The Customer Purchase Bid-Ask System

Just like in the stock market, a purchase involves a bid-ask system where a Customer Ask has to matched with the Business Bid. Businesses need to understand this to convert a potential customer into a customer.

The ‘Customer Ask’ is the pain which the customer is going through currently to solve a particular need. This involves all the investments a customer makes in buying a product or service. This investment can be in any of the following:

Money – the actual price of the product the customer is currently buying.

Effort – this involves the effort the customer is making to purchase a product. For instance, since factory outlets of fashion brands are generally on the outskirts of a city, a customer might have to travel 25 kms to reach there, which is the investment the customer is making in buying the product.

Time – some products have along delivery time and hence the wait is the investment made by the customer. The investment varies with how quickly the customer needs the product.

Harassment – some purchases might involve some level of harassment for a customer. For instance, a lot of people feel shy of going to a chemist and buying condoms. This is also an investment.

A business looking to acquire a customer has to quantify these costs as closely as possible and needs to set a price (including the monetary price and the services offered along with it) for its product/service which can convert the customer to buying its product. This price is called the ‘Business Bid’ and the difference between the bid and ask, which is called the ‘Spread’, should be big enough for the customer to see the value in changing his/her purchasing process.

The Customer Purchase Journey

A customer has to overcome many obstacles before making a purchase from a business for the first time. These obstacles refer to the basic steps a customer has to undergo before going ahead with the purchase.

Product Fit – The first step is to completely understand the product being offered and how it can address a need. The customer needs to go through the different features and benefits of the product to ensure that the product is a good fit for the need addressed.

Tip for Businesses – Highlight the use cases of your product and all its features very prominently. This stage helps in creating customer demand for the product.

Value for Spend – This is where the customer analyses whether the spend is justified. Some customers may not want to spend above a particular amount for a particular need. Also customers should check whether the product is priced well by the business and that he/she is not overpaying for the product.

Tip for Businesses – Understand what value the product holds for a customer before pricing it. Both overpricing and underpricing a product harm a business.

Trust on the Business – This is the final step where if all is well in the above two steps, the customer looks for data/feedback which shows the business’s credibility and its capability to deliver what is promised.

Tip for Business – Businesses should use social proofing to build trust and credibility.

Once a customer goes through the above 3 steps, a purchase tends to be the end result.