There are many components to successfully marketing a good or service, such as building trust or effective pricing. However, before you can even tackle any of those, you first must understand what type of good you are trying to market.
In economics, there are three types of goods.
- Search Good
- Experience Good
- Credence Good
A search good is a good with attributes that are easy to evaluate prior to purchase.
- Bottled Water
- Picture Frame
Since they are easily discernible, these goods are quickly subjected to substitution (i.e., if two products are equal, consumers buy the cheaper one) and price competition (i.e., if two products are equal, producers lower sale price to gain competitive advantage). High price elasticity.
There are two strategic solutions to this predicament. First, increase willingness to pay (WTP) or, second, decrease costs, allowing the producer to price it for less.
- Strategic Pricing
- High Convenience — For example, I’m willing to pay a little more for my bananas if they are closer to me, saving me time to travel further for purchase
- Observability — Making products more aware to consumers
- Differentiation — Adding attributes to make something different, such as wheat bread, organic bread, raisin bread, and so forth versus just plain bread
An experience good is a good where product attributes are difficult to ascertain in advance, such as quality, but will come into realization only after experienced or consumed. Lower price elasticity than search goods.
Experience goods are tricky because consumers have difficulty grasping quality beforehand. Therefore, something priced low could be perceived as low quality. The goal is to proactively quell consumers’ fears in advance.
- Free Samples — This lets consumers know whether they like it or not without having to commit
- Good Return Policy — If there is no fear of commitment, consumers are more likely to try
- Testimonials — If everybody says that it’s good (or bad), it’s got to be good (or bad)
A credence good is a good that there is no definitive measure of its utility before, during, or after consumption. Consumers have difficulty evaluating the benefits.
Generally, a consumer knows that he/she needs it, but cannot tell if it helped (e.g., vitamins) after consumed.
- Fortune Cats / Feng Shui — Is the success of a business due to hard work or the use of a charm?
- Beauty Cream — Did the cream measurably help fight wrinkles on the face?
- Vitamin — Did the supplements make the consumer healthier in a quantifiable way?
Credence goods are difficult to market because consumers have a fear of being overcharged or, worse, subjected to fraud (the good doesn’t even work — for example, facial cream doesn’t really reduce wrinkles).
However, a consumer will place a lot of faith on indirect signals to make his or her decision and cognitive dissonance to sleep better at night.
- Ranking System — Yelp’s rating system is highly valued because it is based on the opinions of thousands of other “normal” people
- Celebrity Endorsement — Faith is earned because celebrities have the authority and luxury to purchase any good, but chose to use the one in question
- Community — Let other like-minded people tell the consumer that the good was phenomenal
Most customers know what they want, but have difficulty deciding which product is best for them.
As a producer, you need to
- figure out what they want
- build the infrastructure to serve them
- convince them that you have it
Your good can be one of the three or a blend of two categories, which is more common. In the end, it is based on the consumer’s psychology, which is why it varies.
For example, let’s examine photography. If the product is a passport photo, it is more likely a search good. In the end, the criteria are simple, so who cares who shoots it? Do you remember the name of the person who shot your passport photo? Probably not. It doesn’t matter. It’s a commoditized good.
Conversely, if you’re talking about bridal portraits, there’s a lot more at stake — one chance to shoot it, very expensive, comfort with the shooter, etc.
At first, a consumer might be hesitant. After the photo is taken, the bride might be content (experience good) or still unsure if the photo could have been as good as another photographer’s (credence good). Notice the blend?
Therefore, having bridal party say that it’s beautiful (testimonials) will help assure the person that it’s more good than not (she still could be unsure).
P.S. I found love in NYC!