Wednesday, September 30, 2009

Make Waiting in Line Interesting

Two years ago, Loblaw Companies Limited, which is Canada's largest grocery retailer, began gradually rolling out what they call "Clutter-Free Check Out Lanes." Magazines, batteries and even the impulse-grabbing, high-margin-earning candy bars are gone. If you want your candy, you buy it in the larger package in the candy section of the main store. The same sort of thing goes for the batteries and the magazines.
     Some congratulate Loblaw not only for cleaning up the overstuffed cash/wrap area, but also for enabling parents to guide their children and themselves through candy-free alleys, making it less likely that they themselves will end up looking overstuffed. But others say Loblaw is cheating stockholders out of dividends by forgoing the chance to sell all those small, last-minute purchases when the shopper is waiting in line with cash, check, or credit card ready to go.
     What did you think?
     Now please consider another perspective: Doesn't the checkout area clutter make any wait seem to go faster? Shoppers pass the time reading magazine covers and consume mental energy wrestling with themselves about which sweets to buy today. If you are going to shift the product selection purchase sites in your store away from the checkout, either ensure there are adequate resources to at least almost completely eliminate any lineups or introduce ways to make the wait more interesting. Product information posters, intriguing ads for stores you've teamed up with, music that's pleasant to listen to. Those all can work. Harvard Business School research finds that mirrors in waiting lines make the time go faster, since people will get involved in looking at themselves. You might not want to use that one in a Loblaw store, though. There's always the risk that customers will take one look at themselves and start putting the food items back.

Tuesday, September 29, 2009

Use Search Engines to Influence Merchandising

Movie rental company Netflix just awarded $1,000,000 to a team with members from Austria, Canada, Israel and America. What did those seven people do to earn them the prize? They developed software that improves the accuracy with which Netflix predicts what movies a subscriber will like based upon the subscriber's past movie ratings.
     The Netflix electronic recommendation agent certainly is among the most sophisticated members of a family of software which helps consumers make item and brand decisions. Lots of your prospective customers are using online search engines to see how others rate the products and services those prospective customers are thinking about purchasing. Research at University of South Carolina and University of Texas found using an electronic recommendation agent about doubles the probability a shopper will purchase one of the products recommended.
     Since a basic tenet of retailing is to provide shoppers what they want, you can increase your profitability by using search engines and recommendation agents to discover how the brands you carry are being evaluated and then, when indicated, changing your merchandise mix to include brands with better ratings of value for the money. You probably won't be able to get inside the new Netflix tool, but there are many other search engines and electronic recommendation agents you can consult.
     Shoppers who use recommendation agents should be among your favorites, since they tend to spend more money than those who don't use recommendation agents. For instance, Yahoo! reports TV and digital camera purchasers who'd first done search engine research spent 10% more in the store than those who didn't do the research. And once shoppers start using recommendation agents, they don't like to turn back. There are so many decisions to be made in life that delegating brand recommendations to the computer gets awfully attractive for shoppers.

Monday, September 28, 2009

Make the Sale a Slice at a Time

Among sales techniques considered tried and true is the foot in the door. The traveling salesman on the front porch with the perfect timing of an expert senses when the lady of the house is about to say no, and at precisely that point offers a combination of merchandise and cost which can't be refused. Once the lady says yes, thereby keeping the door from being slammed shut on the salesman's foot, the sale is built with upgrades and additional items.
     In store-based selling, you'll benefit from refining the technique. Instead of thinking of it as a foot in the door, think of it as making the sale a slice at a time. The first objective is getting the customer to say yes. In a wide variety of studies, it's been found that once the prospect says yes, they're more likely to continue saying yes. Even getting the shopper to nod seems to help, as long as a nod means yes in that person's culture.
     When possible, present the customer items which can be purchased in pieces or can be augmented later. Researchers at London Business School, Harvard Business School, and Duke University found that people are more comfortable when downgraded versions of products are available for sale. This might mean having a barebones version of the product or service, a smaller package or a sample to try out to start, or showing upgrades on the shelves or easily available via special order.
     Please realize that this doesn't mean the customer ends up purchasing the barebones, downgraded model. It is the availability of downgrades and upgrades which relaxes the shopper's fear of buying the whole pie at once. Again, once the customer says yes to the slice, they're more likely to end up wanting the whole thing at some point.

