Friday, July 31, 2009

Ask Customers What You Didn't Have

So your cashiers ask customers, "Did you find everything you needed?" Here's how to do better:
  • Customers often want items they don't need. If you ask only about needs, you're missing out on possible sales. A better question is, "Did you find everything you wanted?"

But wait, there's more:

  • "Did you find everything you wanted?" is a closed-ended question. Closed-ended questions can be answered yes or no or with a limited number of choices. Use closed-ended questions at checkout when the customer's in a hurry. But because the easiest answer to "Did you find everything you wanted?" is "Yes," the customer might easily choose to say "Yes," even when there are unmet desires. A more fruitful question is, "What items would you like to see in our store that we don't have now?"

Do we want cashiers asking this? If nobody else is in line to check out, yes, that's a good question for the cashier to ask. But if there's a line of people waiting to pay their money and get on with their lives, "What items would you like to see in our store that we don't have now?" leads to too much discussion. It has a related problem as well:

  • What do we do with the customers' answers? The busy cashier shouldn't stop right then to write them down. But part of the cashier's responsibilities should be to make summary notes on what was heard from customers and then turn those notes in to a manager.

And one last improvement:

  • Floor staff should be asking, "What items would you like to see in our store that we don't have now?" You'll often discover that the customer missed seeing an item, a substitute item could be provided, or a special order can be placed.

Thursday, July 30, 2009

Be Just a Little More Upbeat Than Your Customer

Customers buy more when they’re in a good mood. But customers in a bad mood still buy, and if your customer is feeling grumpy, you’d rather not have the salesperson showing off a much better mood than the customer’s mood. Research from the Northeastern College of Business Administration finds that, with one important exception I’ll tell you about in a minute, a customer who is in a bad mood is especially unlikely to buy from a salesperson who clearly appears to be in a much better mood than they are.
     Many customer service gurus preach that salespeople should exude the nonstop cheerfulness you’d see in Mickey and Minnie Mouse when they’re on stage together at a Disney theme park. But if I’m feeling downright irritated and irritable because I’d much rather be home in bed resting instead of hunting down a cold remedy, my irritation fairly explodes with some salesclerk who fails to even acknowledge my horrible state.
     Customers want to spend their money with retailers who will confidently help them solve problems. A way to show that confidence is for the salespeople to project a positive approach. But with the one exception, the salesperson’s mood should be just a little more upbeat than the customer’s. The exception? The research says that when the shopper is feeling truly desperate, they have no objection at all to dealing with a highly cheerful salesperson. This is an instance where misery doesn’t want company, but instead prefers a can-do attitude.
     Some customers want their salesperson to be a hero, who takes responsibility for rescuing them, going above and beyond what most salespeople are able or willing to do. But other customers want a wise salesperson who brings enough experience and a sharp enough mind to see the customer’s mood and raise it a little.

Wednesday, July 29, 2009

Introduce Featured Products as Customers Enter

Sometimes, when people enter your store, they're on an item-specific mission. They know the precise product they want. They ran out of it at home and they need a refill NOW. Or they rush through the front doors of your shop holding the current ad or circular. Or they're fitting right in with the consumer psychologist's description of the adult male shopper, whose motto is, "Get 'er done."
     But often, shoppers are coming in for a product, not for a particular brand or size. Here is your opportunity to guide their choices towards what will both satisfy their needs and build your profitability. Whenever there are products you're featuring, you substantially increase the possibility of purchase by introducing those products to the customer as the customer enters your store.
     You could have a display of one package of each of the featured products. There's research that suggests you're best off doing this just to the left of the shopper as they come on in. You could have signs with brand names in large letters and very brief statements about product benefits. The research says this is best done on the right side of the customer who is entering.
     The reason for these left-right differences has to do with how the brain processes information: First, because even those who are not item-specific mission shoppers will still be in a rush, what the shopper sees will enter the brain at a subconscious level. Second, product shapes and brand name fonts will influence purchasing when they come in from the left side of the eyeballs, but the brand names themselves and very brief product benefit claims are most effective when caught subconsciously from the right side of the eyeballs.
     You're aiming for small differences that, when put together, make big differences in profits.

Tuesday, July 28, 2009

Drill Down to Do Item-Level Pricing

Are you setting prices on store merchandise by looking at overall product classes? If so, retailer Art Freedman knows a better way. He wants you to instead do what we call variable pricing or smart pricing. Here's what he has to say about this in Making Money Is Not Illegal, Immoral or Fattening:
"We drill down into a classification of merchandise. We dissect it down to every single item in the class. Some items will carry a low margin, while other items will carry a high margin. That is how we maximize the profitability in our business.
"If you are still setting margins by overall product class, I’m going to think that you are not hurting enough for money. You are making too much money, and you’re taking the easy way out by setting class margins. I would never set a class margin in all my life because that’s not the way to maximize profitability. You go into the class and dissect the class. You look at it item by item, and you set margins based on what the market will bear. Some items within a class may be at 50-60% margin, while some items within that same product class are at 20-30%....
"I’m a retailer and I know retailers, so I’m aware why we set class margins instead of drilling down towards the level of item pricing. We do it because it is quick and easy, and we’re all pushed for time. But if I’d set margins by product classes, I would have been out of business a long time ago….
"Smart retail pricing is knowing where in your assortment of products you need to go to make the money you need to be successful…."
Want to know more about this? Start out at page 60 in the book.

