Monday, November 30, 2015

Sponsor in Good Company

Sponsorship marketing is usually associated with a business helping out a charity or nonprofit. It can also take other forms. Your store might financially support a business seminar for retailers in your community, staff the press room at a week-long local trade show using a few of your paid employees, or provide supplies from your store stock for a children’s soccer team for an entire season.
     A chief objective of sponsorship marketing is to build goodwill toward your business from prospective customers and from community decision makers. Knowing all this, researchers at Leibniz Universit├Ąt Hannover urge you to inquire about and then seriously consider the reputations of any cosponsors. Using sophisticated statistical analyses, the researchers verified that if a sponsor is viewed unfavorably by participants in the activity or event, those negative impressions will bleed over toward perceptions of the other sponsors. This situation could occur, for example, when your cosponsor has signed on in an initiative to turn around a widespread negative impression or to calm recent controversy.
     The bleed-over to your reputation is more likely when:
  • The cosponsor is in the same type of business as you 
  • The cosponsor is well-known 
  • The cosponsor’s name is featured in the same posters, agendas, and speakers’ expressions of gratitude as is your business name 
     Other research indicates that although there will also be a bleed-over when the reputation of a sponsor is highly positive, the influence on audiences is not as significant as with a negative bleed-over.
     It’s probably pretty much out of the question to ask event planners to withhold the identity of a cosponsor you’re concerned about. Yet there is a circumstance where you could make a case to the cosponsor to stifle the notice, and this argument holds regardless of that sponsor’s brand image:
     You might invite one of your suppliers to join you in the sponsorship marketing. After all, building sales is in the interest of both the supplier and you. And if the target is a charity, you’ll get better results in convincing others to join you in donating if you publicize the sponsor as being your store and not the supplier. Research at Michigan State University, Illinois Wesleyan University, and University of Texas-Austin suggests that when a store instead of a brand is publicized as the sponsor, consumers are more likely to see the sponsorship as a charitable act rather than only a selling technique.

For your profitability: Sell Well: What Really Moves Your Shoppers

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Activate Sponsorship Marketing
Donate In Ways that Encourage Others to Donate

Thursday, November 26, 2015

Bring Value Closer

Today’s consumer thinks about today’s value. That’s why, everything else being equal, they’ll prefer products and services which give them immediate benefits over those in which the benefits are over the horizon.
     Researchers at Wayne State University saw this phenomenon when comparing messages for energy savings on light bulbs. Those like, “You can start saving a little money now on your electricity bills by using this product,” generated more purchase potential than did messages like, “Over the next three years, you’ll save a noticeable amount of money by using this product.”
     Psychological distance enters into the shopper’s preference equation in other ways, too:
  • Selecting an item to be used in the future rather than starting now 
  • Selecting an item for use by someone else rather than one’s own use 
  • Considering an item after reading an ad rather than in the store 
     Also, a need to travel a longer way to obtain the item. But this one sometimes adds to the valuation of the item instead of subtracting. Researchers at University of Chicago found that shoppers who characterized themselves as “smart” rather than “not smart” expressed a higher preference for products they’d have to travel across town to get over equivalent products they could purchase nearby. These shoppers also evaluated products more positively when the products had been pushed back on the shelves rather than being in easy reach.
     Related to the degree of valuation are these further effects of psychological distance:
  • Emotional reactions become less intense. According to studies at University of Colorado-Boulder, University of Oviedo in Spain, and Lieberman Research Worldwide, this is true for highly positive emotions—such as the thrill in having the item—and for highly negative emotions—such as anger at flawed product performance—and for all the emotions in-between. 
  • There is a stronger link in the shopper’s mind between price and quality. Researchers at Hong Kong University of Science and Technology told study participants how much had been paid for a set of items—ranging from yogurt to computers—and then asked each participant to guess the quality of each item. In some cases, the study participant was to assume she herself had made the purchase. In the other cases, the participant was to assume a friend had made the purchase. With purchases made by friends, there was a more direct relationship between the price paid and the assumed quality of the item. 
For your profitability: Sell Well: What Really Moves Your Shoppers

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Drive the Psychological Distance
Challenge Smart Shoppers
Commit Shoppers from a Distance for Expenses