Sunday, September 27, 2009

Expect Shopper Conformity & Variety Seeking

When you dine at a restaurant with friends, do you want to know what everybody else is ordering before deciding what you'll order? Do you do that because you're simply too lazy to look through the menu? Or is it either because you want to be sure you fit in by ordering what others are ordering or be sure to order another selection to demonstrate your independent nature?
     When people in a group are all buying and each person's selection is announced in sequence to the others, there are some people who will seek out what's different from what others are selecting. Therefore, it's useful for you to have sufficient variety in each of the product types you carry. But other shoppers will want to buy exactly what others in the group are buying, so it's useful for you to have enough stock of the particular items.
     Whether a shopper is a variety seeker or conformist depends in part on the degree of conformity of others in the group. Again using the restaurant experience as an example, consider the findings of an observational study conducted with diners at Flam's in Paris by researchers from Sorbonne-Assas in France and University of Adelaide in Australia.
     The researchers found that when about 30% to 80% of a group had ordered the same choice, people placing their orders next tended to go along with ordering this choice for themselves. But once the conformity exceeded 80%, subsequent orders were much more likely to show variety seeking.
     If you're selling socks or socket wrenches instead of steaks, and if you're doing business in Paris, Texas, not Paris, France, the percentages will probably be different. But in any case, do your merchandising and selling with the expectation you'll be having both conformists and variety seekers as shoppers.

Saturday, September 26, 2009

Competitively Price Sensitive & Competitive Items

Skilled margin management means keeping prices on certain items high enough to drive business success. But it also means pricing other items quite competitively. How do you determine which items fall into this second category? In Making Money Is Not Illegal, Immoral or Fattening, Art Freedman gives examples of Sensitive and Competitive items, using his experiences from his family's store, American River Ace Hardware in Folsom, California:
"Project starters. I'll drop our margins slightly on our gallons of paint, and then we sell all the sundries, and that's where we're making our money. We must be close with the competition on pipe. If we're not, we're going to lose the entire project sale. If you can lead the market, fine, do it, but if not, just stay within 5% to 15% of the market leader on price.
"Commodities. These are items you buy and sell by the truckload. For us, it's topsoil, potting soil, bark, steer manure, wood pellets, firewood. Our margins track down a little bit, and one of the reasons they track down a little bit is those are also items that we are advertising.
"Items usually bought in multiples. For us, a good example is cabinet hardware. When a customer is going to buy 10, 20, or 30 of the item at the same time, they are looking closely at price. Now whenever possible, I don't carry the same brand as Home Depot or Lowe's carries, and then I don't need to be so competitive on price. But I still am careful on cabinet latches and the cheap silver polish door pulls."
In your store, what are the project starters, commodities, and items usually bought in multiples?
For a much fuller description of how to identify your Sensitive and Competitive items, see page 74 of the book.

Friday, September 25, 2009

Use Customer Life Changes to Switch Brands

Sometimes you want customers to stay firmly committed to brands they're using now—specifically when they're buying high margin ones. But if you'd like to encourage brand switching, try doing it when people are moving from one role in life to another. This happens with events like college graduation, getting married or getting divorced, having a first child, changing careers, and locating in a new country or culture.
     We might assume that when people are already feeling highly uncertain about what's happening in their lives, they'd actually be less likely to switch brands. Since moving from one role in life to another is a time of high uncertainty, it would seem that you trying to change brand commitments then would only end up being a big waste. But when it comes to role switching, the truth is the opposite of what we might commonly assume.
     With this in mind, here are two tactics for you to build your profitability:
  • Maintain easy-to-use gift registries where people due to graduate or marry can list the items they'd like to receive from well-wishers. Even some Ace Hardware stores have wedding registries. In setting up those registries, suggest items with brands that might be unfamiliar to customers, but which offer distinctive features for users and good profitability for retailers.
  • Aim some advertising and store signage to people in your target markets who will be looking for evidence that they’re doing okay in their new roles. Then think about brands which are or can be associated with status in those roles. Put these together so the ads and signage feature these brands in ways which convey the status benefits. Does it work? Research at University of Minnesota showed how recent immigrants seek out brands to give themselves acceptable status in their new culture.