Monday, July 27, 2009

Be a New Shopper in Your Own Store

As you walk through your own store, it's probably from the perspective of a manager. That's good. You should be walking every aisle daily to check how your standards are being respected when it comes to adequate inventory on the shelves, top attention to customer service, store and check stand cleanliness, employee appearance, and the rest.
     But have you also discovered the outstanding benefits of walking the store like you are a new shopper? It's not easy to do. You see, I'm not talking about quickly picking up some items before leaving work for the day. You know where all the items are located, so you can breeze around without needing to notice whether a new shopper would have trouble finding the same types of items as the ones you're looking for.
     I'm not talking about waving as you walk past the registers. Nope, I mean learning how painful or fascinating it is to stare at the batteries and candy bars while you're waiting in line. I mean listening to what the other customers are saying about their shopping experiences.
     Start your shopping trip from one of the entrances to the store that new shoppers will be taking, not from your office in the back of the store. Before you enter the store, think about what items you'll be looking for. As you walk into the store, observe what cues are there or should be there to help you find the items. What's the personality of the store? The odors? The noises? If there's music, does it make you want to shop more quickly or more patiently?
     Use what you've discovered to develop action steps, and then implement the first of those action steps the same work day, while your emotions are still at the right levels to motivate you.

Sunday, July 26, 2009

Be Creative, But Only Sometimes

The business leader who generates creative ideas nonstop will fail as a retailer. A key to success as a retailing leader is implementation of plans that have been critically analyzed. If you're spending all your time generating new ideas, there's no time left for critical analysis of those ideas in terms of strategies and other criteria and then execution of the most promising tactics.
     Store staff thrive on new ways to look at the jobs they are assigned to do. But they'll quickly get frustrated if not allowed time to work with their instructions before the rules change. Good staff want to understand, to learn, to try out, to discuss, to assess, to report back to their supervisors and managers, to fine-tune.
     For each decision you're making and each plan you're developing which impacts those you lead, keep it clear to yourself and to them whether you're in open minds, open roads, or open wounds gear:
     Open minds. Here's where you welcome all sorts of input, realizing it's always easier to tame down an unrealistic idea than to try to make the same old ideas exciting.
     Open roads. Here's where you cut back on the brainstorming, critically evaluate what you've got, develop your plan based on what's most likely to work for the long-term, and move on ahead for a while with minimum distractions.
     Open wounds: You hope to minimize use of this gear, but inevitably, there will be times the bad news floods in so fast that you must take decisive steps. You might ask others for ideas, but your focus is on short-term bandages.
     Great ideas come from building on what's already been tried out. Creatively adapt, but never do things differently just for the sake of being different. Do things differently so they'll make you more money.

Saturday, July 25, 2009

Target Customer Segments with Cultural Events

In general, shoppers prefer to do business and buy products from salespeople whom those shoppers see as sharing their distinctive characteristics. The key word is distinctive. Members of minorities are more finely tuned to whether a salesperson is a member of that minority than are people who don't consider themselves to be in the minority.
     Researchers from Stanford University found that African-Americans had more positive reactions to an ad with Black actors than American whites had to the same sort of ad featuring white actors. Earlier, other researchers had reported that Latino consumers living in Austin, Texas—where Latinos were an ethnic minority—were more likely to trust a Latino salesperson than were Latino consumers living just 80 miles away in San Antonio—where Latinos were an ethnic majority.
     You might read this to mean that to keep your profitability high, you should staff your store with people who share with shoppers what those shoppers see as distinctive ethnic characteristics. Well, yes, that's a good idea, as long as doing business this way affords equal employment opportunities and results in you having staff with clear retailing skills, not just certain ethnic, racial, cultural, and language identities.
     But there's another way to target these distinctive customer segments, and it depends less on the look and sound of your staff: Know what cultural groups in your target market areas do consider themselves to be minorities. Then arrange special events to commemorate their particular cultural celebrations—for example, Cinco de Mayo for consumers of Mexican heritage—or to honor special accomplishments by people with whom they can identify—such as the Italian men's archery team winning a silver medal at the latest Summer Olympics.
     Okay, maybe a World Cup win in soccer would be better known among your target markets than would an archery championship.

Friday, July 24, 2009

Compare Unknown Brands to Best-Known Brands

Retailers often can get especially good purchase prices on product brands new to the target market or otherwise not well-known. But selling those branded items means creating in the shopper's mind a brand image strong enough to overcome the risks of purchase which always lurk as the shopper's deciding. As they look over this unfamiliar brand, they want to know, "Will this product solve the problem I'm buying it to solve or help me make the gain I'm looking for?" "Is it safe to use, both physically and socially?" "How much time would I need to invest in learning to make best use of this product?" "What is this brand of the product really like?"
     Answer those questions by hitchhiking onto the very strong images created by what are called prototype brands. These are the brand names most strongly associated with their respective product categories, and their manufacturers devote massive amounts of marketing support to maintaining top-of-mind awareness. For laundry detergent, the prototype brand might be Tide, so you compare your newly introduced laundry detergent brand to the Tide brand. For peanut butter, the prototype might be Skippy. Prototype electronics brands include Sony and Samsung. For beer, it would be Budweiser in America and Heineken in the Netherlands.
     The objective is to inform the consumer, not to confuse the consumer into purchasing something other than what they want. So sometimes in advertising, signage, and face-to-face selling, you'll say, "Tools that do the job like Black & Decker, but less expensive to purchase" to communicate the quality of this unknown brand. But you'll say that only when, in fact, those tools do have a proven performance that's equivalent to Black & Decker. In other cases, you'll want to set the brand apart from the prototype: "More all-round dental protection than Crest."

