URBAN WALLACE ASSOCIATES

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Purchase Logic: The Foundation of Marketing Strategy

The foundation of a successful marketing strategy is an understanding of what product/service should be offered, how it should be presented, and to whom. Determining these three things is the essence of the marketing function. Purchase Logic is marketings primary tool for coming up with the answers. This paper is a discussion of Purchase Logic and how to use it. We will begin by dening the term. Then we will explain the importance of Purchase Logic to you, the marketer and seller. In closing, we will offer some examples of how to turn an understanding of your markets Purchase Logic into positive, prot generating action.

Part 1. What is Purchase Logic?

Term Denition Purchase Logic is the description of how and why someone buys a particular product or service. Purchase Logic is an understanding of customer motivation that goes far beyond industry or demographic classications. Purchase Logic denes what an individual customer wants and how he or she sorts among different alternatives. The more factors involved in a purchase decision, the more complicated Purchase Logic becomes. Small, routine purchases have simple Purchase Logics.

What Determines Purchase Logic

Should I purchase?

FACTORS
The number of needs and wants to be satisfied Length of commitment to or longevity of the product/service Number of people involved in the decision Number of alternatives Price

CUSTOMER

PRODUCT/ SERVICE

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The complexity of Purchase Logic increases as any of the following variables increase: Examples: How Purchase Logic Becomes Complex the number of needs and wants to be satised length of commitment to or longevity of the product/service number of people involved in the decision number of alternatives price

Two examples illustrate how Purchase Logic becomes complex. First, think about buying a meal for lunch at work. You are hungry, have half an hour to spend and have no plans to meet anyone. The decision is simple. You run downstairs to the cafeteria and pick up a sandwich for four dollars. This choice was easy because you had few options and a very simple need to satisfy your hunger and perhaps also take a little break. The price was also insignicant. Now think about buying a meal on Saturday night. Because you are going out with your spouse and another couple, you sort through many more factors to arrive at a decision about where to go. Hunger is only one need to satisfy. You also seek some kind of entertainment or atmosphere. You have four peoples tastes to blend and will spend a signicant amount of money. Further, you have many more options. Even if you are not aware of it, you use a fairly complicated Purchase Logic in selecting the restaurant. This latter scenario is still quite straightforward compared with most purchase decisions. Thus, in order to succeed in selling a product or service, it is important to take a systematic and formal approach to looking at Purchase Logic.

1995-2005 Urban Wallace Associates | www.uwa.com

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COMPONENTS OF PURCHASE LOGIC

A systematic approach to examining Purchase Logic will look at each of its four components: Benets, Barriers, Trade-offs and Price.

PURCHASE LOGIC IS A PROCESS

How Will Someone React to What is Offered Every purchase decision involves a number of steps. These steps may not be clearly discrete or particularly conscious, but they do exist. They represent the order in which alternatives are sorted and decisions are made. The more factors involved in a purchase decision, the more complicated Purchase Logic becomes. Sellers need to understand each step of Purchase Logic in order to make sure they are talking about the right thing at the right time. Clearly, a seller will benet by understanding what is on the buyers mind and how he or she is approaching the purchase decision. Purchase Logic reveals how a prospect will react to what is offered. Purchase Logic also denes the sequence in which issues must be confronted. Benets must be addressed rst. After the benets have been established, it is time to address barriers to purchase. Next come trade-offs and price. After an individual weighs all these factors, a purchase decision is made. PURCHASE LOGIC
PURCHASE

BENEFITS
We all buy benets. Even if we have a specic idea of what features will deliver them, benets are what we seek. Benets fulll needs and wants. Purchase Logic denes all relevant needs and wants. Purchase Logic allows us to understand how important each benet is to an individual buyer and why it is so important.

1995-2005 Urban Wallace Associates | www.uwa.com

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What Motivates a Purchase

Wants can be particularly tricky to identify. Often they are emotional and may appear irrational. Buyers are often reluctant to share their wants with a seller; frequently they are not even conscious of some of them. Nevertheless, wants are usually most inuential in a buying decision. Think about purchasing a watch. The desire for prestige or some other very emotional need or want justies the choice of a Rolex over some much lower priced alternative. Both do an equally good job of satisfying the basic needto tell time reliably.

BENEFITS Purchase Logic defines all relevant needs and wants and how important each one is ...

I must have this benefit. This would be useful too. I really want this (perhaps irrational) emotional benefit.

BARRIERS
What Prevents a Purchase Barriers to purchase are those factors that may prevent a customer from purchasing. We need to design our products or services so that they overcome these barriers. They can be at least as important as the desired benets. Overcoming barriers can become the most important benet.

BARRIERS ... what factors may prevent a customer from purchasing ...

But I dont like this.

And I really Barriers to purchase can be hard to discover. fear this. Because people want to avoid conict, they usually do not offer objections and criticism freely. Sometimes barriers may seem irrational or unfair; thus, the buyer will not mention them. However, barriers must be dealt with. The seller needs to know what they are in order to address them.
One highly motivating barrier in business-to-business situations is the fear of criticism. This fear causes buyers to select the safest choice, the one that can not be criticized. Usually that is the brand leader. In this situation, demonstrating product superiority is not enough. In order to win, the seller must also provide evidence that the buyer can use to defend his choice.

1995-2005 Urban Wallace Associates | www.uwa.com

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TRADE-OFFS
What is the Relative Value? Trade-off analysis is the process of assessing the relative value of different offerings. Customers do not buy individual features, functions or benets. They choose among services or products that offer bundles of benets. The trade-off is a comparison of these different bundles. What a customer concludes from the trade-off evaluation directly determines how that customer will react to different prices.