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

Thursday, September 24, 2009

Ease Frustrations About Your Pricing

It's not only your customers who are frustrated by store pricing. Chances are, it's also your sales staff and you. Are your staff repeatedly dealing with shoppers' complaints and efforts to negotiate? Are you frustrated because you'd like to keep prices lower, but realize your business's balance sheet won't allow it? What about those abandoned half-filled carts, clothing left in dressing rooms, and items returned because there's a lower price elsewhere?
     Frustration eats up needed energy from you and your staff, and frustrated customers are less likely to buy from you. It's in everyone's interest, then, to ease the frustration. Consumer psychology researchers at UCLA and University of Southern California suggest a three-pronged approach:
  • Describe pricing as subject to change. When your customers and staff know you're regularly reviewing your pricing, looking for opportunities to pass on savings, they are less likely to stay frustrated. Give your staff examples of how you're not keeping all prices high and higher. Then coach your staff to approach customers who are in the area of competitively priced items to say, "Here's an item that might be of interest to you. Notice what we've done to the pricing."
  • Explain why prices are what they are. If customers complain about price increases, staff might say, "When our suppliers increase their prices to us, we need to pass those increases on to the customer so that we can stay in business and continue to both serve shoppers like you and employee the people like me."
  • Give staff and shoppers influence in pricing. Consider staff suggestions on what items to discount for specials and where to increase margins to balance it out. Point out product alternatives to shoppers so they feel a sense of control, since a sense of control helps wipe away frustration.

Wednesday, September 23, 2009

Consider Your Store a Sports Stadium

For some customers, shopping gives the same emotional charge as watching an exciting sports event. A University of Oregon study of football game attendance suggests some ways you can keep up the thrills and pack the stadium—I mean, your store. The researchers found three flavors of sports fan motivation:
Die-hard fans. These football fans are committed to the team and love the sport of football. These store shoppers love the game of shopping, and they're dedicated to doing it with you. Keep feeding them information about the history of your business. Have staff spend time talking with them. Post pictures of the team. Give them plenty of notice about upcoming changes so they feel they're in the know. Distribute business cards and special event announcements for them to pass on to their friends. Sell items carrying the store logo.
Fair-weather fans. These football fans like to cheer for the winners, and they'll switch allegiance if games get dull. These store shoppers get their excitement from looking at the latest developments. If it's electronics, they want to be the experts on the newest technologies. If you carry clothing, they want to try on next month's big thing. If it's groceries, they're into the Food Channel trends. These shoppers are much more likely to switch stores than are the die-hard fans. Keep them excited by regularly introducing new items and new ways of presenting your classic items. They like to be around winners, so use signage and conversations to tell them how your store is better than the alternatives.
Tailgaters. These football fans are there for the camaraderie. These store shoppers get most excited about the social experience. Hold special events in and around the store. Have places in the store where small groups can exchange critiques. Give group purchase discounts.

Tuesday, September 22, 2009

Put Ads by Easy-to-Read Articles

You want your advertising to be easy for the shopper to understand. So you don't crowd the text, allowing the reader to appreciate each message. You boost involvement by having a picture or two in the ad. You clearly tell the shopper what you'd like them to do after they finish reading the ad—purchase from you—and how to do what you'd like them to do—for instance, giving them your phone number and street address and/or website address.
     But let's say the newspaper in which you are placing your ad repeatedly puts it next to articles which are tough to digest. For instance, because the subscriber base for the newspaper has shrunk, the paper has shifted to a smaller typeface font to save pages. Or some of the staff writers pump out paragraphs which lack real pizzazz.
     Researchers at University of Illinois, Chinese University of Hong Kong, and Hong Kong Polytechnic University found that this situation could be trouble for you. When a newspaper article is tough to read, the ad next to that article is likely to be much less effective than when the article is easier to read.
     But wait! The research findings get a little trickier: The carryover from article to advertisement happens when the content of the ad is related to the article. You sell watches, so you asked that your ad be placed next to a feature article about classic timepieces. In contrast, if the theme of the article has absolutely nothing to do with the theme of your adjoining advertisement, a tough-to-digest article will actually increase attention to your ad.
     Since lots of other research shows advantages to having ads next to editorial with similar themes, the lesson is to do what you can to have your ads placed by easy-to-read articles.

