Thursday, October 8, 2015

Irritate Me Rather Than Ignore Me

Why would people become more likely to repeat a consumer behavior that had earlier been acknowledged with a mildly annoying sound or mildly unpleasant sight? Because it is better to be acknowledged than ignored.
     The researchers at University of Chicago, University of Florida, and University of Wisconsin-Madison who documented this effect even found that after a while, what had been annoying or unpleasant was actually rated by the consumers as pretty nice. The pleasure of acknowledgement came to trump the irritation.
     And talking about “trump” brings to mind a related phenomenon with The Donald. When presidential nomination contender Carly Fiorina was told Donald Trump considered her ugly, she replied, “[J]ust maybe I am getting under his skin a little bit because I am climbing in the polls.” She’d been acknowledged. It’s in the tradition of Simon Cowell insulting a previously unknown singer during “American Idol,” and comedian Don Rickles producing big grins from audience members by calling them hockey pucks.
     I’m most certainly not recommending you go out of your way to irritate your shoppers. But I do recommend you go out of your way to acknowledge them and their actions, even at the risk of mildly irritating them.
     A while back, I conducted a two-day “Profitability Tactics for Small Retailers” seminar with a set of business advisors from the Los Angeles Regional Small Business Development Center Network. The objective of the seminar was to equip the business advisors so they would help their retailer clients implement profitability tactics I preach.
     During the evening between the two days of intensive training, a pair of the business advisors from out of town supplemented their retailing knowledge by shopping at an IKEA store. At the cash/wrap, the two shoppers experienced an unsettled feeling. There was no sound accompanying the completion of the purchase. No sound of a cash register, although the sound from a cash register is not something most people would seek out in other circumstances. No acknowledgement from the cashier, who had promptly moved on to the next customer, although these two shoppers weren’t really interested in a prolonged post-purchase dialogue with the cashier. It was the absence of acknowledgement which struck them sufficiently to bring it up with me the next day.
     Imprint memories in shoppers’ brains as they enter your store and then again through each step of the purchase process. Acknowledge the shoppers and their actions.

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

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Sound On When the Purchase is Completed
Acknowledge People Waiting in Line

Monday, October 5, 2015

Hang In There for Impulse Buying on Budget

Shoppers on a tight budget who make an unplanned purchase will immediately become less likely to make another unplanned purchase. That finding in studies at University of Notre Dame, University of Pittsburgh, and Market Rise Consulting isn’t at all surprising. But the researchers hung in there and did find something retailers might not expect: After a while, the resistance fades. The tight-budget shopper who made an impulse purchase earlier becomes more likely to make another one than does the tight-budget shopper who hadn’t already made an impulse purchase.
     So, in the spirit of those researchers, you should hang in there, too. Encourage shoppers to make an unplanned purchase early in their store visit, create a store experience which tempts shoppers to stay for a while, and then, later, encourage another unplanned purchase.
     Be sure those unplanned purchases will benefit the shopper. But realize that researchers at University of Pittsburgh and Baylor University say most shoppers make plans to make impulse purchases. The University of Pittsburgh and Baylor University study was conducted at several Texas grocery stores. Before starting their shopping, participants were asked to estimate how much they planned to spend. For more than 75% of the shoppers, the amount they thought they’d spend altogether was more than the amount they estimated to be the cost of items they planned to buy. These shoppers had prepared themselves to come across both needs they’d forgotten to include on their shopping list and items they wouldn’t realize they wanted until the items were in front of them or in their hands. Some of the study participants even explicitly said they intended to make impulse purchases.
     Then the researchers found even more evidence that shoppers carefully plan to do the unplanned: Shoppers were quite accurate in predicting how much they’d end up spending. The average overall difference between predicted spending and actual spending was 47¢.
     Most of your customers intend to spend a certain amount of money on impulse items. Accommodate them by stocking the right sorts of items in the right places and offering the items in ways that carry an impression of service, not trickery.
     Also, to maintain impulse sale revenues, stock package designs and use signage which stimulate quick thinking. Bright colors. Animation. Uniform sizes and prices. Easy access to the items. Waiting times long enough for shoppers to grab items, but not so long as to encourage prolonged deliberation.

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

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Sell Impulse Items to Serve
Stimulate Quick Thinking for Impulse Sales