Click below for more:
Introduce Unknown Products with Charity
Compare Unknown Brand Extensions
Display Unfamiliar Brands with Prototype Brands

Thursday, July 23, 2009

Know You Are in Business to Make Money

In Making Money Is Not Illegal, Immoral or Fattening, Art Freedman asks retailers a question:
"Why are you in business? There is only one good answer to that question: To make money.
"Sometimes when I ask retailers that question, I get, 'We're in business to support the community.' But for how long can you support the community if you are not making any money? Some people say, 'We are in business to support our employees and their families.' I say, 'Well, that's a wonderful thing. But for how long can you support them if you're not turning a profit?' How many families did Handyman Home Center support? They had about 300 stores. They're all gone.
"The home center, hardware, and lumberyard retailer of the year in 1984 in the United States was a company called Heckinger's. If you read anything about Heckinger's in 1985, you'd think they walked on water. They're gone. How many families do they support now? None.
"Do you know why they're not here any more? They lost one heck of a lot of money, and they went out of business. There is only one reason why you are in business, and that is to make money. This model is working in the United States, and it's working very well: Make money in your business, and take a portion of that, maybe two-thirds of the profits, to reinvest in your store. The first third goes to the store owner for what they risk on that business."
When circumstances force you to attend to hour-to-hour or even minute-to-minute decisions, it's easy to lose focus. So every business day, begin by motivating yourself with an affirmation that you are in business to MAKE MONEY. Then spend the rest of the day making decisions which turn this affirmation into reality.

Wednesday, July 22, 2009

Have Unannounced Discounts on Common Purchases

At first glance, it might seem to be really bad business to surprise a customer with an especially low price on items the shopper had already intended to buy. After all, they’ll buy the items at the price they had expected, so why give up any of the profit? But consumer behavior researchers at University of Arizona, Arizona State University, and University of Pennsylvania found that just such a practice, used with care, can end up building your profits.
     The reason is that customers who are grateful to you will buy more from you, and nothing brings out gratitude in a customer more than finding a surprisingly low price on an item the customer already had intended to buy. They’ll buy more from you over time, and they’ll also spend more than they’d originally planned to spend during the shopping trip where they found the surprise special.
     The researchers discovered evidence that what’s behind the extra purchasing is a desire to reward the merchant. It’s not just a matter of getting items at a better price. That’s why the shopping cart total goes up. And on top of all this, these shoppers become more likely to tell others about the excitement they experienced when in your store. That makes it more likely you’ll have those people coming to you as well.
     The key to doing this effectively is to maintain the element of surprise. Don’t discount most items on the person’s shopping list, and don’t stop advertising the low prices on those popular items which will draw traffic into your store. But knowing you offer surprise specials will motivate all that traffic to move up and down the aisles on a treasure hunt, and what better way than this to make shoppers aware of all the products you offer them?

Tuesday, July 21, 2009

Show Fair Pricing By Contributing

With customers' sharp sensitivity these days to prices, pay special attention to what research has found set offs a sense that pricing is unfair. Chief among these indignation triggers is a perception that prices are being raised without warning because demand is greater through no fault of the shopper. This can lead even loyal customers to pledge to never again enter your store.
     Or purchase from your vending machine. Some years ago, the Coca-Cola Corporation was assessing the value of a vending machine which would change the price for a bottle based on the temperature. On hotter days, the price would go up and on cooler days, the price of the Coke would drop. Well, even the most fervent doomsayers of global warming can't legitimately blame the weather on a guy or gal who just wants a Coke. The outrage from Coke's customers led to the prompt demise of the hot flash vending machine.
     But suppose the company said it takes more energy—and is therefore more expensive—to keep a Coke bottle refrigerated on a steamy day than on a chilly day, and that this accounts for the change in pricing. A variety of studies both in the laboratory and in stores indicate that if the amount of the price increase can reasonably be accounted for by a rationale, shoppers will accept the price increase.
     Another avenue to easing indignation is team up with charity. This works best when the charity partner is logically related to the price increase. Suppose major flooding hits a store's target market area, resulting in a demand spike for flashlight batteries. If the store increases the price of batteries, but announces how a portion of the profits will be contributed to the Red Cross, acceptance of the price increase could be a slam dunk.

Monday, July 20, 2009

Project Your Brand Positively

Handle the name of your store as a brand which projects just as strong an image as the name appearing on labels on any of the products your store sells. In a shopper survey sponsored by the Wharton School of Business, the Verde Group, and the Retail Council of Canada, the single most important driver of customers coming back was what the researchers called "brand experience."

  • How exciting is the design of your store, and how imaginative are the ways you work the name of your store into the décor? Each time the name of your store appears on a shopping bag, do the font, the color, the background design, and the rest all team up to project the impression you want people to carry around?
  • How consistent is the quality of your products balanced against considerations like price? Plenty of shoppers will sometimes want to pay less and so will settle for "better" instead of "best." But the customer who buys a product they've known to be the best expects to get that same sterling quality when they buy another product with the same name on the label. Whenever your store's name appears as the house brand name, the quality level should be predictable, whether the product is green beans or auto shock absorbers.
  • If your store is one of a chain, if you operate under a franchise, or if you're in a retailer cooperative, the name you use is probably used by others. How well are you teaming up with those others to help them project the quality of the brand? When you discover better ways or tools for doing business, are you sharing those with your namesakes? Do you take time to thank them for what you learn from them about upholding the brand?

