Monday, May 25, 2015

Grow Profits the Organic Way

Introduce “organic” into your retail marketing and profitability is likely to increase. But the increase is often for reasons you might not expect.
     Researchers at University of Groningen used scanner data to track purchases across 28 product categories. They found that sales volume advantages of an organic label held most reliably with fresh foods for which limited promotions are done. With items which are processed, heavily advertised, or sold at discounts, listing “organic” as a product benefit won’t increase sales that much. Shoppers find it easy to justify not buying the organic choice. The researchers saw egoism and price consciousness as principal justifications.
     So why does the profitability increase when the store carries organic items and boasts about it? The answer is that the increased profitability often comes from purchases of items not carrying the organic designation. The presence of socially conscious products makes it more likely the customer will purchase products that do not embody social consciousness. It’s as if having chosen the store is enough to satisfy the values.
     Studies at City University of New York, Loyola College, and Duke University suggest that even when this sort of thing doesn’t occur within the same shopping trip, it can occur over subsequent shopping trips. That is, if someone purchases a socially conscious item on this trip, they become more likely to purchase next time an item which shows little attention to social consciousness.
     Consumers who favor organic products think of themselves as being environmentally conscientious, and that leads to another indirect explanation for the increased profitability from organic items. This explanation applies to categories like cleaning products. Studies at Central Michigan University and National Dong Hwa University found that consumers believe green products are less effective than others, so they use more of them for the equivalent task, requiring larger buys.
     Researchers at Özyeğin University in Turkey and State University of New York-Buffalo assessed sales elasticities for 56 product categories of organic and nonorganic items: What happens when product assortments or price discounts are raised or lowered in your store?
     They found elasticities are higher for organics: Increase item assortment 20% with organic and nonorganic items. The increase in sales will be greater for the organic set. Discount prices on organic items 20% one week and on the nonorganic parallels 20% a few weeks later. The sales boost is greater for the organic than for the nonorganic items.

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

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Organize Organic Item Assortment/Promotion
Acknowledge Customers’ Willful Ignorance

Thursday, May 21, 2015

Gambol with Gambled Price Discounts

The trouble in giving deep discounts on items is that it devalues the items for when you return to normal pricing. With the ultimate deep discount—free—you may very well attract lots of takers, but those takers probably won’t fully appreciate what they’re getting. Researchers at Monash University in Australia find that consumers have an easier time recognizing the value of a big discount when charged even a token price than when getting it for free.
     Now researchers at Ruhr University Bochum and University of Stuttgart are proposing a method they believe will carry the draw of a deep discount without the danger of item devaluation. It works best in those circumstances where the shopper lacks sufficient information or attention to relate higher prices to higher quality. The researchers call their method Gambled Price Discounting (GPD): To receive the discount, the shopper must win at a game of chance. The “scratch-off ticket” promotions used by many retailers are a form of GPD.
     When you tell customers they’re receiving a price discount, they’ll build good will toward your store. If you add that the discount isn’t available to every other customer, the good will might be even greater. But do be aware that your announcement could make the customer uncomfortable. Loyal customers often believe they deserve better odds. Be consistent and ready to explain the reason for the discount. Otherwise, the customer can get angry, thinking that your store pricing is highly arbitrary or even discriminatory. For American consumers, make the reason demographic (“A 10% discount to senior citizens”) or marketing-determined (“A 10% discount to first-time purchasers”). With GPD, the reason becomes, “You won!”
     In the Ruhr/Stuttgart studies, which tracked shoppers’ behavior in actual retail stores over an extended period of time, GPD effectiveness didn’t depend on the shopper’s actual probability of winning. But other research indicates that the perceived probability of winning makes a difference. Consumers who feel they beat higher odds are more interested in using the discount.
     Even though the GPD tactic overcomes the devaluation effect of deep discounts, you’re still wise to keep the discounts in the range of 20% to 30%. The frequency with which the shopper sees low prices influences a store’s price image more than does the amounts by which prices are lower. The Ruhr/Stuttgart researchers found that the GPD effectiveness held up as well with modest as with high discount percentages.

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

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Strengthen the Price-Quality Link
Excite Shoppers with “100% Off” Sales
Follow Big Discounts with Smaller Discounts
Show Devoted Customers How to Get Lucky
Mug for Shoppers Who Buy Distinction
Sharpen Your Price Image

Monday, May 18, 2015

Question Dulled Shoppers

“A RIMtailing post that will improve your retail profitability?”
     What are the circumstances under which my putting a question mark at the end of that sentence lends persuasiveness? On the other hand, consider the circumstances in which it would be better for me to make my point by using a period, as in, “A RIMtailing post that will improve your retail profitability.”
     Researchers at Boston College say it has to do with shopper arousal.
     For a field study in a supermarket, at certain times the background music was a highly stimulating Felix Mendelssohn composition, and at the other times, the music might legitimately be called a sedate Felix Mendelssohn piece. In the produce section, the researchers had positioned an electronic sign. The sign display was switched between reading “Berries?” and reading “Berries.” The sales of strawberry boxes were tracked.
     Of the people shopping in the presence of the highly stimulating music, 31% bought the berries after seeing the question mark signage, compared to 58% who made the purchase after seeing the signage with the period. Of the people shopping in the presence of the low-stimulation music, 56% bought the berries after exposure to the question mark, while 38% did after exposure to the period. On balance, shoppers aroused by the music were moved to buy by the period, and shoppers dulled by the music were stimulated to purchase by the question mark.
     The researchers attribute these findings to an evolutionary predisposition. Our brains drive us to be curious when we’re feeling safe from intrusion, and questions trigger curiosity. When we’re highly aroused, our brains prefer the certainty of statements.
     Rhetorical questions lie between statements and standard questions. These are generally yes/no question to which the answer is felt to be so obvious that no reply is necessary. Examples include “Wouldn’t it be fun to have this couch in your living room by tonight?,” and “Do you want to miss this wonderful opportunity?” Researchers at University of Minnesota and Ohio State University find that rhetorical questions work only with customers who are already feeling favorable toward making the purchase.
     When nagging doubts remain with shoppers, rhetorical questions make them feel boxed in. There’s a high risk they’ll conclude that you are trying to manipulate them, and they will want to escape from the purchase. You'll lose the sale.