Monday, November 23, 2015

Downgrade Free Upgrades

“Buy an 8-inch cake and we’ll give you a 10-inch at no extra charge!,” says the bakery salesperson to the birthday cake shopper. To the next birthday cake shopper, though, the salesperson says, “Buy an 8-inch cake and, for only a penny more, we’ll give you a 10-inch!”
     How strange that the person asked to pay the tiny extra amount is more likely to select the 10-inch model than the person who would get it absolutely free. To ascertain why, researchers at China’s Southwestern University of Finance and Economics-Liulin offered either a free or token price upgrade to real shoppers for one or another of a range of items. After analyzing the shoppers’ reasoning, the researchers concluded that the token fee made it easier to appreciate the value of the deal compared to the price of the regular version. Zero makes a poor comparison point.
     Monash University researchers saw a similar oddity that led them to say retail customers would be happier with a drop from a 5% interest rate to a 1% rate than if the drop is from 5% to 0%. Again, this is because zero doesn’t serve well as a consumer’s anchor for appreciating the magnitude.
     When the cost is more than a penny, the general principle still holds for an initial upgrade: Make the relative cost calculation easy for the shopper. They’re more likely to choose the upgraded alternative if the cost is a round number. So if the prices on the bin tags are $19.99 and $29.99, the salesperson says, “For only $10 more, here are the additional features you’d get.” The easy comparison facilitates acceptance of the upgrade.
     However, get set to pile on another oddity for subsequent upgrades during the same shopping trip. Here, shopper agreement to the upgrade is more likely when the price comparison is more difficult. Researchers at Babson College and Baruch College found that, when considering subsequent upgrades, people perceive the differences in prices between the regular and upgraded versions to be smaller if the comparison is harder to compute. For these subsequent upgrade considerations, quote the actual price points rather than rounding them, and discuss the prices in detail.
     How to explain why this works? When the shopper has expended considerable mental energy deciding whether to put out even more money on another item upgrade, their resistance to accepting an upgrade which benefits them is worn down.

For your profitability: Sell Well: What Really Moves Your Shoppers

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Detail Subsequent Upgrade Price Comparisons
Give Shoppers a Comparison Point

Thursday, November 19, 2015

Repeat Warnings at Time of Acquisition

You would think that if you warn some shoppers “The product may cause significant hair loss, headaches, and damage to the immune system,” those shoppers would be less likely to choose to use the product than if no warning had been given. But researchers at New York University, Tel Aviv University, and INSEAD-Singapore found that, under certain circumstances, the warning ends up actually making product use more likely.
     Those circumstances occur when there’s a delay between the warning being given and the step of acquiring the item. It’s a version of what consumer psychologists call “the sleeper effect,” in which part of a message is remembered and acted upon, but the rest is forgotten or ignored. When people are warned of the dangers in using a product, they build trust in the retail source of that message as being honest. Over time, the impact of the warning fades, but the feeling of trust in the product benefits statements remains.
     For one study, researchers included within a pitch to women for a certain artificial sweetener a warning that the product could cause immune system damage. The remainder of the women in the study were not given that warning. Then for half of the women in each group, an invitation was extended to order the sweetener right then. The others were asked to return two weeks later, at which point they were invited to order the sweetener.
     Women in the immediate-choice circumstance who had been given the warning ordered about 5% the number of sweetener packages ordered by those who didn’t get the warning. The caution frightened them away. But in the two-week-later group, those who had been given the warning ordered 265% more than did those not given the warning. The warning built trust which outlasted the caution.
     Similar results for other items indicate this paradoxical influence of warnings holds for purchases of a range of products, medical procedures, and financial investments. Other research indicates that the scarier the original warning about an item the shopper desires, the more likely the warning will be forgotten. Added to the sleeper effect is willful ignorance.
     My general advice to retailers is not to give warnings to shoppers unless asked. Inform without intruding. However, I make an exception when it comes to safety. Via product labels, risk statements in ads, and face-to-face dialogue, arouse caution in shoppers at the time of product acquisition.

For your profitability: Sell Well: What Really Moves Your Shoppers

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Monday, November 16, 2015

Get Price Hike Irritation Over With

More often than not, retailers will impose price hikes less frequently, but in greater amounts, than price drops. Still, there are plenty of exceptions. This practice, which economists have named “Rockets & Feathers,” occurs about 70% of the time.
     Why not all the time? Probably because experienced retailers have come to realize that the Rockets & Feathers method is most successful in certain situations. Studies based at University of Seville identified two of the factors, saying it works best:
  • With the more expensive items within a product category at that particular store
  • When the consumer will be highly involved in use of the item rather than using the item without much conscious thought
     For items fitting these circumstances, get the pain associated with price hikes over quickly. Raise prices as infrequently as you can, and when you raise them, be sure it is by an adequate amount.
     Those are the rockets. Also remember the feathers. Do not drop prices too severely. It’s better to offer frequent smaller decreases.
     Researchers at Northwestern University and Massachusetts Institute of Technology created a merchandise catalog listing 86 products, 36 of which were discounted. In one version of the catalog, the discount averaged 34%, while in the other, it averaged 62%.
     The greater discounts led to more demand in the short-term. That did not necessarily mean higher profitability, since the dollar amount of each sale was less. More important, though, were the longer-term effects: Customers who had recently purchased one of the items that now was going at a 62% discount were upset. They subsequently bought much less than before, and this effect lasted beyond one and a half years. Sales dropped most severely for loyal customers. The researchers called this a “boycott effect.”
     Does the boycott effect still operate if shoppers expect to see big discounts on items, such as after Christmas? When the researchers tested this out with a clothing retailer, sales did not drop as dramatically as in the first study, but still, there was a 4% drop.
     Consumer behavior research at Northwestern University and Massachusetts Institute of Technology finds that lowering prices gently and with precision is a good way to ensure customers who visit your store often will continue to trust your pricing. Use of the word “feathers” to describe this pricing strategy fits nicely in another sense, too. One meaning of “feather” is to hit softly and precisely.

For your profitability: Sell Well: What Really Moves Your Shoppers

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Feather Pricing Changes with Precision
Drop Prices Slowly
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