Sunday, July 19, 2009

Avoid Panic When Cash Flow Drops

"Don’t just stand there, do something." That or some translation of it has probably been shouted at one time or another by every job supervisor throughout history. Well, it's possible that now would be a good time for you to shout it at yourself. With the worldwide recession dramatically changing what retailers need to do, be sure you're not panicked into inaction by stress.
     But there's another side to it as well. "Don’t just do something, stand there," has been publically proclaimed by a wide range of well-known individuals, from 1960's radical Abbie Hoffman to U.S. President Ronald Reagan to the White Rabbit in the Disney version of “Alice in Wonderland." You see, in addition to freezing us into destructive inaction, panic can cause premature action. Instead of thinking through the alternatives and selecting the least bad choice, the retailer moves too soon.
     Successful retailers are optimistic and action-oriented. They realize that in the fast-changing reality of retailing, those who stand still are almost sure to be left behind. Their motto is more likely to be, "Ready. Fire. Aim." than "Ready. Aim. Fire." They are "Give it a try and see what happens" people.
     In these challenging times, the weaker retail businesses will die off. When economic recovery comes, and it will, those who took the reasoned action to survive will have a more open playing field in which to thrive. Recognize danger. Manage your stress. Be prepared for alternatives. Keep that optimism finely tuned and in abundant display for your staff as you lead them.
     Are you in this for the long term? Okay, then, protect your business. If you ever feel yourself taking action out of panic, start singing Simon & Garfunkel's "The 59th Street Bridge Song (Feelin' Groovy)." It starts off, "Slow down, you move too fast."

Saturday, July 18, 2009

Use Scripts & Service to Justify Higher Prices

If you're competing against a Big Box which features cut-rate prices, be sure to offer good deals to your customers. But your financial model might not let you be competitive on every single item. So shoppers could start asking questions about your prices.
Here's a reminder of some of what Art Freedman advises in our book, Making Money Is Not Illegal, Immoral or Fattening, about responding to those questions:
"What if customers ask you why your prices are higher than at the competition? Well, first of all, realize the customers expect prices at the high-convenience, world-class-service, small to midsize retail business to be higher than at the Big Boxes. Even when we're priced below the Big Boxes, we get no credit for this. They will think our prices are significantly higher than at a Big Box. So I say, why disappoint them?
"But answering questions about pricing is another place where scripting for the floor staff and cashiers is helpful. Here's what I suggest as an answer. 'Thank you for your input. I'll let my manager know what you've said. I think you'll find that our prices are fair and at where we need to be to offer the services for our community.'
"The problem you have here is when you do not execute on what the customers' expectations are. They will pay a higher price if there is value attached to it. If your customers are complaining about your higher prices, maybe what they are saying is, 'I would pay a higher price in your store, but I do not see a benefit to doing this, so I may as well shop at a Big Box.'"
In using the scripts and in meeting customers' expectations, staff should improvise so it comes across to the customer as genuine, not wooden.

Friday, July 17, 2009

When Space is Tight, Show Product Differences

For a variety of reasons related to the bad economy, you could find yourself needing to sell in more crowded circumstances. It might be because you're forced to move to a smaller store, but you're wanting to present customers the same product mix within that less spacious footprint. It might be because you were able to make a great buy on merchandise from a retailer or vendor who has money problems, but now you need to decide how much of the new merchandise you can fit on your current shelves. Or the selling in more cramped quarters might be because your traffic flow has increased substantially as other retailers have gone out of business.
     When you find yourself conducting retail sales in tight quarters, you might be tempted to cut back on the breadth and width of your product selection. Before doing this, please note the findings from researchers at Columbia University and University of British Columbia: On average, when shoppers from Western cultures are in tight spaces, they want greater variety among products. If they have fewer choices, they'll become less comfortable. The trouble here is that uncomfortable shoppers leave the store sooner and resist returning to shop with you again.
     So what to do? The answer comes from another research study, this one done at the University of Pennsylvania. Shoppers who initially see a limited variety in the breadth and width of merchandise become much happier, and therefore stay around longer to shop, when the retail store helps them recognize the differences among the products. The shoppers don't feel so trapped by limitations on their freedom to choose.
     In signage and in customer-salesperson conversations, you'll want to categorize products because customers seek categories. But especially in the more cramped store, also highlight the differences among the product offerings.

