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Blurred lines between needs and wants within marketing
Economics of Business
Motivating wants
In the previous sections, we addressed the basic needs of individuals for living (basic), our relationships (physiological), and our desire for more (self-fulfillment). In this section, we will discuss the economics of business and psychology of consumerism.
Vocabulary
Need
Want
Social norms
Power of One
Influential
Endorse
Innovators
Early Adopters
Early Majority
Late Majority
Laggards
Tipping Point
"Take my Money!"
How often have you ever thought to yourself, "I need that" or "I want that". While both concepts are different, they are often used interchangeably by consumers to convey interest and not to express things that are necessary for living. Have you ever heard anyone or said any of the following below?
It's limited edition.
Those kicks (shoes) are totally worth that price.
I don't want to cook dinner, let's just eat out.
It's so cheap. I can totally resell this if I don't want it later.
I'll buy it now and hold on to it. Then when it goes up in value, I will sell it.
This never goes on sale, I have to have it.
Look, a Buy One Get One (BOGO) sale; I have to get two pairs. (naks favorite)
Oh it's 3 for $1, guess I'll get three.
These are a few of the marketing tactics by businesses to train our brains to justify the purchasing of goods and services; even when there is a clear alternative (not to buy). Furthermore, businesses blur the lines of needs and wants, to the point that they are synonymous, to encourage spending by consumers.
Find this hard to believe? In 2018, the average U.S. household credit card debt had an estimated $6,741 in revolving balances, or balances carried from one month to the next. Even worse, this does not include average mortgage debt ($185,591), auto loans ($27,630), or student loans ($47,634).
Tip of the Iceberg
As defined by Maslow, our basic needs is what allows us to survive.
Food and water (enough to maintain your health)
Clothing (just what you need to remain comfortable and appropriately dressed)
Housing (A roof over your head; whether you own, rent, or live for free)
However, many would argue that there are four other supplemental categories that fall under our need to survive in today's society.
Gas and electricity (heat/cool during winters/summers, cook/preserve food)
Transportation (ability to get to work to make money for basic needs)
Insurance (basic health care and life insurance)
Retirement fund (monies to supplement cost of living for our needs)
So where do we draw the line when it comes to needs vs wants? In the iceberg diagram above, it shows you that success often is the result of many unforeseen efforts. So are these efforts considered a 'need' or a 'want'?
If you come from a household that places a large emphasis on the home/family, is having a family a 'need' or a 'want'?
If your parents moved to this country so that you could have a better life and more opportunities, is an education a 'need' or 'want'?
Is it a 'need' or 'want' for the people who are seeking asylum into our country or other countries due to war or violence?
Is religion a 'need' or 'want'?
Is mandatory schooling from K-12 a 'need' or 'want'?
Are school buses a 'need' or 'want'?
Based upon our previous discussions, all of the above are 'wants' as they do not suffice the basic need for survival. But, based upon how we are raised, environment, and our beliefs, we often view the world in a certain light and can justify why many of the above are 'needs'.
What does this mean? It means that the real difference between a 'need' or 'want' is really the justification we perceive. Whether it is something we read, experienced, been told by a credible source, or simply a belief you established, they all lead back to one concept: justification. Food for thought: do you like our....
School?
School lunch?
Teachers?
President of the United States?
Hawai'i?
At some point, we all lose sight of what is really a need or want based upon our own justification, marketing, and social influences. To make things even more confusing, something we 'need' now, we may not need later and a 'want' now, might end up being a 'need'.
Think About It: End justifies the means
What would you consider a successful life? List 3-4 'needs' and your justification behind each of your 'needs'.
What are other things will need to happen in order for you to achieve your 3-4 'needs' above?
Scratching an Itch
It is the role of marketers and businesses to establish a connection between consumer and product/service. A product/service that is not seen as being useful or having better alternatives will not be successful without the market accepting. A good example is the history of the electric car and how it came and went on several occasions since the 1800's (History of the Electric Car).
So how do we get mass acceptance? This principle is best explained in the Law of Diffusion of Innovation.
Anyone can make a single sale due to innovators, early adopters, or family/friends who support you. As indicated in the video, there are two ways to reach mass acceptance:
Target each segment differently
Slowly move through each segment to build momentum
So how do we build momentum slowly or within each segment? We will cover this in depth in the Business Canvas Model Module: Customer Segments and 4P's of Marketing Module: Promotion, but in this section we will cover social influences.
Social Influence
Social influence has a lot to do with the people we associate with, the image we want others to perceive, our location, and even our culture. Have you ever noticed groups of people that wear similar clothing/brands, have similar interests in music or pop culture, or have similar beliefs? Ever notice when someone does not fit into a group or when one changes?
