Tito F. Hermoso / | January 06, 2011 19:22
Too many choices?Customer right?
Originally it was about giving the customer what he or she wanted, but now that he or she is bewildered with so many choices, the sellers already encounter difficulty identifying the kind of product the customer really wants. Besides, the incentive to simplify product lines by reducing complexity and narrowing choice, cuts costs and boosts revenues.
But isn't an excess of choice a good thing? Fastidious shoppers, like the Japanese and Germans, will not have it any other way. Besides, they are willing to pay the price. But isn't it demotivating? In tome "The Paradox of Choice", there may well be a point that exerting that extra effort to learn more about other choices in order to discern the advantage/disadvantage will outweigh the benefit of that extra other choice. Some choice is good but is more choice better? Can choice liberate or debilitate? Might it even tyrannize? As choices proliferate, product niches continue to sub divide into smaller niches as demands shift from a few standard mass volume products. How many flavors of potato chips does one find nowadays compared to a decade ago?
Consumers face the risk of misjudgment of perception and calculation. Misunderstanding one's own tastes or the alternatives or yielding to reckless abandon is surely cause for after purchase guilt and regret. There is also the stress of being unsure of what one knows and the further stress of finding out what it is one has to know - the stress of information acquisition. Too much effort to make up one's mind may lead to letting someone else make the decision for you. Is there credence to "The Power of Less"; the art of limiting only to what is essential. Choosing less in a world of more? Are the French right in saying "Trop de choix tue le choix" - too much choice kills the choice?
Then there were five
Forty years ago, we could only choose between four locally made PCMP approved brands. Then, because of some judicious jet setting, one more brand came in. And three more were "folded in", so long as they shared the core five car maker's precious dollar allocation. Being a product for the upper upper income segment, the market stayed small. Then the grey market for used cars sprang up with nicer and "cheaper" imported models of brands unheard of. Twenty years later, more brands were let in to create 2 new categories of motor vehicles - the "people's" car, ironically after Volkswagen folded up and the Asian Utility Vehicle.
CKD vs. CBU
Today, thanks or no thanks, depending on which side of the CKD-CBU debate you posit, we have the most brands and models available of any ASEAN member, save for Brunei and Singapore. It can't be denied that options have improved life beyond measure. They are a testimony to man's ingenuity and innovation. Having freedom of choice drives competition which in turn drives growth. It keeps competitors on their toes keeps prices down and customer service up. Our Telco industry was backward and archaic when we had no choice. Our car industry's history is littered with poor quality and Soviet style customer service when people had limited choices.
On a showroom level, think of all the standard features that one gets even if one doesn't need them. If you want model M's roll up blinds, privacy glass and power fold 3rd row, you could only get it if you buy the trailer towing pack, glass moonroof and heated seats. This actually makes production cost sense. To simplify production, car makers, bunch options in packs - you get a group of options even if you don't them need all. Firms reckon buyers won't walk away from a sale because you're giving him more than he asked for.
Economize to scale
There's also an opportunity sales angle. Consider brand H sub compact. To beat the sales leader, brand H has to give the customer things that the leader doesn't offer. So brand H adds electric power steering, 2 air bags and ABS-EBD brakes as standard. Say brand H has a global production run of 200,000 units of sub compacts. It doesn't make sense to delete some of the options in the option pack of some 10,000 units, just because the Philippine market won't care for such standard niceties in a bare basic car. Brand H chose to go for bigger global sales, fit more standard options, which drives the per unit cost of the options down. The more ABS-EBD brake orders, the lower the cost per unit for the suppliers.
The next marketing trick is to widen the price difference between basic and top of the line. A very popular brand always does that when introducing a new model locally. It knows this market very well and that the non-fleet Filipino customer will always stump the extra financing package in order to drive out of the showroom with the feeling of having bagged a good deal because of all those "extra" accessories at no extra charge. Now this all works at a micro-level. How about sales overall ?
Home town mentality
The local market, is more than 61% LCV. This is so because of the popularity of the SUV. With compact SUV's priced like compact cars, Filipinos will always opt for the flood wading extended-family hauler. When you get to the 30% portion of the market composed of cars, you will even see a finer graduation and large number of variants and brands. Given that you have some 17 major brands offering an average of 4 model families with a multitude of variants, we should see an even spread of car brands and types on our streets. London, Singapore and Hong Kong come to mind as these places do not have any car makers indigenous to the city. Contrast this to Hiroshima, where almost all the cars on the road are Mazda.
Its still them?
But this is not so. The roads are still dominated by Toyota, Mitsubishi and Isuzu - the three descendants of the original PCMP five. Toyota's brief absence in the 80s, shifted the pitched battle to Nissan vs. Mitsubishi. And when Honda arrived at the tail end of the 20th Century, a resurgent Toyota had a new nemesis. The success of Honda in breaking into the tight top 5 and Hyundai's recent ascendancy is indeed remarkable. More so when you realize that after all these years, the Filipino buyer tends to stick to the brand they trust rather than try their luck with a newbie. Faced with all these choices, why does he still gravitate to the brands which, presumably, he has been sick and tired of ?
What path to take? The best example is no secret. The world's biggest car maker, Toyota never denied the world its techniques. Everyone now uses flexible manufacturing. Even more visible is Toyota's flexible marketing. A model generation ago, Toyota's Revo, facing stiff competition from Isuzu's Highlander and Mitsubishi's Adventure, introduced the most number of special versions and variants in the history of Philippine made vehicles. Result? It was dominant in the AUV category, considering the previous cheap and basic Tamaraw was a tough sales act to follow. Toyota tapped into the rising incomes of the rapidly growing OCW market.
Mind the price gap
When Toyota introduced the Vios, it had one bottom spec dirt cheap bare bones model, a mid spec starter salesman/family version and an all in leather seats 1.5-liter automatic. The price gap between bottom and mid spec was narrow, but the gap between mid spec and top of the line was wider. Still, the accessory addicted Filipino buyer, who is usually a price buyer, wasn't blind to the enhanced bang for the buck of the top of the line model. Recently, after cementing its lead, Toyota rolled out the 1.3 automatic, boosting sales to untouchable levels.
If having many choices inflate expectations, then, is there such thing as a perfect choice? Confusion. Indecision. Panic. Regret. Anxiety. Is this the price of having multiple choices? That's why, to many, it pays to have a brand that can be trusted. When paralyzed by too many choices, one will retreat into a comfort zone, where the chances of regret are less or nil. It pays to have many choices, but the perfect choice, whether car buyer or car maker, is based on trust.