Thursday, July 16, 2009

Publicize What You Distinctively Offer

Press releases and comments on blog posts are ways for you to start others talking about the distinctive benefits you provide to the people who shop in the communities where you do business. Publicity for your store isn't a substitute for advertising, but it does have one gigantic advantage over advertising—the praise is seen as coming from somebody else, not just from you. When somebody else says what a good job you're doing, people give it more credibility than when you're the only one saying it.
     The challenge is that every one of us already has plenty to talk about. This is why I emphasize the word distinctive . What do you offer that sets you apart from others? Being distinctive doesn't mean you are the only one around who is doing it, but it does mean that you're different from most.
     Do you offer the broadest selection in town? Then find a blog devoted to people who use the sorts of items you carry and make a posting or comment which tells about the most unusual items you stock in that category.
     Do you have staff members with backgrounds that give them both expertise and passion about the products? Unfortunately for most consumers, this mix of knowledge and excitement is truly unusual in stores. Many of us as customers are faced with sales staff who would rather devote their attention to talking to each other than to helping us find what electronics components, artwork, or fashion accessories will fit together and fit our needs.
     But unfortunate as this fact is for consumers, make this fact fortunate for you. Send off a press release which briefly describes the fascinating background of one of your passionate experts.
     Shout it out with justified enthusiasm, and that enthusiasm itself can make you distinctive.

Wednesday, July 15, 2009

Give Customers Long-Range Perspectives

Want shopping cart contents to total more at the checkout counter? Then get customers thinking about how much money they can afford to spend in the long run, not just right now.
     Researchers from Princeton, University of Chicago, and Digitas-Boston surveyed people entering a grocery store. One set were asked, among other things, questions about the contents of their wallets. This nudged their thoughts towards the money they had to spend in the short term. Another set of shoppers were asked instead about the different types of financial accounts they had in their investment portfolio, such as checking and savings accounts. This got those shoppers thinking long-range.
     What difference did it make? Well, the second group spent 36% more than the first group when checking out with what they ended up purchasing.
     Notice how easy it was to set those customers thinking in ways that resulted in them spending, let's say, $136 instead of $100. A question about financial accounts instead of about wallet contents was enough to do it.
     But how can you use this information? Customers coming into your store won't welcome being stopped to answer a survey before you let them make their purchases. And if your sales staff who welcome the shopper start out by asking, "How much do you have in your savings and checking accounts?," there's a really high probability the shopper will gallop out your store's front door with their checkbook, wallet, and credit cards.
     What are ways you can gently bring the customer's mind towards a longer-term perspective on spending their money? How about stating prices not just as the total, but also as the cost per month over the expected useful life of the product? How about offering extended payment terms? What else will work for you?

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

Tuesday, July 14, 2009

Give Free Samples of New Products

Vendors introducing a new item might have you offer the item as a gift when the shopper buys at the regular price another item already attractive to the same target markets. The idea is that the shopper will enjoy the new item so much they'll start purchasing it regularly.
     This is a wonderful way to quickly build kickoff sales. But be sure the free product is presented as a sample. In consumer behavior studies conducted at UC Berkeley, USC, Stony Book University, and Indiana University, researchers found that if a product is offered for free, the shopper becomes less likely to buy the product at full price afterwards. What happens is that when getting it at no charge, consumers conclude consciously or subconsciously that the product must be low quality. This is a terrible first impression to leave with the consumer about a new product. It also makes you look bad for giving what appears to be a low-quality gift.
     The way to avoid this problem, some of the researchers discovered, was to be blatantly honest with the customer. Tell the shopper in signage, advertising, and salesperson-customer conversation that the free item is being offered as a sample because you believe the shopper will enjoy the product and want to buy it in the future.
     That much you can do yourself. But there are two related tactics for which the manufacturer and/or supplier can help: The free product should be clearly labeled as a sample, and it's best if the free item is in a size smaller than any of the standard sizes offered for sale. Also, because developing habits of purchase requires making more than one buy in a row, attached to the free sample should be a coupon for a customer discount on the next purchase.

Monday, July 13, 2009

Have Audits in Your Money Handling

When your business is making money, protect profitability by preventing people from stealing that money. Here's one angle on this from Making Money Is Not Illegal, Immoral or Fattening:
"Let’s say you have somebody who comes in every day, goes into the office, opens up the safe, pulls out the drawers from the previous day, sits them down on the table, reconciles each one of the drawers back to $100 or $150 or whatever you have in the drawers on a regular basis, makes up a deposit, sits down at the computer, puts a little note in there on what the deposit is going to be, puts the money in a bag, puts it back in the safe, and goes about their day doing whatever they’re going to do.
"Then at the end of the day, they get this bag, they put it in their pants or their pocket or whatever they do, they take it to the bank, and they sit down in front of the banker, who counts the money, signs the deposit slip, and gives it back to the employee, who goes home, knowing the bank’s got the money. When that person comes back to work the following day, they go into the computer system and put the check mark next to the deposit, meaning it was all there, and they go about their day."
So far, so good. But what if at the end of the month, you get an accounting of all your deposits and expenses, and the same person who did all that stuff before is the same person who reconciles your checkbook? Now the system has a bad problem. Unless you divide up those responsibilities, you'll take a financial hit sooner or later. It is just a matter of when it happens.