Monday, September 21, 2009

Pay the Bills Essential to Profitability

A reminder from Making Money Is Not Illegal, Immoral or Fattening:
"What do retailers tend to do when a bill comes in for a dollar and there isn't a dollar in the bank? In many cases, the retailer takes money that should have been used to replenish inventory and pays expenses with it. Next in line is likely to be cutting payroll, and then slashing away at training and advertising. The four things that we absolutely need to do to compete when we have cash flow problems, we don't do.
"If you don't have it, you can't sell it. You must be in stock. That's a top priority. There's very little in the business that's more important than staying in stock once the store is up and running out of the ground. Very close behind that, and this is where I would get you to start to think, is the interaction between your customers and your employees. I mean right there where they interact, where they're talking on the floor. So how much of your time do you spend every day coaching the people who work for you in your store to do a better job taking care of the customers?
"Is your answer, 'Well, I trained each of them when I hired them'? If you said that to me, I'd fall down on the floor laughing. How in the world can you train an hourly employee once and think they are going to go out on the floor and do it right all the time? It isn't going to happen. So I want to convince you to spend enough time out on the floor coaching the people who work for you to do a better job dealing with the customers."
For more details, see page 18 of the book.

Sunday, September 20, 2009

Use Consumer Attitude Survey Findings

On October 23, I'll be presenting a one-day version of Conducting Consumer Attitude Surveys designed for retailers and under sponsorship of University of Nevada, Reno.
Just as there are changing fashion attitudes when it comes to women's clothing, there are fashions in retail marketing research: What's hot now in some retailing marketing research salons is an attitude that you can learn loads about your target markets by watching people shopping in your store and you won't learn much at all by asking consumers about their attitudes.
     The truth, though, is that it's valuable to do both the watching and the asking. Watching shoppers is the best source of information about what your current customers are doing today. Asking shoppers is at its best in helping you determine why they're doing it so you can figure out what they'll want and need next season.
     In the same ways that being too obvious when watching shoppers distorts what you see, being too obvious in asking about attitudes distorts the results. People will show and tell you what they think makes them look good or what they think you want to see and hear.
     At the same time, there are many differences between tracking shoppers and quizzing them. Here's the most important one: If you unobtrusively watch shoppers and end up never using the findings, you've wasted time and money. But if you ask people to do you the favor of opening up their minds to you and you fail to analyze the results, use what you discover, and then let the respondents know what you're doing differently as a result, well, it's much worse than a waste of resources and opportunities. You've irritated the attitude survey respondents, making it less likely they'll open up their minds honestly if you ask them again.

Saturday, September 19, 2009

Allow Modest Expectations of Discounted Products

Research at Israel's INSEAD and at Stanford University confirms that when people buy products or services at what they consider to be deeply discounted prices, they tend to end up feeling that the benefits are less than if they'd paid full price. They love having gotten a discount, but they don't have as much love for the product or service. Consumer psychologists call this the price-quality link.
     We'd like our customers to be absolutely thrilled with all their purchases from us, so we may be tempted to point out that the discounted item is identical to what the person would have gotten at a higher price somewhere else. But because the price-quality link operates at an emotional, non-rational level, it doesn't easily yield to logical arguments.
     In the short term, this can create a nuisance. People who think a product or service is inferior are more likely to request refunds. But in the longer term, it's to the benefit of the retailer to maintain the price-quality link in the consumers' minds. Your staff can say, "We'd be pleased to accept a return and give you a full refund or if you'd like, a credit towards purchase of a regularly-priced alternative to the item you bought."
     The price-quality link also is useful in another way: Research at University of Texas, San Antonio found that the initial enthusiasm when making a purchase often fades over the time the consumer uses and then eventually discards the product. Because the discounted product or service begins with more modest expectations, any disappointment the consumer experiences may be less, meaning that good will towards your store is protected.
     Certainly deliver full value to every customer. But allowing those customers to believe, "You get what you pay for," can be to your benefit as a retailer.

