This issue is about consumer choice and decision making. How do, for example, consumers decide between a better looking product versus just a plain albeit a functional one? How do they make trade-offs between different features and are such purchase decisions restricted to high involvemnet and high value items? How much premium are they willing to pay for style, aesthetics or a functional feature? When does the added value in a product violate the price value equation? These are some of the questions relevant for product design and pricing. Most companies are coming to realise that consumers may vote for functionality but beyond a point they will not settle for anything less than contemporary good looks.
Following is an extract from a research paper by Ravi Chituri and Rajagopal Raghunathan that explores some important lessons for marketers on improving profitability through product design.
Sony has long been the aspirational brand, well out of reach of the middle classes. LG and Samsung brought in television sets, refrigerators and other products that were state-of -the -art designs at affordable price premiums. Existing brands like Godrej, BPL, Philips and Onida were forced to follow suit and offer more world class designs.
Tata Motors, second only to Maruti, have notched up an impressive market share in the last five years. Here are some insights into Indica- designing a car the consumer wants at a price he is willing to pay.
Kamini Banga
FORM vs FUNCTION: DESIGN, EMOTIONS AND PROFITABILITY
Consumers today are increasingly looking for products that not only meet their functional needs but also appeal to the senses. They are demanding a fulfilling emotional experience in return for their dollars. Designers and marketers are beginning to realize that “form” and “function” both have become equally important in delivering a positive experience to the target customer. Highly attractive Apple PCs and Laptops continue to garner higher profit margins compared to their relatively unattractive cousins from HP and Dell—Why? This is a billion-dollar question for companies in hi-tech consumer electronics and durable goods industries. The answer to this question lies in understanding consumers’ emotional reactions to product attributes and alternatives in the choice set. Our research suggests that design strategy can significantly influence consumer purchase behavior by eliciting different types of positive and negative emotions. These emotions in turn drive choice behavior that could significantly influence market share and profitability of the product.
Product attributes are a combination of features, functions, and benefits. These attributes can broadly be classified into two categories—hedonic and functional. While functional attributes help alleviate stress by meeting functional needs, hedonic attributes increase pleasure. Research shows that giving up on functionality evokes feelings of guilt and foregoing aesthetics gives rise to feelings of sadness. Our research with cell-phones explores consumer emotions and choice behavior when making trade-offs between functionality and aesthetics in a variety of scenarios;
Consumers were asked to choose between a highly attractive cell-phone with low functionality and an unattractive one with high functionality. While they were excited about choosing the attractive one, they also felt guilty for compromising needed functionality in favor of superior style and attractiveness.
In contrast, when they chose functionality over aesthetics, they felt confident but this was mixed with sadness for losing the opportunity of owning a highly attractive cell-phone. Depending on the level of attractiveness and functionality of the cell-phones in the choice set, consumers experienced different levels of guilt and sadness.
Further, the results show that when only one of the two cell-phones meets functional needs, functionality wins hands down even if it goes with an unattractive design. This is because the guilt that goes with choosing aesthetics over function far outweighs the sadness at giving up the highly attractive looking cell phone i.e. giving up aesthetics. It is evident that the resultant consumer behaviour is to reduce the guilt.
When both cell-phones meet or exceed functional needs—consumers choose the one that is highly stylish and attractive over the one with higher functionality. This is because the intensity of sadness with the choice of an unattractive cell-phone far exceeds the intensity of guilt associated with the choice of a highly attractive cell-phone.
Finally, and most importantly for marketers, the research also shows that in general, consumers who prefer stylish and attractive cell-phones are willing to pay much more than those who prefer cell-phones with higher functionality. This has very interesting implications on product design and packaging and this works even in low unit value items like soaps. Clearly, the return on investment in aesthetics is greater than in adding functional features.
The implications of the research findings for designers and marketers are summarized below:
1) Observed Consumer Behavior: The style and attractiveness of the product has minimal influence on consumer purchase behavior if the product does not offer the minimum level of needed functionality.
Implications for Marketers: Marketers must segment the market based on the minimum level of required functionality. Designers must then design products to meet or slightly exceed the functional needs of the target segment. Beyond this value addition will get better results by adding design features rather than functional ones. Cars and television sets are good examples of this. While cars spell lifestyle both are certainly status symbols in India.
2) Observed Consumer Behavior: Once the minimum functional needs of consumers are met, the style and attractiveness of the product influence purchase behavior much more than functional features.
Implications for Marketers: Designers must first focus resources on meeting the functional needs of the target segment, and then focus on enhancing the hedonics rather than continuing to increase the functionality.
3) Observed Consumer Behavior: Consumers who choose a stylish and attractive product design are willing to pay more than those who choose a product design with higher functionality.
Implications for Marketers: Enhancing functionality of a product vis-à-vis competition is likely to increase market share. However, higher profitability can be achieved by increasing style and attractiveness of the product compared to competition. In order to maximize ROI, designers and marketers must design highly stylish and attractive products that meet or slightly exceed the minimum required functionality. Increasing functionality above and beyond the minimum functional needs pays much lower dividends than improving the aesthetics. Bang&Olufsen music systems are a case in point.