Sunday, July 12, 2009

Joke Around to Facilitate the Sale

When customers feel happy, they're more likely to buy. One tool for keeping spirits high is a nice sense of humor. Gently and briefly kid around with the customer.
     You can give yourself lots of reasons not to make jokes with customers: The shopper on a tight schedule doesn't want to take the time to hear you tell your favorite dozen funny stories. Everybody wants their dignity respected, so if the humor takes the form of teasing a customer, you'll lose that sale and probably any opportunity to make a future sale. In many cultures, such as Latino and Japanese, ridiculing a retailer or product that competes with yours is considered offensive. Maybe worst of all, the customer might not get your joke. They'll feel bad, not happy.
     But wait. Regarding that last one, researchers at Georgetown University and University of Washington found that even if consumers don't fully understand a joke—in this case a pun based on a product's name or features—the consumers still enjoy the wordplay.
     In fact, a joke that isn't immediately understood can be especially effective in making a sale. Research says the shopper's mental energies are taken with trying to figure out the humor, and this distracts the customer from thinking about reasons not to buy. So humor can be useful in moving the indecisive customer to the cashier station. Humor usually relaxes tensions and lifts spirits, both of which enhance the desire to buy. But the partially understood joke actually increases tension temporarily, and the shopper resolves this by making a purchase.
     The best humor to use in a sales situation is gentle and informal. To avoid offending, build on what you discover the customer considers to be funny. Make humor a team sport as you volley giggles back and forth.

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

Saturday, July 11, 2009

Sell Ease of Use to Last-Minute Shoppers

When customers shop for a product or service for future use, they'll pay special attention to the distinctive features. But when they plan to put the item to work soon, they're especially interested in ease of use. That's true across cultures. Researchers at University of Illinois and Korea University Business School explain that when, for instance, people are looking at word processing software they'll start using in a few months, they give great weight to the range of capabilities of the software. However, if they plan to start using the software within a few days, their primary criterion is ease of learning the software.
     The lesson for your salespeople is to remember to ask shoppers how soon they plan to start using the product or service. Knowing this allows the salesperson to focus the information to the shopper on the most effective balance between desirability and feasibility benefits. Whether in advertising, signage, or talk, you don't have time to tell the shopper everything. Home in on what makes a sale which will benefit both the purchaser and your bottom line.
     In some cases, you can guess how soon the shopper plans to start using the purchase. Certain items are likely to be last-minute searches. Floral bouquets and hot water heaters come to mind. With these, you don't need to depend on sales staff contact to get the message across. In your advertising and signage, feature ease of delivery, ease of installation, ease of learning, and other angles on ease of use.
     Yes, there are shoppers who aim to earn prestige by mastering hard-to-use products and services. And many shoppers do want to put their energies into customizing their purchases. But even with those folks, when time is tight for them, be sure they know it can be turnkey.

Friday, July 10, 2009

Follow a Big Sales Event with a Smaller One

If people miss a chance to buy merchandise you offer at a substantial discount, you'd like them to feel sorry about it. That way, they'll stay alert for the next time you announce a big sales event. After all, the main reason you have sales is to draw traffic into your store so they'll buy not only the substantially discounted merchandise, but also all the items you're selling at higher profit margins. You want people to notice when there's a big sale.
     Unfortunately, though, many shoppers who miss a big sale will experience regret in a way that leads them to dislike the retailer and criticize the merchandise. In a University of Miami research study, people said that a sofa they'd missed purchasing while on sale was less attractive, trendy, and suited to their décor than an objectively equivalent sofa that was still on sale.
     More importantly, the research found that those missing the sale became less likely to buy anything at all from the retailer. Maybe this is because people were blaming the retailer for what was actually their own fault. Maybe it's because people want to avoid any reminders of the great opportunity they missed.
     The research also showed that to overcome the problems, offer customers another opportunity to purchase merchandise on sale. You still want shoppers to come into your store, so the sale should be on what the regretful shopper will find attractive. But if this follow-on sale is on merchandise different what was offered in the big sales event, the amount of the discount does not need to be nearly as deep as what was available in the big sales event. That's how to avoid giving away profit needlessly while still maintaining good feelings toward your store and toward what you're selling.

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

Thursday, July 9, 2009

Make Extended Service Contracts Worthwhile

Extended service contracts are a profitable add-on sale for you. They also can add to customer satisfaction, since if a product fails to function properly, a good ESC avoids the customer having to exchange or discard the item. However, most consumer advocates recommend against ESCs. They say the average cost of an ESC is much higher than the average cost of making necessary repairs to the product. They also say that when customers purchase ESCs, they're telling the store it's okay to carry merchandise which breaks down.
     Never leave a customer believing you've encouraged them to make a bad decision, so never pressure your customers into purchasing an Extended Service Contract. But researchers at University of Maryland, Rice University, and Carnegie Mellon University find that there are situations where an ESC is a worthwhile escape for the purchaser. In these cases, you'll want to describe the advantages:
  • Purchasers who operate on a limited budget can find it very difficult to pay for replacing the product if it breaks or in handling any unexpected costs for repairs. They'll appreciate you pointing out to them that in buying the ESC now, they're making a fixed payment, removing lots of unpredictability.
  • Purchasers of pleasure-related technology products, such as video game controllers, don't want to be deprived of use of the item. They're willing to pay for an ESC that offers prompt replacement of the product if the defect can't be fixed immediately.
  • Purchasers who are expected to repair every broken product in the home—maybe a husband being viewed this way by his wife—may be happy to pay a fee to avoid the time and trouble of repairing at least this one product.     

     When you see the opportunity, point out the value added by an Extended Service Contract.

