Created on November 21, 2016
by Teyden Haycroft, Marketing Account Manager, Sandbox Brand Marketing
In an economy like this, many businesses are taking the opportunity to stop and take stock in their company. Is it a good time to look at your business and think about your thinking?
Both companies and households are working with smaller budgets, each purchasing decision is scrutinized. And yet some items will never make it to the cutting block, no matter how tight times might get.
If your iPhone were to break tomorrow, are you downgrading your phone to a cheaper model or shelling out seven hundred big ones for a new one? Throughout historical recessions, one of the last items to go from the shopping list was the missus’ signature shade of lipstick. Why are these items we can’t live withoutabout, even when times get a little tough?
Why… because people buy ideas, not products or services.
It’s not just a phone, it’s the idea that it’s a part of who you are. It’s not just a shade of red on her lips, it’s part of her feminine identity. It’s the idea that product represents, and their customers will be loyal to the end.
So does your business sell an idea, or some thing?
When you’re selling something, people often sell the features and benefits of that product. But an idea transcends the products/services they are selling. What is much more effective is to be able to sell the idea of something, and get really good at that.
The key is to have an idea that isn’t out there yet, or that is poorly expressed. People will either love or hate the idea, and buy it or not – but the ones that align with that idea will be loyal to you until the end of time. That’s because they truly believe in what you and your brand represent for them. It aligns with their values, reinforces their identity of self, and makes them feel better about themselves for holding that belief.
Companies that still base their business model’s around selling a product or service typically follow this formula: present the product or service, here’s it’s features and benefits. Our #1 goal is to sell more of this product.
But this thinking is dated. Everything has changed now.
Businesses that are built around what they sell instead of an idea can especially struggle in markets facing an economic downturn. The competition is incredibly fierce because anyone can come in and start selling the same product or service that you do, but for cheaper, and of course everyone has to follow suite. It’s hard to actually make profit off of this, and even worse if you’re selling a low-margin commodity product. Too much competition also means it’s deltealso harder to stand out. And even if you have the best product at this moment, someone is inevitably going to come along with something better, sleeker, lighter, faster, etc.
But here’s the bigger problem – you’ve built your business and your brand around selling product X. You’re painted into a corner. Because it’s a product or service based business model, you must stay within their industry and product/service category or risk losing all the brand equity you’ve built up over the years. You don’t have room to pivot onto something new, your customer base won’t follow you there.
Now, consider if that same company had defined their brand around an idea – something that they are ALL about. Ideally it’s an idea that speaks to a highly defined audience and how it will make their life better. When they started that business, they hadn’t even thought of the product yet. They can sell multiple products and services that align with their big idea. This company never has to change their business model due to market forces or competition, because the big idea is applicable to multiple products/services, in varying industries and categories, that can be scaled up or down. And their idea also has a more meaningful point of differentiation than the competitor who’s trying to sell a product. For the customer, you’re focusing on “me” and no one cares about me like they do.
The key to building this type of company is this: you have to have a big idea that makes customer feel special. Remember, they have to align with it in a way that makes them feel good about the choice they are making. It reinforces their idealistic version of themselves. The perceived value of a big idea like that is ultimately higher than any product or service’s features and benefits.
Here’s the other key to this type of business model: you won’t have to work as hard to engage customers with your business BUT you will have to ensure you keep them very, very happy. You need to hang on to them, because it’s harder to get them in the first place. Selling an idea is going to take more effort than selling someone an item. The payoff? Selling them a product will not make people stay with you forever! Selling them an idea will buy you loyalty, even when budgets are slashed.