B2C buyer’s buying process in insecure settings and the reasons not to buy
Investment sales in Finland can be challenging for small or medium-sized operators. The reactions to the COVID-19 pandemic around the world caused an unexpected economic crisis and a crash in the stock market as we have experienced. The pandemic has not been the only event that has a tremendous effect on the market and on the B2C buyer’s buying processes.
The pandemic did not altogether cause private people to stop buying investment products. Fairly quickly, the investors continued their buying even though the economic environment was left with after-stresses. Some business sectors even recovered faster than in previous crises, and some new ones thrived. The buying seemed to have moved quite fluently to eCommerce and online surroundings. At the beginning of 2022, most of the world was still recovering from the last hit when another crisis started. The World Bank has estimated that Russia’s war against Ukraine reduces the world’s economy twice as much as the pandemic in 2020. According to International Monetary Fund’s report, from October 2022, the outlook of economic activity is slowing down. These recent quakes have left a clear mark on buying behaviour.
Investment sales is, first and foremost, a business built on trust
A thesis conducted at Turku University of Applied Sciences (Kërtyta, 2022) aims to understand the private buyer’s decision-making in the first online meeting. The study focused to map the buyer’s concerns and reasons to make a negative buying decision. Investment sales is, first and foremost, a business built on dependability. The trust in the service provider’s abilities is necessary since the seller can’t give any bullet-proof guarantee of the product’s performance. At least not like B2C buyers might be receiving on any commodity. The needs has been affected by the increased concerns of the buyer. This does offer a challenge to investment sales in addition to the changing operational environment.
Buyers are assumed to be highly rational in decision making
The standard marketing models assume that the buyers would behave rationally. The rational choice theories have developed from the ideas of Thomas Hobbes from 1651 (Hobbes, 2009). These theories have concluded that the buyer would make choices of the most efficient means. The assumption is, that buyers are highly rational in decision-making, when it comes to self-interests. According to studies of behavioural finance different aspects are influencing the foundations of financial behaviour. These aspects are:
- social
- financial
- psychological.
Additionally the investment buyer is under influence of strong reference points. Regardless of the buyer wanting to make the most efficient choice to achieve their goals.
The two systems of buyers thinking
The prospect theory from Kahnemann (2012) proposes that to determine the utilities, the seller needs to take into consideration these reference points. The reference points are usually something, that the buyer has experienced earlier or associations they have. These might effect the buyers psychological ability to withstand risks. The psychological value of possible losses is growing more critical to the buyer. According to Kahneman’s (2011) theory, people have two systems of thinking. System one operates automatically. The first system is quick on the decisions and requires very little effort. System one is the one that operates with reference points. Without positive reference points, the buyer is quick to make a negative decision on the seller’s suggestions. Specially if there is no pressing enough need for critical thinking.
The amount of information given about the financial collapse, or economic downturn, is taking more time in the news. This means that the buyer’s reference points are filled with negative signals. System two of thinking, according to Kahnemann (2012), is more conscious and reasoning. It is needed to construct thoughts but requires more effort. Not all buyers are ready to make the effort if the do not see the need. However, the sales should keep in mind, that system two takes suggestions from system one regarding
- impressions
- intuition
- intentions
- feelings.
Not all buyers take initiative
There might be uncertainty in the air, but that does not mean that the buyers are taking initiative to look for remedial solutions. If the seller is actively trying to point the possible threats to the buyer, the buyer might not take these points into consideration. Specially, if the seller has not yet established their credibility in the buyer’s eyes. Buyers who have not identified a problem in their situation, do not automatically identify themselves as part of the seller’s target group. The seller who enters the buyer’s process and has knowledge of the buyer’s position in the buying process, is more likely to give a professional image. The seller needs to understand the buyer’s position in the buying process to identify the buyer’s concerns and the level of need. At least before this, the seller should not suggest a solution and expect it to receive a positive response.
If the buyer does not see a problem in their situation or emphasises the risks, they are not willing to make a change either.
A buyer who is not aware of the effect of threats in the future does not see a reason on making changes to their current situation. The buyers might also feel content with their current situation and therefore ignore possible problems that they might be facing by staying on their decision. Maybe they have made the best possible solutions for today’s issues. The seller’s job is to see the threats the position might be facing in the future. The salespeople who are communicating with their potential buyers in the early stage of the buying process and identify the barriers to buying with the buyer are more likely to win the sales than the sellers who are waiting for the buyer to shift their own position from not buying to trying actively looking. This is where adding value before asking the deal itself jumps in.
The role of the seller is to be available to the buyers who have identified needs but also an advisor to those who have not yet arrived at the stage of awareness or discovery in their buying process. The first encounter in any sales is critical to building trust between sales and buyers. It helps the sales to assess if the problem of the buyer is critical or motivating at all. If the problem to the buyer is not critical, they are more likely to be using automatic decision processes and say no.
References:
Hobbes, T. (2009). Leviathan. The Project Gutenberg EBook of Leviathan. Retrieved November, 2022 from https://www.gutenberg.org/files/3207/3207-h/3207-h.htm
International Monetary Fund. (2022, October 17). World Economic Outlook: Countering the Cost-of-Living Crisis. Washington, DC. October https://www.imf.org/-/media/Files/Publications/WEO/2022/October/English/text.ashx
Kahnemann, D. (2012). Thinking, Fast and Slow. Penguin Books.
McKechnie, S. (1992). Consumer buying behaviour in Financial Services: An Overview. International Journal of Bank Marketing, 10(5), 4-12. https://doi.org/10.1108/02652329210016803
The World Bank. (2022, April 10). Russian Invasion to Shrink Ukraine Economy by 45 Percent this Year. The World Bank. Referred 20.10.2022 https://www.worldbank.org/en/news/press-release/2022/04/10/russian-invasion-to-shrink-ukraine-economy-by-45-percent-this-year