Wednesday, July 8, 2009

Keep Reminding People Why to Shop with You

Your customers might swear BY your customer service while at the same time swearing AT the customer service offered by other retailers. But unless you continue to remind them why to shop with you, they might end up FORGIVING the others and FORGETTING to give you their business. In Making Money Is Not Illegal, Immoral or Fattening, here's a story my coauthor Art Freedman tells to illustrate the point:
"A customer comes into the store with a whole bag of plumbing fittings, throws them out on the counter, and looks very frustrated. He says, 'What am I supposed to do with this stuff?' I ask, 'What are you trying to do?' He says, 'Well, I've got a half-inch compression, and I need to go to half-inch iron pipe.' And I go, 'Oh, okay,' and I walk over to where I have that stuff, show it to him, and show him how it works, and that's it right there. Then he walks back to the counter again and says, 'How about all this other stuff? What am I supposed to do with it?'"
Art spots another retailer's name on the customer's bag, so he says, "'Why not take it back over there and ask them?' The customer says, 'I am not ever going back.'"
Two weeks later, Art's over at the other retailer's store, and who does he see but that same customer. "And this is what that customer says, 'You know, they are so big here, and they don't have very many employees in the store because they're trying to keep the costs down, and I just thought I'd give them another chance.'"
So when something like this happens to you, what words will you say to the customer to remind them why to shop at YOUR store?

Tuesday, July 7, 2009

Project Your Store's Personality

Retail stores come to have a personality in the minds of customers and prospective customers. Some businesses are seen as daring and spirited, while others are seen as cautious and intellectual. It works best when you decide what personality you'd like your store or website to have and then carefully design advertising, merchandising, signage, staffing, and all the rest to strongly project that personality.
     Here are five dimensions that consumers use in understanding a retailer's personality:
  • Sincere or witty: In what ways is the retailer honest? Wholesome? Cheerful? Teasing?
  • Exciting or predictable: To what degree is the retailer daring? Spirited? Stimulating? Trendy? Responsible? Dependable? Persistent?
  • Expert or inquisitive: In what ways is the retailer knowledgeable? Successful? Calm? Confident? Secure? Imaginative? Curious?
  • Sophisticated or approachable: To what degree is the retailer formal? Assertive? Ambitious? Casual? Sociable?
  • Rugged or luxurious: In what ways is the retailer gruff? Challenging? Cooperative? Trusting? Considerate? Indulgent?
     Fit your store's retailing personality to how your target market members want to see themselves. But realize that whatever you choose to be on each of the dimensions will always carry some good and bad points. For instance, stores with a sincere, predictable, or expert personality are usually highly respected, but may have trouble keeping customers after a product recall or bad customer service. That's because the target market members don't like surprises when the surprises make it look like the retailer is inept.
     But with stores that have a witty, exciting, or inquisitive personality, customers are ready for a reaction like, "We make shopping more fun with the unexpected," and, "We're always learning so we can get better and better."
     Which mix of these five dimensions will distinguish your retail business in ways that are most profitable? What will you be doing today to start projecting that mix?

Monday, July 6, 2009

Motivate Indecisive Shoppers with Brand Names

Is your shopper having trouble deciding whether to make a purchase? Well, present that shopper with the names of some of the brands you believe would best meet both the shopper's needs and your store's profit objectives. Researchers at University of Cincinnati and Miami University found that having brand names available to think about helps move indecisive shoppers forward towards a purchase.
     Why does this work? Shoppers weigh the answers to two sorts of questions: How would this purchase help me achieve a gain? How would this purchase help me avoid a loss? Shoppers differ in the amount of importance they place on these two, but almost everybody puts some attention into both. By presenting brand names, the salesperson brings the decision from the abstract to the concrete. This helps the shopper figure out the answers and move on.
     But don't suggest just any brands. Think through what provides the best fit for the prospective purchaser and for your store. When you give brand names, the shopper tends to focus the decision on those and eliminate other brands from consideration. This is especially true of customers who are senior citizens. In fact, with these older customers, it can be a disservice to mention brands that are a poor fit. If you name a brand and point out the faults, by a few days later, senior citizens will too often remember the brand name, but forget that you said the brand has faults. If one of these customers makes a purchase based on that flawed memory and is irritated at the product's poor fit with their needs and wants, that can make your store and your salesperson look bad.
     Be ready to answer questions about all brands your store carries. But in talking to the customer, accentuate the best-fit brand names.

Sunday, July 5, 2009

Know How Customers Dispose of Products

How do your customers get rid of products they purchase from you? Knowing that might seem to be pretty useless in discovering ways to be more profitable. But as you think about it some more, you'll see how talking with customers about disposing of products opens up opportunities for you.
  • Are they taking the products to recycling collectors? Those of your customers motivated to go green would like to hear how what you sell includes previously recycled materials and how your products are biodegradable so disposal of the products won't pollute the environment.
  • Are they donating the products while the products still have a useful life? Here's a chance for your business to team up with your customers and with charities in the community. You'll be doing good while at the same time earning good will that can build business. Have special events at your store where customers and prospective customers donate items to charity.
  • Are they using their worn-down products in new ways? Are they turning old pants into shorts or using old golf clubs for teaching their kids to enjoy the sport. Well, then it could be that your customers are interested in purchasing shorts from you or in you carrying a bargain-priced line of golf clubs.
  • Are they trading in the products? Resale stores continue to grow in popularity. If you add reselling to your business, it means deciding where in your store or on your website to fit it, building additional skills in your staff, and maybe needing to get extra clearances from government agencies. But it also could be a profitable move.
  • Are they throwing away the products? If your attitude surveys indicate customers are feeling guilty about trashing stuff, you can offer them some alternative methods of disposal.

