Monday, April 15, 2019

Compensate Group Service Failure Collectively

When running your business well, failures to service your customers won’t occur frequently, and when a service failure occurs, it will usually be a matter of resolving the issue with an individual shopper. Still, there are times in any business when a significantly sized group of your customers are impacted by the service failure. Maybe a large number of your employees call in sick so service slows down. Maybe a traffic accident or a bad storm causes late deliveries or a power outage in your store.
     Findings from consumer studies clearly indicate financial compensation for the shortfall heads off ill feelings toward the business. Researchers at University of Alabama, Copenhagen Business School, and Friedrich-Schiller University of Jena had a question about the circumstance where a group has been impacted: Should you tell shoppers in the group that all are receiving the same compensation for the service failure? The alternative is to tell each individually only what they are receiving.
     In answering this question, the researchers confirmed findings from previous studies concluding the relationship between the size of financial compensation and preservation of satisfaction follows a concave curve. At low levels of compensation, the more you give, the better the results. But at higher levels, the curve flattens out. You won’t get much better results by offering more.
     Attentiveness to customer reactions can tell you the point where the curve flattens. But the research findings do show this point occurs earlier when everyone in the group knows that all are receiving the same amount. You’ll need to spend less on giving credits toward future purchases or providing a discount on the current purchase.
     The explanation is that a sense of fairness itself enhances satisfaction. Knowing all have been compensated the same portrays fairness. This applies otherwise, too. In a store queue, shoppers become highly vigilant. One reason is the extra stress caused by being in close physical proximity to people they don’t know. Another reason is to be sure social norms are respected, such as nobody butting into line and each person waiting about an equal amount of time.
     There are qualifications. If you offer discounts not available to other customers when those privileged customers believe the others won’t learn about the favor, recipients’ satisfaction grows. It’s because of distinctiveness. Assuming superiority to others beats out concern others are getting more than you. The highest satisfaction level climbs higher still.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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Knock Out Rage from the Old One-Two
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Offer Exclusive Price Discounts Cautiously

Monday, April 8, 2019

Cause Donations to Enhance Business Credit

In cause-related marketing, you address social responsibilities by making charitable contributions. For example, you announce to your target markets you’ll donate a certain amount of money based on purchases from your store.
     Researchers at Washington University in St. Louis point out that another example consists of donating goods rather than money. Their studies conclude this is a better alternative if consumers view your business as lacking warmth. You’ll earn more credit in consumers’ minds by contributing items, with the monetary value of each donation stated as what the cost to your business is.
     The explanation is that people are prone to attribute hidden, exploitive motives to low-warmth organizations. Donations of appropriate goods instead of money show warmth via you attending to the distinctive needs of others. In the studies, donors lacking warmth were defined as those low in the communal characteristics of friendliness and trustworthiness.
     The researchers muse that charities probably prefer monetary contributions to donations of merchandise, since the money gives the charity more flexibility. So it could be in the interest of all parties for a business experiencing perceptions of low warmth to improve these perceptions. In the meantime, though, give goods. Still another alternative is to pay your employees to do work at the charity. For many situations, donations of time give impressions of warmth.
     Another issue is what charity to contribute to. It would seem you’d want to choose a recipient consistent with your store’s brand image. But studies at North Carolina State University and University of South Carolina make a case for including charities which don’t fit the personality of the store operations. The reason is that this has been found to give the consumers more of a sense of personal participation in helping the cause through their purchases. They feel noble, and a sense of nobility facilitates buying intentions.
     If you follow this advice, the specific mission of the charity probably differs from the specifics of the mission of your business. Therefore, your business may want to give merchandise different from what your store usually carries. This is because studies at National Sun Yat‐Sen University, Nanjing University, and CTBC Bank verify how the match between the charity’s mission and the nature of the donation is most important in leading consumers to consider the motives of the business to be genuinely altruistic. It is this consideration which maximizes intentions to buy from the business.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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Monday, April 1, 2019