TRADE-OFFS ... and what kinds of trade-offs might be considered.

If I purchase A Ill get these benefits, but have to deal with these barriers. How does that compare to the set of benefits and barriers for B?
A vs. B

PRICE
What am I Willing to Pay? Price is the mechanism by which sellers capture some of the economic value of the product or service being offered. Price is a function of the benets provided. The value of those benets to a specic customer determines the maximum price that a customer will pay. Cost does not determine price unless you are selling a commodity. However, what a customer will pay is very much inuenced by the relative value of alternative products or services. Cheaper acceptable alternatives put limits on how high a price a customer will pay.

PRICE Price is a function of the benefits provided and the value of those benefits to a specific customer.

$$$

$$
A vs. B

1995-2005 Urban Wallace Associates | www.uwa.com

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PURCHASE DECISION
As the customer completes the Purchase Logic process, the answers to three questions determine the nal purchase decision: 1. What is the relative value of the options I am still considering? 2. Is the value of one choice enough to justify a higher price? 3. Since nothing is perfect, which minuses am I willing to live with?

PURCHASE DECISION Based on the relative value and relative price of each option, a purchase decision is made.

1995-2005 Urban Wallace Associates | www.uwa.com

PURCHASE

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Part 2. Why Should You Care About Purchase Logic?

Real Benets to the Seller There are four specic areas in which a seller can apply an understanding of a Purchase Logic to enhance the likelihood of success: Analyzing the Market, Communicating, Identifying Qualied Prospects and Altering Offerings for Stronger Appeal.

ANALYZING THE MARKET

Who Wants What You will gain a clearer picture of the kinds of people who are likely to be interested in what you have to offer. In addition, you will have a deeper understanding of what your current customers seek. This gives you power to change your offering or approach, and thereby strengthen or defend your position.

COMMUNICATING
What Should Advertising Say No matter what communication vehicle is used, knowing your prospects Purchase Logic will help you talk about the right topic at the right time. You will know what benets to stress in order to motivate purchase. Also, you will know how to position your product for greater appeal versus others in its market.

IDENTIFYING QUALIFIED PROSPECTS

How to Find Customers From Purchase Logic you can pull out some salient questions or characteristics that will help you identify good prospects. In some cases you may even be able to construct selling messages that will prompt buyers to self select and identify themselves to you.

ALTERING OFFERINGS FOR STRONGER APPEAL

How to Improve Your Product or Service As we have already suggested, Purchase Logic can also help you revise or improve your products and services to give them stronger appeal. Clear understanding of your markets needs and wants and their relative importance will give you the guidance you require to make effective changes.

1995-2005 Urban Wallace Associates | www.uwa.com

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Part 3. How Is Purchase Logic Turned Into Positive Action?

Purchase Logic Leads to Action Understanding precisely what your customers want and why they want it is a powerful tool for managing the marketing of your product or service. Specically, your understanding of Purchase Logic enables you to choose the most compelling features, marketing programs and sales message. These choices become clear because Purchase Logic denes what products and services to offer and how to talk about these offerings. Once you have identied the Purchase Logic(s) in your marketplace, the direction in which you need to move will be evident. We close with two brief examples of how an understanding of Purchase Logic can make a difference. The rst focuses on how Purchase Logic may be used to redene product offerings. The second illustrates how understanding Purchase Logic can increase the power of your communications.

PRODUCT REDEFINITION
Example #1 This example is a case history. A vehicle eet leasing company was experiencing disappointing growth and competitive price pressure. It expected to increase margins and gain new points of difference against competition with several addon options to its base service. We were asked to determine which of the add-on services were most valuable. We conducted qualitative research to learn about the Purchase Logic of eet buyers. From this work, we discovered two important ndings: 1. First, the add-on options did not offer signicant benets to eet buyers. Some buyers were neutral about them; most were negative. Although these extra services would be attractive to eet car drivers, they would create many potential problems for the eet buyer. Fleet buyers felt that these add-on options would make their job harder. 2. Second, by learning about the Purchase Logic, we came to understand the personal risk that eet buyers face regarding residual values at the end of a lease. We identied a large opportunity to gain market share by assuming that risk for them. With this understanding of eet buyer Purchase Logic, our client abandoned the planned add-on services. Instead it developed residual value insurance that eliminated personal risk for the eet buyer. As a result, the business grew signicantly.

1995-2005 Urban Wallace Associates | www.uwa.com

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ADVERTISING MESSAGE
Example #2 You are all familiar with small package overnight air-delivery services and at least some of their advertising. Think about your own Purchase Logic for these services. Which of the following two messages speaks to you? Which company would you choose? When it absolutely, positively, has to be there. If it doesnt get there on time, you get your money back. Federal Express understands the Purchase Logic of the business customer and has reected this understanding in its communications. The company knows that $25 is virtually no compensation for the aggravation and humiliation of standing up in front of an audience (your boss, your potential customer) without slides to present. It also knows that no refund will make up for a contract that was disqualied because it arrived late. Federal Express is talking to business customers. The other company is not. Both services may be equally reliable. However, Federal Express has demonstrated how a seller can build a strong perceived point of difference by making its message t the Purchase Logic of its customers.

Related Articles
To learn more about the topics discussed in this article, you may wish to read the following papers found on www.uwa.com: Use Research to Identify Purchase Logic The Five Rules for Reliable Marketing Research Qualitative vs. Quantitative Marketing Research Identify Market Segments That Want a Product or Service Develop Marketing Communications or a Sales Message Improve and Differentiate a Product or Service

1995-2005 Urban Wallace Associates | www.uwa.com

Marketing solutions that work.