Monday, March 18, 2024

Foment FOMO & Fear for Crypto Crazy

What persuades people to invest in cryptocurrencies, given the level of financial risk with even the most stable alternatives? In describing the popularity of cryptos, researchers at Universitat Ramon Llull note that financially vulnerable minorities are overrepresented among the range of investors. Therefore, perhaps the appeal is related to that of lotteries: The poor are drawn to dreams of cashing in big while ignoring the odds of crashing down big.
     Those researchers then go on to explore the power of FOMO. People’s caution about cryptos is dissolved by a fear of missing out on the astounding financial gains they believe others are achieving. For one of the studies, the researchers used as participants people who had recently invested in cryptos. The participants were asked to pretend they were considering another crypto investment. Some then read, “Other users, traders, and investors have posted comments and videos on this social media platform about the release of this crypto. They have commended the hype about this new crypto and how profitable it might be. So, you think you are missing out if you do not invest.” The others read, instead, “Other users, traders and investors have not mentioned anything about this crypto and have not shown any interest on this social media platform. So, you are not sure about the hype of this crypto and its profitability. You do not think you are missing out on anything if you finally decide not to invest.”
     As the researchers predicted, the fear of missing out resulted in higher agreement with, “It’s very likely that I will invest in this new crypto.” Additional studies in the set supported the conclusion that FOMO precipitated the investment interest and that this worked even when the investor had experienced prior losses. The implication is that sales of highly risky instruments can be increased with use of a FOMO appeal.
     However, consumer advocates and ethical financial advisors will want to curb financially vulnerable consumers’ attraction to crypto. The researchers found evidence that a fear message can counteract the FOMO effect. The text used in the study was, “9 out of 10 investors suffer severe losses when investing in crypto.”
     A separate project found the driving force of FOMO toward cryptocurrency investing is more likely in people who show high interpersonal agreeableness and low self-confidence. When a financial advisor identifies these characteristics in a consumer, delivering fear messages is especially important.

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Dissect the Shopper’s Risk Tolerance 

Monday, March 11, 2024

Green Up Your Corporate Social Responsibility

Offering products designed with sensitivity to environmental welfare—green products—improves the attractiveness of a store carrying them. A University of Indiana analysis of 75 green product introductions finds that this doesn’t uniformly equate to more buying of the products, though. Increased profitability often comes from purchases of items not carrying the green designation. In fact, the presence of socially conscious products makes it more likely the customer will buy products that do not embody social consciousness. It’s as if having chosen the store is enough to satisfy the shopper’s desire to display green values.
     By comparison, when a brand designs its corporate social responsibility programs to benefit environmental welfare, the positive emotion among consumers results in increased purchases of the related products.
     For their analyses, researchers at Imperial College London and University of Southern California sorted CSR initiatives into three categories—targeted to fair labor practices, such as contributing resources for the betterment of its employees; targeted to community philanthropy, such as making donations to nonprofit organizations; and targeted to environmental sustainability, such as supporting the welfare of nature.
     Participants in the set of studies were each provided a description of a wine brand, hand soap brand, or stationary paper brand which engaged in one of the three types of CSR initiative, or in no CSR initiative. Each participant was also invited to purchase the described product, using a portion of money given to all as a stipend for study participation.
     Compared to those people not told of the brand’s CSR initiative, those told of an environmental CSR were more likely to spend their money purchasing the product. This was not generally true when the CSR initiative was described as targeted to employee welfare or community philanthropy.
     Further aspects of the studies identified the explanation for the effect as moral elevation, a characteristic measured by high degree of agreement with statements such as “The brand moves me because of the ideas it represents” and “The brand makes me want to be a better person.” CSR efforts targeted to environmental welfare generated greater moral elevation, and the moral elevation resulted in higher sales of the associated products.
     In the marketplace, shoppers will look for evidence beyond the CSR programs to judge the true values of a brand. Still, the general truth is that enabling shoppers to feel good about themselves improves sales, and environmentally-targeted CSR helps with that.

