The Changing Decision Landscape

Abstract: In this article, I will examine how we as humans make purchase decisions and how selling organizations need to adopt its product, services, and marketing to fit changes in the decision landscape — the complex set of internal-to-us and external factors that we, as humans, use to make a decision when considering making a purchase.

It is crucial for any company selling anything to understand the decision landscape that affects their customers. Those who do a better job of understanding the decision landscape, and how they can influence the decision landscape, end up as market leaders, and those who fail eventually end up out of business. That’s the harsh reality!

But before talking about how the decision landscape is changing, let’s first define the decision landscape.

When we as humans make a decision, especially a purchase decision, a whole slew of “things” are going on in our heads at the same time. These are both generated from external and internal factors alike. This mix of different “things” all affect how we make our purchase decisions. This is what is known as the decision landscape. And we automatically process a massive amount of data in a blink of an eye. The decision landscape is that mix of factors that drives our decisions, decisions to purchase or not, decisions on what to buy.

Examining what goes into the behavioral landscape and how it affects how we make our decisions is not something that I invented but an academic field called Behavioral Economics. This field of academic research has a foundation developed by three Noble Prize winners. Herbert Simon (1916–2001, Nobel Prize in 1978), Daniel Kahneman (b. 1934, Nobel Prize in 2002), and Richard Thaler (b. 1945, Nobel Prize in 2017). Added to this is Dan Ariely (b. 1967), who is Professor in Behavioral Economics at Duke University and, in my humble opinion, also should receive a Nobel Prize for his stellar work in this field.

So now we know that the theory behind the decision landscape comes from the most eminent scholars in their field, that our decisions are both made from a large number of inputs, and there is well respected academic research to back up the understanding of how we make decisions, let’s get into the details and explore why the decision landscape is both changing and how you can affect your customers’ decision landscape.

Context
All our decisions are made in context, with references. These references are both external and internal to the decision-maker. The process consists of first deciding what references to use and then using those references to make our decision. The decision of what references to use is somewhat arbitrary. Nothing is saying that we use the right references, and what references we use may change every time we decide. That our usage of sub-optimal references for the decision also makes the decision sub-optimal, too. We are happy with “good enough” even if the decision could be better, more optimal, if better, more relevant, references were used.

So, what are those external references we use when making our decision?

Marketing
Whether we like it or not, whether we acknowledge it or not, we are influenced by the messages we are constantly exposed to. The seller with a marketing message that appeals to us the most will influence our decision-making the most. When I say, “marketing message,” I mean this in the broadest possible context, from the company or brand name, logo, product or service name, product packaging, service definition, how the product or service is delivered, how is it presented to us, warranties, and, of course, the price of the product or service, and of its competition and other alternatives on the market.

We are also influenced by experiences from other people and their experiences with the various product or services and how they communicate with us. This is why there are “influencers” and why “influencer marketing” works. Influences are significant when it comes to our decisions. It is why the relator, selling a house, talks mostly to the wife, while the husband is the more likely breadwinner; it is why salespeople making in-home sales are trained to do the same. (I’m generalizing here. It does not happen all the time and every time. And the wife can, of course, be the breadwinner too.) Likewise, in complex B2B sales, there are often individuals that have the power to prevent a purchase but do not have the authority to make the purchase. They can say “no” but cannot say “yes.” Which is why, in complex B2B sales, the seller need to convince a wide range of individuals having their own agenda and rational for their decision.

Then there are also internal references used for the decisions we make.

Heuristics
These internal references are called Heuristics and are a concoction of different things. It includes our experience, if we have any with the various choices available to us (competing brands and products or services), experiences with alternatives, experience with the multiple sales methods and channels and delivery methods (both for products and services) that are on offer, experience with various marketing methods (that affects us differently). But don’t think this behavior applies only to consumer goods; behavioral economic theories were initially established and consequently confirmed for B2B goods. Familiarity with a product or service category or even familiarity with a brand, a company name, a product, or a service name affects our decision-making process when considering making a purchase. Likewise, we are more likely to purchase something we were just reminded of than something we were not recently reminded of. This is why, in the consumer goods market, the practice of relentlessly repeating a brand, a logo, or just a company name works in driving higher sales volume.

Part of heuristics is also the current situation and how we experience our current situation or circumstance. These two may or may not be precisely the same. In my presentations, I use the extreme example of how our urgency to buy a commodity like gas when the tank is getting empty is different when on the way to the hospital with a sick or injured child, compared to when on the way to the in-laws. In the former case, the nearest and quickest gas station would do; in the latter, searching for a familiar brand or the brand with a loyalty program or just look for the lowest price. This gas example is an extreme circumstance, but if you think about it, you will find many everyday circumstances that affect this decision-making process. Both in business and personal life.

Change
So now, we have established that our decision-making process:

• Use a slew of external and internal references that all together is called the decision landscape.
• It is imperfect.
• It happens in the blink of an eye.