Saturday, July 4, 2009

Reduce Unwanted Risks for Your Shoppers

Almost everybody loves to take a chance occasionally. But when it comes to shopping decisions, consumer psychology researchers find that almost everybody wants to avoid six particular types of risk. Here are those six categories and ideas to get you thinking about how you can reduce unwanted risks for your prospective customers:
     Functional risk: "Will the product or service solve my problem or meet my needs effectively and efficiently?" Have at least one sign in your store announcing that product performance is guaranteed.
     Financial risk: "Am I paying too much money?" Know what your competition is charging, and if you are charging more, be sure that the customer is told what you offer that the competition doesn't.
     Time risk: "If I make this purchase, does it mean investing too much time for what I gain?" Make it easy to use, unless you sense the shopper wants complexity for prestige.
     Physical risk: "Is my health or safety or that of those I love in danger if I use this product or service?" Provide expiration dates, safety instructions, and recall notices for all products where those are available and appropriate.
     Social risk: "If the people I admire know I'm using this product or service, am I in danger of falling out of favor with them?" Make it easy for shoppers to bring along friends and family or to contact them via cell phone from inside your store.
     Psychological risk: "Does using this product or service conflict with the image I want to maintain of myself?"
     In personal selling, learn the shopper's values so the purchase benefits you present are compatible with those values. In self-service shopping, use ads and point-of-purchase displays to communicate a range of purchase benefits so the shopper can find at least one that resonates with their values.

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

Friday, July 3, 2009

Set Higher Margins on Low Velocity Items

In Making Money Is Not Illegal, Immoral, or Fattening, we describe item velocity as one of three approaches to increased profitability through margin management. Here's how Art Freedman discusses item velocity:
"For this, I bring out another set of buckets, labeled A through D, with A being for the fastest selling items, those with the highest inventory turnover, and D being for items with the slowest turnover. Oh yeah, I do have two more buckets for sorting by item velocity. The X bucket is for items that have not sold one unit during the past year, just sitting there on your shelves. The XX bucket is for the items that have not sold even one unit for at least two years."
With the X and XX items, turn the merchandise into cash. Lower the sales price to below your cost if necessary. I know you might be thinking, "I'm not going to sell it below cost. Somebody might buy it someday at what I'm charging now." The trouble is that until the someday comes, it's costing you to carry the inventory. But with the C and D items, it's a different story and a different strategy.
"I would suggest to you that you tweak margins up on the C and D sellers, but never on the X and XX non-sellers. I'm not talking about putting high margins on items to slow down the sale. Don't hear that. I'm just saying that if you have items on your shelf, and they're selling only a few times per year or less, but you must carry them in your store, look at your margins on those items. If you've set a Final Gross Margin overall of 44%, you had better be carrying at least a 50 point margin on those slower selling items."

Thursday, July 2, 2009

Coach Your Staff with Stories

While consulting with a toy store retailer, I asked a manager what she finds to be the best way to sell to children. She smiled, kneeled on the floor, and then looked up at me. "I come down to the child's level. Never talk down to the child."
     After she and I exchanged more ideas, I asked to speak with a salesperson. The manager walked me to the back of the store and introduced me by saying, "Leandro does a superb job for our little customers." I started off by asking Leandro my same question: "What do you find to be the best way to sell to children?" He looked me in the eye for a few seconds, smiled, crouched down, and then stood back up. He said, "Yes, I'm selling to the child, but the one paying the bill is the adult. When the adult sees me get down to give my full attention to their precious child, they like me, so want me to have the sale."
     The two store staff had different explanations for why crouching down is a good idea when selling to a child. But my guess is that if you decide to follow this advice, you've been more influenced by the story than by the specific explanations. We all love a good story every once in a while.
     Use stories to teach and to motivate your staff. The best stories feature your current employees in starring roles, and the plot line centers on how those employees did a great job.
  • Keep your stories short.
  • Make the point of each story crystal clear.
  • If you do talk about an employee in your stories, ask their permission first.
  • Keep the important details the same each time you tell the story.

Wednesday, July 1, 2009

Have Discounted Prices End In $1.99 or $2.99

You have one item in your store priced at $222.99 and another item priced at $199.99. You decide to discount each one $11, so the prices are now $211.99 and $188.99. Which one of the two is the better percentage discount? Researchers at Clark University and University of Connecticut found that your customers are likely to feel that the discount from $222.99 to $211.99 is better than the discount from $199.99 to $188.99. In fact, though, the first discount is about 4.9%, while the second discount is the better one, at about 5.5%.
     Our brains are not real good at working with percentages. Do you need more evidence? Okay, here's some, courtesy of researchers at University of Miami and University of Minnesota. Say you want to clear out a line of seasonal merchandise. You apply a 20% discount, but then when it's not moving well enough, you apply a 25% discount to the sale price. What is the total discount now off the original price?
     Maybe one more percentage will make you feel better: When university students were presented with that problem, 59% of them got it wrong. They added the 20% to the 25% and said the discount was 45%. The correct answer is 40%.
     There are times you'll want to do the calculations for your shoppers so they aren't misled. There are other times that trying to straighten it out could actually add to the shopper's confusion. You might decide to have discounted prices end in a $1.99 or $2.99 to maximize the impression on the shopper. The truth is that there really isn't that much difference between 4.9% and 5.5%. The difference looks larger because we pay extra attention to the number to the left of the decimal point. That's another distortion.