However, the unstated need is the real motive that drives the behavior. This is sometimes referred to as the “human desire” that transcends satisfying a simple need. In fact, unstated needs correspond to the emotions that drive purchase decisions like love, prestige, fear of loss, greed, and guilt as discussed in previous posts.

Allow me to illustrate this:

Ex. 1:   Love            

Stated need:
“I want to buy a tube of toothpaste.”       

Unstated need:
“I want to have confidence to face the girl of my dreams.”               

Ex. 2:   Prestige

Stated need:
“I want to buy a car.”

Unstated need:
“I want to impress my friends and especially the girl of my dreams.”

Ex. 3:   Prestige

Stated need:
“I want to get a Platinum credit card.”

Unstated need:
“I want to be treated very special and I want access to special privileges.”

Ex. 4:  Guilt

Stated need:
“I want to buy a gift for my in-laws.”

Unstated need:
“I don’t want my wife to think I’m being bitter by not extending the gesture.”

Ex. 5: Fear of Loss

Stated need:
“I want to get health insurance.”

Unstated need:
“I don’t want to have big medical bills should I get sick unexpectedly.”

We must keep in mind, however, that the target customer is not always consciously aware of his unstated need. Therefore, it is up to the salesman to recognize it and bring it to the surface during the sales presentation.

Surprisingly, it is also possible for salesman to suggest an idea, confuse the priorities, and eventually convince the target customer to buy the product based on the suggested need. Short of branding some salesmen as hypnotists, I have met some who were very good at making suggestions that they can virtually spoon fed the target customers with their rationale until they are eventually induced to make the purchase.

In a larger sense, the need for a product or service (and the satisfaction it gives) could make or break a trader. Among economists and businessmen, the general public’s need for a product is called “demand.”

Especially when the product or service caters to the mass market, attempts to appeal to the unstated need are systematically used by advertising campaigns. The use of mass media (radio, television, print) to attract buyers is simply the preferred method used by advertisers to develop and drive the demand for products, and we only need to watch TV for a few minutes before getting inundated by such advertising material.

The Law of Supply and Demand

If we think about it, whenever there is talk of a price increase, we often hear traders explain how the Law of Supply and Demand has influenced the price increase. However, do we truly understand this powerful economic model? Allow me to explain this in simple terms for everyone. The key elements of this economic model are price, demand quantity, and supply quantity. Next, we have to understand the dynamics that takes place as these factors influence each other. For a clearer illustration, let us put this principle in the context of one commodity—tomatoes.

Let us assume that there are 100 kilos of tomatoes priced at P20 per kilo, and that the demand for the produce is at 100 kilos as well. This implies that the market demand (the combined need of various individuals/households) for tomatoes is equal to the supply available and buyers are willing to pay P20 per kilo and nothing more. From this point on, let us keep in mind that any change among the three factors could upset the balance (equilibrium) and affect the other factors.

The common explanation that goes with the Law of Supply and Demand is that prices will go up if the demand is high, but that prices will go down if the demand is low. Moreover, prices will go up if supply levels are low and prices will go down if supply levels are high.

Allow me to explain this further using the case of the tomatoes. Should the demand for tomatoes rise to 120 kilos and the supply remains constant at 100 kilos, then the shrewd trader will maximize his profit by selling at a higher price, say P25 per kilo. People will pay the extra amount because there is a supply shortfall of 20 kilos and they have no choice.

Perhaps some people will decide not to buy anymore, but there will still be enough buyers who can afford the price increase and buy the produce until all the 100 kilos is bought. However, if the trader raises the price too much, say to P30 per kilo, then the number of buyers who can afford the commodity will decrease further, resulting in some of the tomatoes being left unsold. To sell the remaining tomatoes, the trader might decide to reduce the prices to a more acceptable level or suffer spoilage of the tomatoes.

Similarly, if the available supply decreases to 80 kilos and the demand remains constant at 100 kilos, then there could still be a price increase because there is still a supply shortfall of 20 kilos.

Conversely, if the demand is constant at 100 kilos but supply increases to 120 kilos, then there will be a price decrease. This is to induce buyers to buy more than what they normally consume, failing which the trader may suffer spoilage of the tomatoes due to oversupply.

Similarly, if the demand decreases to 80 kilos and supply is constant at 100 kilos, there will be an oversupply, in which case lowering the price might be needed.

We can therefore say that from the point of view of supply, a shortfall will lead to price increases but a surplus will lead to price decreases. However, from the point of view of demand, a shortfall will lead to price decreases but excess demand will lead to price increases.

Imperfect Market Information

The harsh reality concerning the Law of Supply and Demand lies in the availability and quality of the market information available to the trader and consumer alike.

Unfortunately, there is no way for a trader to objectively know the demand situation for a particular trading day or even for the days to come. It is simply impossible to conduct surveys on consumer preferences on a daily basis. Instead, businessmen rely on historical data to forecast the demand, but this is in no way precise.

One age-old practice is observing and anticipating the seasonality of demand based on preset social or calendar events like school openings, summer vacations, and holidays. In fact, many will tell us that the demand for products and services follow a recurring pattern—demand starts to rise around July coincident with the school opening, peaks in December during the Christmas season, then gradually declines from January throughout the doldrum summer months.

On the supply side, traders closely monitor suppliers, and news about the supply situation allows them to decide whether to increase or decrease the prices. This is critical to fresh-produce traders, particularly because adverse weather conditions could affect the harvest or prevent the cargo from reaching the main distribution centers or market places, thereby reducing the supply available for retail.

Meanwhile, some traders also consider the seasonality factor. We all know that some fruits are abundant in summer while some are abundant during the autumn months. And yet there are those that are available all year round.

Hoarding and Price Manipulation

Now, what if the supply-side information is not accurate? One form of imperfect information is when supply information is distorted to suit the interest of unscrupulous people. Imagined or rumors of a poor harvest could trigger price increases even if large supply quantities are available in the warehouses. If a trader hoards the supply until everyone else is out of stock, then waits for the prices to skyrocket before unloading the goods, then for sure we know that the trader is up to no good.

If a group of suppliers agree among themselves to set the price, then we have here another source of imperfect information, the cartel. The cartel dictates the price and consumers have no choice but to accept it. This is because for cartels to work, the combined supply capacity of its members has to be quite significant to keep nonmembers from providing an alternative supply source.

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