The most significant change that has happened to most people during the last year is, of course, the effect of the COVID-19 pandemic; many of us have had to change the way we work, the way we interact with friends and family, the way we travel. We all know this, and I’m not going to repeat the details. It gives us all a convenient but extreme example of the change in the decision landscape and purchase priorities. Extreme because it changed so much at the same time. I’m sure we all know companies who understood the changes in the decision landscape imposed by the pandemic and adopted their way to do business, their product or service, their marketing messages, and prices to be relevant in the change of circumstances affecting them. Because of that, they prosper. I’m also sure we all know companies who did not change, did not react to the changes in the decision landscape or were late to change, and for that reason, failed. Here is a couple of examples in where I have the inside story:

Across the street from me lives a restaurant owner who owns a small chain of pizzerias. As restrictions on in-door eating were imposed, they quickly flipped to delivery and pick up only. They retrained their waiting staff to deliver to a home, not a table on the premises. Thus, they could retain most of their staff. “Business is better than ever,” the owner said. I also know a restaurant owner who was slow to adopt and did not make the necessary business changes according to the change in the circumstance but closed — waiting for a sudden end to the pandemic to re-open. When the owner finally decided to offer delivery service, six months into the pandemic, it was too late. With more agile competitors grabbing market share, the restaurant closed for good.

I also happen to know, have, as personal friends, a few well-known keynote speakers. People who mostly are brought into corporate events to inspire and, in a way, provide mentorship to the corporate staff and executives. With no large gatherings being allowed, there are no more in-person keynote speeches. Two of my friends quickly adopted changes to the way they work; one is making a room in the house into a video studio, the other adapted his garage to be a studio. Corporations still do their events, just differently, and my two friends have flourishing businesses. A third friend and keynote speaker, eventually did the same but was slow to change his business and is still trying to catch up. Knowing when and how to adopt changes to the changing factors related to the decision landscape is vital for your business’s success — as you can see from the above examples of those who adopted changes and those who didn’t.

Now, the changes in the business circumstance imposed by the pandemic are extreme and sudden. I hope we do not have to experience this again from now on. But I’m talking about these to make a point.

Imagine yourself being in that restaurant space, is your website messages (text and images) about the “cozy interior” or “personal service” or about “fast, accurate online ordering and delivery”? If you imagine yourself as a keynote speaker, would you market yourself with images and videos of speeches in front of hundreds of people in a theater setting or the same in front of a Zoom call? Which would be more relevant in the current situation?

In closing
Every market is always changing. Your customers’ circumstance is forever evolving; new competitors are emerging while others fall behind, technologies and use-cases change. Your customers’ heuristics are continuously evolving based on their experience and who they are influenced by. The entire decision landscape is changing — always.

So think about how your marketing may (or may not!) have changed as the decision landscape is transformed. Is it still relevant? Can it become more relevant? Ask yourself: Do we truly know how our prospects and customers value and rank the references they use in their purchase decision-making? Do we truly know how the change in circumstance affected decision-making? How about our competitors, do they know this better than we? As the decision landscape is evolving, do we have a process to truly understand these changes? (Hint: asking your customers does not work…)

Thus, the company that understands those changes the best and can best influence its customers to buy just their product is the company that will come out on top. This is already a long article, and I will not elaborate on how this is done. Still, in short, it is about understanding how each of the aspects of the decision landscape affects sales volume and revenue at different prices. So, you can market your product or service in such a way that sales and revenue will be optimized, and growth and profits will be higher than the competition. But that is a topic for another article.

Per Sjöfors
The Price Whisperer™
Founder
Sjöfors & Partners Inc
www.sjofors.com

Pricing has always been an interest area for Per. As a serial entrepreneur, running companies in Europe and the US, he did pricing experiences. Some of these worked spectacularly well, some did not work at all. As a result, Per founded Atenga (now Sjöfors & Partners) out of his frustration that what business schools teach about pricing is too abstract, too academic for a business executive to act on. Likewise with books about pricing. Consequently, he set out to make pricing practical and actionable. Pricing for business people. Since then, he has been at the forefront as thought leader in everything pricing and he is a sought-after speaker for a variety of conferences and business circuits.

Per appear regularly on business radio shows and gets quoted regularly in the financial press, including Forbes, Fortune Magazine, Inc., IndustryWeek, Business Insider and the Financial Times.

About Us: Sjöfors & Partners has developed a unique method for data-driven pricing based on price-specific market research, that generate precise measurements of customers’ willingness to pay or buy for a product or service. Armed with this knowledge, companies can focus their sales, marketing and product development efforts towards the market segment with the highest willingness to buy at the highest prices. The measurement also allows Sjöfors & Partners’ clients to accurately predict the results of different prices, taking the uncertainty out of pricing decisions.