• by Gord Hotchkiss , Featured Contributor, September 20, 2022

Twelve years ago, when looking at B2B purchases and buying behaviors, I talked about a risk/reward matrix. I said  that all purchases have an element of risk and reward in them. In understanding the balance between those two, we can also understand what a buyer is going through.

At the time, I was saying how many B2B purchases have low reward but high risk. This explains the often-arduous B2B buying process, involving RFPs, approved vendor lists, many levels of sign off and a nasty track record of promising prospects suddenly disappearing out of a vendors lead pipeline. It was this mystifying marketplace that caused us to do a large research investigation into B2B buying and led to me writing the book “The Buyersphere Project: How Businesses Buy from Businesses in the Digital Marketplace.”

When I wrote about the matrix right here on MediaPost back then, some commenters said I had oversimplified buying behavior -- that even the addition of a third dimension would make the model more accurate and useful.

Better yet, do some stat crunching on real-time data, as suggested by Andre Szykier: “Simple StatPlot or SPSS in the right hands is the best approach rather than simplistic model proposed in the article.”

Perhaps, but for me, this model still serves as a quick and easy way to start to understand buyer behavior. As British statistician George P. Box once said, “All models are wrong, but some are useful.”

Fast-forward to the unusual times we now find ourselves in. As I have said before, as we emerge from a forced two-year hiatus from normal, it’s inevitable that our definitions of risk and reward in buying behaviors might have to be updated. I was reminded of this when I saw last week’s commentary “Cash-Strapped Consumers Seek Simple Pleasures” by Aaron Paquette. He starts by saying, “With inflation continuing to hover near 40-year highs, consumers seek out savings wherever they can find them -- except for one surprising segment.”

Surprising? Not when I applied the matrix. It made perfect sense.

Paquette goes on: “Consumers will trade down for their commodities, but they pay up for their sugar, caffeine or cholesterol fix. They’re going without new clothes or furniture, and buying the cheapest pantry staples, to free scarce funds for a daily indulgence. Starbucks lattes aren’t bankrupting young adults -- it’s their crushing student loans. And at a time when consumers face skyrocketing costs for energy, housing, education and medical care, they find that a $5 Big Mac, Frappuccino, or six pack of Coca-Cola is an easy way to 'treat yo self.'”

I have talked before about what we might expect as the market puts a global pandemic behind us. The concepts of balancing risk and reward are very much at the heart of our buying behaviors. Sociologist Nicholas Christakis explores this in his book “Apollo’s Arrow.” Right now, we’re in a delicate transition time. We want to reward ourselves but we’re still highly risk averse. We’re going to make purchases that fall into this quadrant of the matrix.

This is a likely precursor to what’s to come, when we move into reward seeking with a higher tolerance of risk. Christakis predicts this to come sometime in 2024: “What typically happens is people get less religious. They will relentlessly seek out social interactions in nightclubs and restaurants and sporting events and political rallies. There'll be some sexual licentiousness. People will start spending their money after having saved it. They'll be joie de vivre and a kind of risk-taking, a kind of efflorescence of the arts, I think."

The consumer numbers shared by Paquette show we’re dipping our toes into the waters of hedonism. The party hasn’t started yet, but we are more than ready to indulge ourselves a little with a reward that doesn’t carry a lot of risk.