The fundamentals of demand and supply are being supplanted by a new form of ‘rationalism’; one that is dynamic, deeply personal, and beyond classical economic principals such as price and product. In such an environment, the latter are essential but no longer sufficient for brands to build loyalty.
Whether they are contemplating a purchase, an investment or even a potential career opportunity, individuals’ process has evolved from the ‘rational’ to the ‘multi-rational’ in nature. While the former was largely a reflection of demand and supply and relatively predictable using traditional assumptions, multi-rationalism is far more nuanced.
Today’s decision-makers are equally motivated by factors such as a brand’s commitment to a cause, alignment to their personal beliefs, and other (trusted) people’s opinions, as securing the best deal for the lowest price. In fact, the classical economic principle of the ‘rational consumer’ programmed to optimise utility given finite resources is becoming obsolete.
The implications of this societal shift extend beyond customers; relationships with partners, investors, regulators, the local community and even potential employees are being redefined in the same way. Price and product performance remain important but they are no longer sufficient for brands to maintain loyalty. In particular, these trends are evident with particular respect to the following:
- Beyond price/product: Today’s consumer expects their supplier or their employer to reflect their personal values, to act responsibly, to contribute to the wider community, and to demonstrate the type of ethical judgement they would expect of any individual. For example; Gen Z considers providing good value for a fair price a socially responsible behavior that delivers a greater good. Beyond that, studies have shown that Gen Z is interested in racial, gender and income equality, as well as environmental issues. Standing up for these values is becoming a differentiator for brands
- Deeply personal: Young people born in the digital era are fast becoming immune to generic content. In their quest for products, services, and often employers, they want alignment with ideas and beliefs that are they feel are relevant to them personally. According to a study by Deloitte, 1 in 5 consumers who expressed an interest in personalised products or services are willing to pay a 20% premium
- ‘Peer-to-peerism’: Now, people are more influenced by what they believe to be an authentic review by a peer or a customer than ever before. 72% of millennials report buying fashion and beauty products based on Instagram posts. 90% of people believe brand recommendations from friends. Millennials share because they trust consumer opinions, and believe that others trust theirs. Authentic opinions, like customer reviews unedited by the company (even for grammar or spelling mistakes), are by far the most trustworthy. This is an important consideration for brands; particularly when we consider how vocal the millennial generation are with their views – globally, nearly three quarters of Gen Y surveyed. (74%) believe that they have to power to influence others, according to the same research Indian youth are more likely to share and heed advice coming from their peer group than from any other country.
These trends have transformed the equation between businesses and their various stakeholders whether the latter are clients, employees, investors, partners or members of the local community, each of whose decisions are based on multiple, dynamic and, in many instances, wholly subjective criteria.
According to research from Nielsen, for instance, consideration for the environment has the power to sway product purchase for 45% of consumers surveyed, while a commitment to social values or the consumer’s community are also important (each influencing 43% and 41% of respondents, respectively). Retail data backs up the importance of these influencers. In 2014, 65% of total sales of consumer goods measured globally were generated by brands whose marketing conveyed a commitment to social and/or environmental value.
Employees – in particular those aged under 35 – are increasingly motivated by the reputation and behaviour of their employer beyond the product or service they are producing. According to Deloitte’s annual Generation Y survey, 76% Indian millennials claimed to have chosen employers whose values matched their own.
So, price and product are no longer sufficient to ensure marketshare, brand reputation or access to the brightest and best recruits. Earlier this year, in a further confirmation of the demise of traditional economic thinking, one of the US’ largest business groups, the Business Roundtable, replaced its longstanding “shareholder primacy” mantra to urge companies to consider the environment and workers’ wellbeing alongside their pursuit of profits.
The message is clear, whether operating in the private or the public sector, brands which adapt to these dynamic new criteria will be best placed to prosper. Welcome to the age of ‘multi-rationalism’!