1. Graph shown below simplifies a fundamental of relationship between cost of a
product and customer experience.
There is nothing so special about this linear relationship between these 2
parameters but for beginners it can be very useful.
As the cost of a product increases our expectation also increases hence our
needs also relates to something other than a core product. Imagine buying a
chocolate from a shop near your house of 50Rs. Ambience of the shop , or the
way shopkeeper handles you hardly makes a difference. Whats important is the
core product and that in this case is chocolate.
Similarly if one has to buy a shirt of 2000Rs then one cannot just go to a
shopkeeper and ask for it, but why? Why do selling a shirt requires a world
class showroom and a qualified sales executive?
Something called as purchase experience comes into picture here. Purchase
experience as we move up the cost graph of a product becomes important. And
amazingly it supersedes the core product at times. Imagine yourself paying
200Rs for a hot coffee at costa coffee day. What are you paying for? Coffee?

2. No you are paying for an experience and it becomes a core product for you in
this case.
One of the very important phenomena which I wanted to touch while
discussing shirt example was “complex buying behavior”. It is a very important
fundamental principle which plays a vital role in product selling cycle. Cost of
product is directly proportional to complexity in buying process. As we move
up the cost matrix of a product expectation from the product increases in the
mind of the customers. It at times exceed the core property or utility of the
product as well.
Lets consider a example here:
From chocolate a customer may expect – taste or to an extend packing of the
product
But from a shirt as discussed earlier expectation will be Brand, Quality, Fitting
etc etc
Take an example of a car , expectation matrix will be much more complex and
it will touch upon: Brand, quality, performance, maintenance, after sales
service etc etc
Complex buying behavior study is so important these days that companies are
focusing on it in a big way. Selling an ice-cream is not just selling it on the
roads but there are now ice cream parlors all across. Product can be of 50Rs but
what you get is a world class place to sit, aroma of ice cream making you feel
fresh, centralized AC parlor and an experience to share.
I may quote lot of examples but in our lifestyle we are now moving to an era
where companies are very smartly moving from just selling a core product to
selling a package for which customers are paying more. I wear a cotton shirt
but if I don’t have a brand logo on it nobody cares. So am I wearing a shirt or I
am wearing a logo ?
Now consider it from a company's perspective. If it is so complex then why
will any organization will target this segment (high product cost)? answer is:
1. Higher profit margins
2. Sustainable Competitive edge
3. Market share (instead of volumes)- simple operating channel

3. Any company working effectively in this sector where product cost is higher
and customer buying is complex will gain sustainable competitive edge over
the competition and if things goes well it will be there for years. It may not be
the case where products are of a lower cost..
In this industry competition will be lesser but margin of error will be minimum.
Even a small mistake can end monopoly of the company which is not the case
with companies dealing with products of comparatively lower cost. For an
example you can afford to buy a shirt again in a month if you made a wrong
decision considering any attribute of a product say design. Imagine buying a
car again ?
It is altogether a different and a very important topic of discussion on which i
will elaborate in my next article.