Friday, September 18, 2009

Cultivate Kids as Future Customers

For most retailers, children are an influence market, giving suggestions to the adults on what to purchase. The chief evidence can be seen in the cereal aisle at any grocery store. But it’s much more than this. Surveys find that about one-third of parents say their kids also actively participate in deciding which automobile the parents should buy.
     For all retailers, children are a future market, with their high potential to remain or become primary customers in five to fifteen years. Because of children's roles as a future market, you've a responsibility to the wellbeing of your business and your community to cultivate kids into good consumers.
     University of Minnesota research indicates that a prime time for doing this is when children are ages 7 to 11. Around age 7, children's consumer skills start to blossom. Over the next few years, they become much better at recognizing the benefits made possible by product features, moving beyond a focus on the product features themselves. Their understanding increases for the correlation between money and value. They gain a greater ability to compare products and to do it on more than one dimension (such as ease of use and duration of use) at the same time. Their abilities grow to recognize that more is not always better, such as a strong sour taste being well-suited to pickles but not to peanut butter.
     Attending to purchasing habits of 7 to 11 year olds isn't only to build profits for the far future, though. For some product categories you carry, kids might be a less-than-obvious primary market right now. Consider cell phones. For the parents, the target appeal is they won't let the tracks of their kids, when they're away, go cold. On the other hand, for the kids, having a cell phone is way cool.

Thursday, September 17, 2009

Ease Customer Anger at Delivery Delays

You and your suppliers may be keeping inventory and staffing thinner than in the past. As a result, deliveries of products and services can get delayed. To protect repeat business, ease the anger of your customers about delivery delays. Researchers at Arizona State University found that complaints about delays usually come in one or more of three flavors:
  • The customer says about the retailer, "They don't appreciate the bother this delay is causing me." Allow the customer enough time to tell you, at least briefly, about the bother, and then respond with something that shows you understand the specifics of what the customer said, For instance, you might reply, "I understand what a nuisance it causes for you to have to put your project on hold because of the late delivery. How can I make things right?"
  • "They're trying to hide something." The customer thinks you're intentionally evil. Reply by emphasizing your ethics. Find out the real reasons for the delay and then tell the customer. You could end up saying something like, "Our regular supplier might be having trouble getting financing in this tight market. I'll look into other supply sources. Or would you prefer to cancel the order at this point?"
  • "They're making me look bad to others." When the delay in order delivery occurs at the restaurant with business associates around the table, or the news of a special order delivery delay is presented in front of the customer's family, the chance of anger is greater. To avoid this, aim to discuss the delay and the remedies one-to-one, retailer-to-customer, out of earshot of the customer's business associates, family, or friends.

     Please note that when the customer is thinking, "They are responsible," your response should be "I will take care of this." This eases anger.

Wednesday, September 16, 2009

Set Budgets & Bottom-Line Goals

Here's a reminder from Making Money Is Not Illegal, Immoral or Fattening:
"Amateurs hope they make money, while professionals set bottom-line goals and they budget. Hope is a wonderful thought, but hope alone is not a strategy for success. If you told me you had a business strategy for you to make more money this year, here's what you would know: You would know how much money you made last year, how much money you want to make this year, and an action plan with specific tactics to make that extra money.
"There is going to be no need for hoping in that at all. That is a plan that is laid out. It is not overly detailed because I'm just like you. You give me a plan with a thousand different tactics, and I'll do nothing. You give me a plan with two, three or four critical action points, I've got a fighting chance to make that happen.
"Do you know why small business retailers do not budget? What we fear, we stay away from. No one ever took the time to train the small business owners on how to budget and no one makes them budget.
"Think about the end of last month in your business, as you were getting ready to go into this month. The week before you went into this month, did you sit down to look at what you wanted to happen? Coming into the new month, did you have a pretty good idea of how much your final gross margin was going to be? How much your expense base is? Did you subtract your expense base from your final gross margin to determine if you were going to make any money for the month?"
For more information, check page 26 of the book.

Tuesday, September 15, 2009

Profit by Showing Social Responsibility

An article in this week's online edition of Time Magazine is titled "For American Consumers, a Responsibility Revolution." The article gives evidence of a trend towards consumers aiming to practice social responsibility in their retail purchases. Retailing profits come from anticipating trends, so make contributing to society an integral part of the personality of your business.
     Determine the amount of attention you'll pay to social responsibility by analyzing the values of the culture in which your business operates. Research indicates people with backgrounds in collectivist cultures, like those in many Asian and Pacific Island areas, Greece and Portugal, are more likely to embrace social responsibility than those who identify with individualist cultures such as Great Britain, Canada and the Netherlands. The Time Magazine article about social responsibility among consumers was one of many in the U.S. edition, but it was the cover story in the Asia and South Pacific editions.
     Where to begin? Well, decide how much controversy you want to tolerate. At least at the start, you might choose to take on social responsibility issues that will bring you largely supportive attention. For instance, almost everybody supports reducing the amount of trash we all generate. About half the people responding to the Time Magazine poll said businesses should place more importance on protecting the environment than on economic growth. Your first social responsibility initiatives might involve exploring ways to sell products that use refillable containers, to favor vendors that minimize unnecessary packing, and to accept old products as trade-ins or recyclables.
     Somewhat more controversial is the issue of working conditions. There are employers in the world who think that government oversight of employee rights is excessive. But we've little tolerance for exploitation, so you might choose to tell shoppers the ethical ways in which your fair-trade products are produced.