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

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Use Closed-Ended Questions Selectively
Evolve the Most Basic Sales Pitches of All
Remember to Consider Rhetorical Questions
React When Faced with Reactance

Thursday, May 14, 2015

Gimme Some Lovin’ Handmade

When shoppers want to show love, they’ll have an additional attraction to items that are handmade rather than manufactured by machine.
     In a set of studies at Cornell University, WU Vienna University of Economics and Business, and Technische Universität München, the researchers analyzed a range of other possible explanations for the appeal of the handmade aside from the association with love:
  • More effort to produce than the machine-made, so greater significance 
  • Increased authenticity 
  • Greater pride in production, which deserves to be rewarded 
  • Unavoidable variations, so item uniqueness 
  • Closer attention to detail, so higher quality 
     Other research has shown evidence that at least some of these five can make a difference. For instance, researchers at Colorado State University found that consumers choose to personalize with their own handmade designs even if it means accepting an outcome inferior to what professional designers would produce.
     But even when the Cornell/Vienna/TUM researchers statistically controlled for the other five explanations, the love connection was still there. It showed itself in stronger purchase intentions for handmade than machine-made products when buying gifts for loved ones. This preference wasn’t seen as strongly in purchase intentions for other gift recipients. The love connection was also seen in shoppers’ willingness to pay more for handmade gifts when purchased to convey love than purchased to acquire the best-performing alternative. Handmade craftsmanship gives a backstory the purchaser can tell to family and close friends who see the creation.
     You can use the love appeal of handmade in ways beyond the labels on merchandise. Lululemon Athletica stores have used what looks like a hand-painted calendar of special events and large shelf tags describing the different types of merchandise done in a handwriting font. Keep in mind, though, that research at University of Colorado suggests a handmade look might not appeal to all types of consumers. It’s most attractive to shoppers who see themselves as creative or aspire to be more creative.
     Also recognize that “handmade” and “mass produced” are not mutually exclusive. A few years ago, CB2, a spinoff from retailer Crate and Barrel, hired a craftsman to hand-build a limited edition of 200 American black walnut side tables, which were peddled at twelve stores and via the online catalog. Even at a production run of 200, a claim of uniqueness or of handcrafted authenticity could wear like a thin veneer. “Uniquely authentic” starts sounding to consumers more like “faddishly routine.”

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

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Personalize the Shopping Experience
Ask “Whither Art Thou Helping?”
Offer Neatness to Creative Shoppers

Monday, May 11, 2015

Heat Up Sales Revenues

A Harvard University inquiry came up with examples of how an induced sensation of heat could affect what people end up buying at your store:
  • Higher temperatures when shopping—as long as they’re not too high to be pleasant—lead to consumers being more likely to purchase what others in the vicinity are buying. 
  • Because the fragrance of cinnamon suggests warmth, pairing that fragrance with the offering of a heating pad will lead to more positive evaluations of the heating pad’s effectiveness. 
  • Olay Regenerist facial products are formulated to generate heat when applied as a cue to users that the product is working, thereby increasing the odds of repurchase. 
     These findings support what is referred to by consumer psychologists as “embedded cognition”—how bodily sensations influence purchasing behavior below the level of conscious awareness.
     Use heat to the advantage of your business. Still, stay aware that heat doesn’t always help. “Dog days,” the hottest time of the year wherever in the world, get their name from the rising of Sirius, the Dog Star, just before dawn during summer months in the Northern Hemisphere. As to how Sirius got the name “Dog Star,” that’s a whole different story, since most dogs I know are far from serious in disposition once they get to know you.
     With more scientific backing, “dog days” also refers to a time of sluggish activity and lazy thinking. Shoppers during hot summer months prefer mental shortcuts to detailed analysis in making purchase decisions.
  • When the weather is temperate, people would prefer to get their necessary shopping done with so they can move on to leisure activities. 
  • Pleasant heat after a time of less pleasant cold raises people’s spirits, and happier people get more interested in shopping. 
  • Prolonged high heat wearies shoppers’ muscles, thereby making them less alert and less resistant to spotting weak reasons for buying or not buying. 
     During the dog days, present succinct arguments for buying.
     A University of Pennsylvania researcher explored contrasts in heat as he analyzed the enrollment decisions of 1,284 college prospects at a campus known for its academic strengths and recreational gaps. If the day of the college prospect’s exploratory visit to the campus was especially cloudy, the odds that the prospect would choose to apply to that campus increased markedly. It seems that when the dog days are missing and perhaps missed, consumers are more interested in getting serious.

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

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Use Synesthesia to Reinforce Store Image
Dog Decision Rigor During Dog Days
Cool Summertime Shoppers