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Wash Away Your Greenwash Products 

Monday, March 4, 2024

Couple Fiscal Intercourse

Marketers benefit when shoppers have money skills. The shoppers will be better able to pay their bills and so have funds to spend with you. Building those skills should begin early. As part of your community outreach, encourage parents to include their kids in financial literacy talk.
     A set of studies at Indiana University, University of Michigan, Yale University, and Northwestern University indicates that as those kids approach marriage age, the talk should include encouragement of husband and wife setting up joint rather than separate banking accounts at the start. During the first two years of marriage, couples who established joint accounts had a stronger relationship quality than did couples with separate accounts.
     The researchers attribute this to the partners with joint accounts engaging in more interpersonal dialogues about financial goals and more monitoring of each other’s spending habits. With joint accounts, each partner is thinking how they’ll justify large purchases to their mate. Regularly discussing expenditures and plans for expenditures with each other leads to insights about the important values each partner maintains—a valuable contributor to an enduring relationship.
     Couples often aim to balance their shopping tendencies. Tightwads—who recognize they should be more willing to spend money—tend to marry spendthrifts—who recognize they should be more cautious in spending. They married each other to help moderate the extremes. Joint accounts assist with this.
     The study of joint-versus-separate-accounts is notable because of the implications for the strength of marriages. It’s also notable because of the research methodology. In choosing a two-year tracking time, the researchers report that this span has been considered in prior studies as foreshadowing marital fate. 
     The research methodology also resolves causation direction. We might argue that couples who decide on their own to set up joint accounts already have a stronger relationship than do couples who decide to set up separate accounts at the start. So it’s not that joint accounts cause stronger relationships. It’s that relationship strength causes joint accounts. Or maybe it’s just that the two are correlated, caused by some other factor.
     The researchers addressed this by randomly assigning some of the couples in the study to set up joint accounts and others to set up individual accounts. When the researchers then assessed marriage relationship strength at six points over the first two years of the marriage, they could legitimately attribute the observed differences to the effects of the account type.

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Include the Kids in Financial Literacy Talk 

Monday, February 26, 2024

Strengthen Weekday Sales with Music

Psychological depletion influences all sorts of consumer behavior, and it occurs not just within the span of a single day, but also in the difference between weekdays and weekends. A set of University of Bath and Babson College studies finds that in-store music boosts sales Monday through Thursday to a substantially greater extent than Friday through Sunday. The researchers’ explanation, supported by the studies, is that shoppers are under greater pressure during the workweek, and music fosters positive feelings in ways which enhance the shopping experience and restore depleted spirits. Music seemed to be more influential during later hours on the weekdays, when people would be expected to be more depleted than earlier in the day.
     The findings held for both background and foreground music in a grocery store field study. The researchers describe the background music as, “elevator music, with songs in major modes,” and no lyrics. The foreground music was, “songs that were popular at the time of the study and included vocals, likely to be recognized as individual songs.” The volume was designed to be just sufficient to be heard clearly over ambient noise in the store, and the playlist was long enough so that it avoided repetitiveness for employees as well as shoppers.
     The researchers point out their findings apply most clearly to retailers serving people on-the-job from Monday through Thursday. For a customer base composed primarily of vacationers or retirees, different strategies for using music would be called for.
     Other studies say that the music you play, as well as whether to play music at all, should reinforce the store personality you set. Among supermarket chains, Aldi stores don’t use music, Kroger stores do. The nature of the music also matters. If your sales depend on the shopper carefully analyzing the purchase decision, either do not have music or use music that is barely noticeable. Researchers at Columbia University and Northwestern University find that when a customer listens to the music in the store, their attention is taken away from analyzing the purchase decision. If you’re wanting the customers to try new brands or new products, eliminate intrusive music.
     Based on those same research findings, use noticeable music—such as music with lyrics—if you both expect and want the shopper to select items from habit without much thought. Noticeable music helps head off arguments the shopper might make to themselves about the purchase.