We are often conflicted by what our peers have, the way they act, the way we see ourselves, and the way we want others to perceive us. Below are a few examples of how we naturally trend towards particular products/services.
Societal - social status, fitting in
Interest Level - our personal
Cultural - what others around us use or need
Based upon Age - what others our age associate with
Geographical - what is available to a specific location
Social Media
Social media has also played a major role in shaping pop culture and societal views for centuries through television, newspaper, internet, and other social media apps. One major concept that has been used throughout time is called the Power of One (one person can influence many); or often referred to as Influential.
Famous or well known individuals
In the public eye or media
Connected to many people (stature or similar interests)
By focusing on these individuals, it allows us to reach mass market acceptance through people who connect us to people we may not have been able to reach. Imagine connecting to someone who has 1,000,000 followers who all enjoy products similar to yours. If this individual were to endorse your product what would could that mean for your business? Lets take a look at the Law of Diffusion of Innovation to run some numbers:
1,000,000 followers
Innovators 2.5% - 25,000 followers
Early Adopters 13.5% - 135,000 followers
Early Majority 34% - 340,000 followers
1,000,000 followers - Using the law to establish sales potential
$20 item, $5 profit
25,000 purchases: $500,000 revenue, $125,000 profit
135,000 purchases: $2,700,000 revenue, $675,000 profit
340,000 purchases: $6,800,000 revenue, $1,700,000 profit
While the Law of Diffusion of Innovation does not guarantee followers or purchases, it does give us an idea of the impact a single person could have on our business. And, just think, this was one person with 1,000,000 specific followers. What if you found 10 people with 1,000,000 specific followers (just add a zero to the numbers above)?
A prime example of utilizing the Power of One (Influential) was the rise of the De Beers diamond company. Though many of their actions to acquire other diamond minds have been deemed illegal by the government and are not currently allowed, we will focus on their marketing efforts in the 1900's. Read how De Beers forever changed the view of diamonds and its place in society through using celebrities and the creation of the infamous tagline "A diamond is forever".
De Beers: Emptying men's wallets for decades
Think About It: Power of One
Can you think of a product that you or your family uses that is tied to your culture?
Have you ever started to like something because your friends did?
Within your group of friends, are you an influential or is there someone else?
Other than your immediate friends, who would you consider to be an Influential? In what way are they an influential?
If you wanted to find a influential to promote your product, who do you know personally that you could ask to help you promote the following products? Why?
Fundraising (eg. cookie corner, candy, Krispy Kreme)
Boba shop your family has opened
Best beach on Oahu
Practice: Need or Want
Complete the Need vs Want Chart
Goal
For each block, find people who would consider it a 'need' or 'want'
You want to find one person who views it as a 'need' and a different person who views it as a 'want'
You may not get a 'need' and 'want' for each block
Whoever has the most blocks filled with 'need' or 'want' wins
One person can only sign twice on your sheet
Remember, needs and wants are based on our own personal justifications. Do not comment or judge others based on their beliefs.
Complete and bring to class on scheduled due dates. You may print your work in our classroom prior to coming to class. Assignments can be submitted early, but late assignments will not be graded. Early or on time submissions may be returned for corrections in order to receive points, meet minimal requirements, or to improve your grade. Late assignments can be submitted for correction and to complete modules. Consideration for grade is given to those who complete all assignments.
All activities can be found above or in the Vocab document in the Resource section.
Homework (check online due dates)
1. Vocabulary definitions
2. What is your major takeaway from the ‘Tip of the iceberg’ concept? (JEE)
3. What is the significance of the ‘Tipping Point’?
4. Why would we need to target, change the message, for each of the five stages?
In your Distinguishing Influentials assessment, you will be combining the efforts of finding people who are innovators or early adopters with people that are influential. You may find that some people may be an innovator or early adopter, but they have no influence on others around them. Additionally, you may find people with influence (in-person or online), but they are not passionate about any products or services, and simply wait like most early majority individuals. Your goal is to find people who are both innovators/early adopters and influential.
You must find two people that meet both requirements
Each person must be in a different category (shoes and make-up, k-pop and clothing)
Answer the following questions for each person:
Innovator/Early Adopter Questions
What products or services to they support?
What makes you believe they are an innovator or early adopter?
Influential
Are they influential in person, social media, or both?
What platforms do they voice their influence?
How many followers do they have?
How often do they post?
Do they interact with their followers?
Do they interact with other people they follow (not their own followers)?
https://www.nerdwallet.com/blog/average-credit-card-debt-household/
https://www.nerdwallet.com/blog/finance/financial-needs-versus-wants/
https://www.businessinsider.com/history-of-de-beers-2011-12#a-worldwide-decline-of-diamond-prices-in-the-1930s-led-the-oppenheimer-family-to-begin-their-world-famous-marketing-campaign-a-diamond-is-forever-5
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