Thursday, October 1, 2015

Long for Simplicity in Short-Term Promos

Announce that the sales promotion is available for only a short time and shoppers’ ears will perk up. But if you tell those same shoppers that what’s being promoted requires a long-term commitment, they’ll hesitate taking advantage of it.
     Bundle components together as a package, and shoppers often appreciate you doing the matchup for them. But unless those components each carry a similar retail price, there’s a good chance those shoppers will estimate the value of the package to be substantially less than the total of the retail prices individually.
     Now what happens if you combine these methods intended to build sales? Researchers at Deakin University in Australia offered consumers a three-item bundle, but the consumers were told the offer was available for only a limited time. With some of the consumers, getting the offer required signing a two-year contract, while with the others it did not.
     The result was that the consumers considered the three-item package to be a good deal, but not as much when a two-year commitment was required. The research findings indicate that the consumers would have been more attracted to purchase if a contract wasn’t required or if the offer was for a single item rather than for a package. With so many moving parts in the offer, the shoppers perceived more risk.
     Maintain simplicity in offers you make to consumers when the offer requires a quick decision.
     Also stay aware that your regular customers who choose to avoid the risk and so decline the offer may have regrets afterwards. The regret might reveal itself in a way which leads the customers to dislike the retailer and criticize the merchandise. Maybe it’s because people blame the retailer for what was their own fault. Maybe it’s because people want to avoid reminders of the opportunity they missed.
     Studies at University of Miami and University of Kentucky uncovered two ways that a retailer could shortcut the consumer irritation about missing out on a big sale:
  • Use what the researchers call “steadily decreasing discounting.” Before returning the item to its pre-promotion regular price, offer one or more additional discounts on the same merchandise, each discount at a progressively lower percentage than the deep discount. 
  • Offer customers another opportunity to purchase merchandise on sale. If this follow-up is on merchandise different from what was offered before, the amount of the discount does not need to be nearly as deep. 
For your profitability: Sell Well: What Really Moves Your Shoppers

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Monday, September 28, 2015

Bargain for Good Value via Price Primacy

The standard advice to salespeople is to present the price late in the pitch. First describe the benefits the shopper will gain if purchasing the item and only afterwards, mention the tariff necessary to realize those benefits. Also, you might do best to say the price slowly. Researchers at HEC School of Management- Paris and at University of Pennsylvania find that this makes the shopper less sensitive to the price. So if the price is $148.29, instead of saying "one forty-eight twenty nine," say, "The price of this item is one hundred forty eight dollars and twenty nine cents." Maybe this tactic works because you don't notice the sour taste of the medicine when it goes down slowly.
     But another group of researchers, these at Stanford University and Harvard University, say that if you’re offering a bargain price on an item whose value is apparent to the shopper, you’ll do best to use what they call “price primacy.” You will make more sales when you lead with the cost.
     Their argument for price primacy is distinctive because it’s based on neuropsychological evidence. Data were gathered using functional magnetic resonance imaging of brain activity, much more often a tool for diagnosis of medical pathology than for advice to retailers. Among the study participants, the researchers saw signals in the medial prefrontal cortex showing how early rather than late presentation of the bargain price increased recognition of the justification in spending money on a quality product.
     Price primacy is an exception to that rule of leaving the pricing until the end. This exception can be especially important when the apparent value is in the quantity offered. For instance, consider which of these two is more attractive to shoppers:
  • $29.99 for 70 rolls 
  • 70 rolls for $29.99 
     Researchers at Virginia Tech give the traditional advice to put the quantity before the odd price. The second phrasing of the two above is more likely to draw buyers. But if what you’re offering is a great bargain, the first phrasing could do better.
     The Virginia Tech studies also provide an example of when the order doesn’t make much difference. Say the two options are:
  • $29.99 for 30 rolls 
  • 30 rolls for $29.99 
     Here the appeal of the two is about the same. Shoppers can easily calculate the unit cost. But when the per unit calculation is difficult, shoppers attend more to whatever is the first number given

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

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Thursday, September 24, 2015

Discount Lighthouse Items for Low Price Image

Store Price Image (SPI) is the general belief your target markets hold about the level of prices your store charges compared to what other stores charge for similar items. Some stores have a set of product line SPIs. “They’re high if you’re looking for meat or fish, but I find unusual bargains in the bakery in the early afternoon.”
     Some consumers seek the exclusivity of stores with an image of premium prices. But people generally shop more often, buy a larger range of items, and buy larger quantities of each item at retailers with lower price images.
     The price points of certain items in the store assortment play a larger part than others in determining the SPI. Consumer behavior researchers have referred to these as Known Value Items or as Signpost Items. In a set of studies at Erasmus University Rotterdam, the researchers narrowed the classification further to what they named “Lighthouse Items.” These are ones that signal a low SPI but constitute a relatively small portion of customers’ purchase totals. Therefore, keeping the everyday prices of these items low or, better yet for most small to midsize retailers, regularly discounting them will have a minimal impact on your store profitability.
     Analyze purchase and revenue patterns in your store to spot the Lighthouse Items. The Erasmus study results suggest retailers are most likely to find them in two places:
  • High-priced categories in which the store carries a narrow assortment or there is a narrow price range 
  • Items that are usually bought in large quantities and then stored, and for which consumers believe higher product or service quality requires a higher regular price 
     Research at Emory University and Northwestern University indicates Lighthouse Items operate in the context of other SPI signals:
  • Range of prices. The frequency with which the shopper sees low prices influences price image more than does the amounts by which prices are lower 
  • Price-match guarantees. These cause an image of lower prices, even though few customers ever make use of the guarantees. 
  • Claims about price image. These claims could be in advertising or word-of-mouth. WOM claims by friends, family, and acknowledged experts do have greater influence than advertising 
  • Store location and d├ęcor. Many consumers are happy to pay somewhat higher prices to guarantee a pleasant physical environment. 
  • Customer service quality. This includes factors such as the degree of promptness, courtesy, and accuracy in receiving assistance with purchases. 
For your profitability: Sell Well: What Really Moves Your Shoppers

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