Monday, September 14, 2009

Stage Special Events to Build Sales

Last Thursday night, thousands of mid- to high-end fashion stores held special events under the title Fashion's Night Out. The objective was to build store traffic which would lead to increased sales.
     The payoff may not be immediate. A New York Times article about FNO, quoted one shopper as saying the event was, "effective in terms of speaking to my aspirations and desires, but maybe not my pocketbook." When asked about sales results, Macy's executives seemed to be far from effusive: They said that profits from the event would at least cover the expenses of keeping eight Macy's stores nationwide open a few hours later than usual.
     The real profit from FNO for you could be as a reminder of the value of special events.
  • The appeal is worldwide. Although FNO was centered in New York City, the thousands of participating stores were in other areas of the U.S. and in Brazil, Britain, China, France, Germany, Greece, India, Italy, Japan, Russia, Spain, and Taiwan.
  • You don't need to be a high-fashion retailer to benefit. Say you sell cat food in NYC instead of what comes down an NYC catwalk. Well, consider how Meow Mix Wet Pouches were launched in the Big Apple at events in which consumers were encouraged to bring their cats for taste tests.
  • Research at University of Colorado and Columbia Business School suggests that the nature of a special event should take into account whether shoppers perceive the items for sale as routine or risky purchases. For items that are fairly routine purchases, special events should emphasize free trials. For items carrying financial or social risk, emphasize how-to-use-it information.
  • Never let the crowds or the activities get in the way of your special event participants easily buying merchandise from you at any point.

Sunday, September 13, 2009

Keep a Skeptical Eye on Suggested Tactics

In the RIMtailing blog, I aim to give you actionable advice. Each posting describes a tactic that's been shown to increase profitability. Today, here's a tactic about tactics: Use a skeptical eye. Before putting time and money into implementing a tactic, see if it makes sense to you as a professional retailer that it will work.
     That's not to say every profit-making tactic sparkles like gold at first glance. Some work because they give you an edge over the old, conventional retailing practices used by your competitors. Consider the New York University finding that sales of indulgence products are likely to climb if the products are featured in places adjacent to products that shoppers believe they should purchase. It might take a little thought to recognize how we believe we've earned the right to indulgence after we've bought—or as it turns out, even considered buying—a virtue product.
     With some tactics, the reason they work is what could be called the "Pay Attention Effect." If you decide to rearrange your merchandise to fit what you're told about consumer psychology or how customers flow through your store, you and your staff will be paying extra attention to the shoppers' reactions to the changes, and that extra attention to the shoppers will, in itself, boost sales. Organizational psychologists call this the Hawthorne Effect: Decades ago, researchers found that worker productivity at the Western Electric Hawthorne Plant went up markedly after some changes were introduced. But the productivity increases were really caused by the extra attention the workers were receiving from the researchers.
     Should you care? If the change makes you money, why is it important to spend time dissecting the reasons? Well, because you want to see if there are less expensive ways to achieve the same sales boost next time.