Welcome the Stigmatized

When you chase away shoppers your current customers don’t want to associate with, purchase commitment from many of those current customers increases. People shopping in luxury outlets prefer not to rub shoulders with the shabbily dressed. Consumers who strongly oppose homosexuality like to count on not seeing same-sex couples in retail establishments they patronize. Physically ugly shoppers put off the physically beautiful ones.
     That’s the truth. But it’s clear this truth can itself turn ugly. Researchers at Rutgers University address the case for the opposite approach to business profitability: Expand your sales by signaling to the stigmatized how you welcome them spending their money and time with you. The effects of doing this go beyond increasing business from the specific target. The researchers point to studies showing that when it’s clear one stigmatized group is welcomed, others come to feel they’re welcomed, too. 
     Please recognize the exceptions to this when a stigmatized group itself stigmatizes. If your store signals that they’d love to have the shopping aisles filled with white supremacists—a group which is quite rightfully stigmatized—I’m thinking that disenfranchised racial minorities would read this as being stepped on rather than as a welcome mat. But the general rule still generally holds. Moreover, other studies describe how the broad audience of the non-stigmatized are attracted to retailers who eschew discrimination.
     The Rutgers researchers also note that a brand image which projected danger toward one or more stigmatized groups led to boycotts of the brand. If you’re subject to a boycott by a community action group, determine the group’s objectives before deciding on actions. Researchers at University of Texas-Austin and University of Southern California say community action groups initiating a boycott are usually less interested in doing economic damage to the offender than in forcing changes to the behavior of all businesses engaging in the offensive action. If you find this is indeed the objective of an organized boycott of your retail business, publicize all the ways in which you share common ground with the group.
     The Rutgers researchers conclude that the essential element in welcoming the stigmatized is deeper than carrying items which likely appeal to the target population, such as the hijab-wearing Black Muslim Barbie from Mattel, or in the d├ęcor, such as advertising showing women who are full-figured. The essential element is a message of safety as the consumer reinforces their identity during their shopping.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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Monday, March 25, 2019

Minimize Minimum Purchase Discount Fallout

Discounts with a minimum purchase requirement (MinPR) have the format “Buy at least five items today & get a 20% discount on your entire purchase.” This resembles the format of a multiple quantity discount (MQD) (“Buy at least five balls today & get 20% off”). However, there is an important difference. The shopper interested in the MQD is sure to want balls. The issue is whether they really want to buy five. With the MinPR discount, the issue is whether the shopper can find five desired items from the store’s entire merchandise selection.
     What if they can’t? asked researchers at Soochow University in Taiwan, and so the shopper puts into the basket one or more items they really do not long for in order to get the discount on items they do.
     As you might expect, the answer obtained by the researchers is that the shopper’s satisfaction drops and the shopper loses appreciation for the discount. Even though a MinPR discount is much less restrictive than a MQD and the shoppers are saving money on the items they want, many MinPR shoppers feel cheated. This leads to another question: Considering that MinPR discounts increase total purchase revenues, are there steps a retailer can take to avoid the negative fallout from this type of promotion?
     Yes, the researchers documented. An obvious one is to keep in stock the sorts of items shoppers want. A somewhat less obvious one is to stay alert for signs that a shopper is having trouble filling the quota and then help by making suggestions which are based on what you know about the customer, including what items they’ve already placed into the basket. Reduce the decision difficulty. Moreover, encouraging a shopper to explore your aisles is a fine way to acquaint them with all your store carries.
     Another approach to MinPR discounts and MQD has been validated by researchers at National Chung Hsing University, also in Taiwan. Multiple price breaks are in the format “Buy three and get 10% off. Buy five and get 20% off.” In addition to tempting larger quantity purchases, it also results in more single-item transactions than does “Buy five and get 20% off” alone. Perhaps it’s because single-item purchasers feel more comfortable knowing that others—those who purchase three items, but not five—are also missing out on the best per-unit price.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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Monday, March 18, 2019

Operate Purchase Liking via Opportunity Cost

When a prospective customer is debating whether to buy a particular shirt, let’s say, a salesperson who is anxious to make a sale might very well show the person some alternative shirts. “If you’re having doubts about this one being just right for you, here are a few other choices I recommend you consider.”
     Researchers at Yale University and University of Arizona explore a quite different response the salesperson might make, probably while walking the shopper from one section of the store to another: “I realize you’re having doubts about purchasing that $29 shirt. I know you enjoy cooking, so I’d like you to consider spending the $29 instead on this food blender.”
     This second gambit touches on “opportunity cost,” a term consumer researchers use to refer to the circumstance where a shopper forgoes the chance to purchase an item because of a decision to purchase another item. The second gambit is most appropriate for the shopper on a controlled budget. In other circumstances, you’d prefer the person to buy both the shirt and the blender.
     The researchers found that when a salesperson introduces options from a wholly different category, a shopper’s interest in purchasing the target item decreases. The reason is that the goal of spending the money changes when the appeal is in terms of opportunity cost. The result is that if the shopper does purchase the blender, they are unlikely to feel sorry they didn’t purchase the shirt. Discussing the decision in terms of opportunity cost helps the shopper come away feeling pleased they made use of an opportunity.
     This general finding holds true for both hedonic items, purchased for the pleasure usage brings, and for utilitarian items, purchased for the outcomes they produce. It holds true whether the marketer presents the alternatives which are dissimilar to the target item or whether the shopper is encouraged to generate the dissimilar alternatives. “You’ve doubts about the shirt. Please think about ways you could spend that $29 on a completely different sort of item we carry in the store here.”
     Researchers at Yale University, Arizona State University, and Singapore Management University find that spendthrifts—consumers who are uncomfortable with how much money they spend—respond best to opportunity cost appeals. Counter to what you might expect, tightwads—consumers uncomfortable with how restrained they are in spending—are much less responsive. They’ve already figured out the opportunity cost angles.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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