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Use Music to Motivate, Not Disrupt 

Monday, February 19, 2024

Declare Inexperience to Experience Forgiveness

You want your frontline staff to be experts and for shoppers to recognize the expertise. Yet a trio of researchers at University of Bordeaux and KEDGE Business School find a payoff in boldly proclaiming that an inexperienced frontline staff member is, in fact, not yet an expert: If there’s a service failure during the subsequent sales transaction, the customer is more forgiving of both the employee and the retailer and, if the customer has already built an attachment to the retailer, is more likely to return in the future than if the warning of inexperience had not been provided.
     Based on their study findings, the researchers do add cautions: The customer must not have already experienced a series of service shortfalls from that retailer. And the announcement of employee inexperience must have been given upstream—prior to the service failure—such as by the employee wearing a badge labeled “In Training” or saying at the start, “This is my first week at the job.”
     Researchers from European School of Management and Technology, Loughborough University, Ruhr University Bochum, and FOM Hochschule Hochschulzentrum Berlin identify another effective upstream method, which they call psychological vaccination against disappointment. In their study, a group of 1,254 airline passengers were sent a pre-flight email saying the company’s commitment to service quality had earned it several awards. A set of passengers within the group also received, in their email, phrasing that said long waiting times at the baggage claim cannot be eliminated.
     Among the passengers who subsequently experienced long waiting times, customer satisfaction was clearly higher for those who had received the added message. Importantly, the added message did not decrease customer satisfaction among passengers whose waiting times were shorter. The psychological vaccine only helped. It didn’t hurt.
     Timing of a retailer’s response counts for the downstream, too: Researchers at IMED Business School in Brazil, Federal University of Rio Grande do Sul, and Katholieke Universiteit Leuven find that an apology for a service failure and a promise it won’t happen again are both effective in recovering trust. But the timing of each influences the effectiveness. An apology, which is seen by the victim as demonstrating integrity, best comes promptly. A promise, seen as a sign of competence, best comes a few weeks after the incident. Perhaps this is because a credible promise requires gathering information about what occurred and what will work to correct the problem.

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Have Staff Who Show and Share Expertise 

Monday, February 12, 2024

Swell Inspiration to Hike Multichannel Buying

Better than only persuading your shoppers to buy from you is inspiring them to buy from you. Inspiration enhances cross-channel purchasing, says a team of researchers at University of Valencia and University of Parma. The studies identified novelty as a significant way to inspire shoppers. Novelty expands mental horizons, which in turn inspires the shopper to consider a broader range of purchasing channels, such as both in-store and online, expanding a seller’s opportunities for profitability.
     In the studies, inspiration via novelty was measured by the consumer’s degree of agreement with four descriptions of their physical store and online shopping experiences: “My imagination was stimulated.” “I was intrigued by a new idea.” “I unexpectedly and spontaneously got new ideas.” “I discovered something new.”
     In the study surveys, participants were asked about purchasing of apparel, accessories, perfume and cosmetics, sport equipment, furniture, electronic appliances, consumer electronics and games. The participants ranged in age from 18 to 65 years. The breadth of merchandise types and respondent ages indicates that the findings hold across consumer marketing situations.
     The studies found relationships between inspiration via novelty on the one hand and, on the other hand, making purchases across channels. The effect is stronger in the direction of in-store to online than from online to in-store. One implication for retailers is to periodically redesign areas of the store in order to maintain novelty when an objective is to hike online selling. Change color schemes and merchandise arrangements.
     Multichannel retailing in itself introduces a sense of novelty and therefore the potential for inspiration. Shoppers find enjoyment in a variety of shopping experiences. But one way they can obtain this enjoyment is to go to different stores. Your customers might be shopping elsewhere even for products they could purchase from you because they seek the stimulation.
     Win those customers back for at least a while by reminding them you’re still around and worth looking in on. Distribute news about developments with the items you carry, such as variants, extensions, added features, and special offers. Then encourage returning shoppers to explore. Researchers at New York University-Stern, University of Pittsburgh, and Drexel University found that a coupon requiring shoppers to travel farther from their planned path to obtain discounted items resulted in an average increase in spending of about $21.00. When the coupon didn’t require wandering from the planned path, the increase was instead about $14.00.

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Utilize Multichannel with Hedonic Selling