Wednesday, December 6, 2017

Extrinsic Goals, Perpetual Dissatisfaction, and Sustainability

There is a clear difference in consumer expectations, or rather more of a division between intrinsic and extrinsic goals.  Some customers are focused on the intrinsic value of a product (the functional benefit derived from its use), whereas others are more concerned with the extrinsic value (the esteem that a person derives from being associated with a product).

It is a common mistake to suggest this is an evolution – as it is not. Preference for the intrinsic is prevalent amount the Silent Generation, Generation X, and the iGen whereas extrinsic is prevalent among Boomers and Millennial Generations – but even within the generations there are customers of both kinds, not to mention that each individual has a mix of extrinsic and intrinsic goals when approaching any purchasing decision.

It is plainly evident in advertising messages that some firms seek to associate their brands with the intrinsic value of their product, whereas others seek to associate with the extrinsic value.   I believe the latter to be a tactical benefit and a strategic mistake because extrinsic motivation does not support a sustainable competitive advantage and, in fact, creates a business model that is inherently unsustainable.

This is mainly because the extrinsic qualities of a brand are entirely beyond the maker’s control.   They may believe that they have command of the market, that their advertising dominates customer perception, but it does not: the market may hear the voice of the brand, but it often comes to its own conclusion.

Moreover, the intrinsic value of a brand is immutable, whereas the extrinsic is extremely mutable, and mutates in a manner that is entirely whimsical.   If a brand is popular because it is fashionable, it may find that it becomes unfashionable in an unpredictable and inexplicable manner – or at the very least new customers reject the brand because of its acceptance among old customers from whom they wish to dissociate themselves.

As a concrete example, considering the advertising campaign that proclaimed “This is not your father’s Oldsmobile.”   The market heard and rejected it, voting with their dollars that, in fact, yes it is my father’s Oldsmobile, and because I want to be perceived as being different from the older generation, it is not the vehicle for me.   And on that hill, the brand lost the battle.  It failed entirely to shift the extrinsic value of the brand to meet the expectations of the younger generations, and it died when its previous customer base left the market.

Not only is it impossible to predict the whims of the extrinsic market, but satisfying such demands can lead only to short-term success.    It is typically the younger generation, which is perceived as being capricious and fastidious, never satisfied and constantly complaining – but it is also true of older extrinsic customers, and it is because of a simple maxim, that “money cannot buy you happiness.”  The extrinsic goal may be achieved, but it is a limited and short-term success.

The extrinsic customer is seeking to become something he is not by associating himself to a specific brand.  But instead of the customer being perceived differently because of the brand, the brand is then perceived differently because of the customer.   That is, if working-class people buy a brand because it is associated with the wealthy, then they are not perceived as being wealthy – at least not in a sustainable manner.  Instead, the brand loses its glamor and is perceived as a working-class brand.

To go again to the automotive market, consider the mistake made by Mercedes-Benz in putting out an economy version of its marque.  The affordable C-class (and the extremely cheap A-class) did, for a time, make their blue-collar drivers feel like they had advanced their social status, but the wealthy then saw the brand as being more of a working-class vehicle, low-quality and cheap, and the Mercedes brand has correspondingly fallen from grace, and the maker had to launch a new brand to recapture the luxury market.  Though they may find commercial success in serving the mass markets, they may never again be regarded as a luxury brand.

Back to the point, the extrinsic customer who seeks to change his status by associating himself to the brand will be dissatisfied because the status of the brand will be diminished by his patronage.  In much the same way, a person who purchases a brand with the assumption that ownership will make him seem smart, clever, and sophisticated will still be the same stupid, dull, and vulgar person he was the day before he purchased it.  The ability of a brand to adjust perception is thus only temporary.

This considered, any appeal to the extrinsically motivated customer must be regarded as a happy accident, rather than a sustainable brand strategy.  And brands may ignore this to their own peril, as they will invariably  discover that the sustainability of their firm derives from the sustainability of their brand – it is unwise for long-term objectives to be pursued by means that are inherently temporary and capricious as fashion and those who follow it.

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