Saturday, September 12, 2009

Capabilities Before Technical Specifications

Each time you sell a product, you're selling not just the brand name of the item, but also the brand name of your store. So why should a customer buy that product brand name from you rather than from somebody else? One reason is that you make it easier for the customer to distinguish products from each other based on what the products can do for the customer. Don't confuse our shoppers with technical specifications. Shoppers are more interested in what each of the products can do than in how the products do it.
     This point is being put to use by computer chip maker AMD. By and large, consumers won't be buying an AMD computer. They'll buy a Dell or an HP that contains an AMD chip. To distinguish themselves by making it easier on the shopper, AMD is embarking on a marketing campaign in which the manufacturer can assign one of three labels to the computer: Vision Basic computers contain the AMD chip that has the best price/technology tradeoff for fundamental internet use. Vision Premium computers hit the sweet spot for multimedia, and Vision Ultimate computers are for the heavy-duty video gamer. AMD intends to have a Vision Black category for even more demanding computer processing.
     AMD won't bother us with the technical details—that is, unless we want them. Then the details will be easily available. And according to researchers at University of Chicago and China's Shanghai Jiao Tong University, having the specifications clearly available does help make the sale, even if the shopper doesn't actually read the specs.
     In your retailing, be ready to fill in the technical details promptly whenever you realize the customer is looking for them. But make your lead story the different capabilities of the different product choices you're offering the customer.

Friday, September 11, 2009

Visit Your Competition to Build Confidence

Why don't you tour your competitors' stores more often? Is it because you are afraid you'll see your customers there and won't know what to say? In fact, though, visiting the competition can build your confidence. Here's part of a story Art Freedman tells starting on page 50 of Making Money Is Not Illegal, Immoral or Fattening:
"Consider what happened to me at a store in a small community in California. The store is owned by a father and daughter. They run the business. At the time I visited, a new Home Depot had come in.
"Now the three of us are going into Home Depot. We get to the counter. We are standing there watching the salesman on his cell phone. We hear him trying to set up a date for that night. I finally get his attention and mouth the words, 'I need to talk to you.' But that doesn't make one bit of difference to this guy. He's still on his cell phone yakking away about getting a date.
"No, he doesn't stop talking. Believe it or not, instead of that, he turns his back on us. I am now looking at the salesman's butt. I didn't want to have that in eyeshot for very long, so I turn to the daughter and say, 'Would you let that happen in your store?' She answers, 'Not in a million years, I wouldn't let that happen.' I said, 'Well, this is another reason why you're going to be fine, and these guys are going to be less successful because of you.'"
And as to what to say if you run into one of your customers at a competitor's store, try, "How does shopping here compare with shopping at my store?," and then use the information to improve even further.

Thursday, September 10, 2009

Delegate, Empower & Collaborate

Develop the skills of your staff. That's necessary so you can work on your business, not just in your business. And in carrying out staff development, distinguish delegation, empowerment, and collaboration.
     Delegation. People like to own a portion of a task, seeing it through and tracking the results. When you slice off part of a task to be done--such as setting up the end caps--and hand it to an employee, you're granting authority, responsibility, and accountability. The output might not be as high quality as if you'd done it yourself, so keep an eye on the progress and do coaching when indicated. But resist any urge to swoop in to take back the whole task yourself. If things get really bad and the impact on your business might be dire, trim down what you're asking the employee to do. But leave at least a few important portions so you allow the employee to come out of it feeling a sense of positive accomplishment.
     Empowerment. Give employees latitude in how they respond to customer complaints. Remind them that customers are always more important than store policies. If your employees do go beyond what the store policies say, they must let their supervisor know so the issue can be discussed. Another element in empowerment is making clear that some employees will be granted more latitude than others, but that your objective is to give progressively greater empowerment as employees demonstrate progressively greater wisdom.
     Collaboration. When grooming employees to take over for you, you'll delegate and empower. But with the strategic decisions, it's best to collaborate. Have the employees fully participate with you in identifying the problems, generating and evaluating the alternatives, and setting up the action plan. That way, both you and your collaborating colleagues get better.

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

Wednesday, September 9, 2009

Use Shopper Psychology to Curb Shoplifting

Many techniques can be highly effective for minimizing shoplifting: Set up mirrors to increase visibility. Post signs sayings that you prosecute all shoplifting, and then do it. Keep high-value items in locked cabinets. Alternate the direction of hangers on clothing near doors. Have uniformed guards patrolling your aisles.
     You're not doing all that? No wonder! You'd irritate the devil out of your shoppers and irritate your shoppers out the door. And full-bore shoplifting prevention is expensive. Balance shoplifting reduction with providing a welcoming atmosphere. Balance the costs of shrinkage from shopper theft against the costs of shoplifting prevention. Keep in mind that, if you're like most retailers, few of your customers shoplift and a higher percentage of shrinkage is due to employee theft than to shopper theft.
     As you decide what measures to take, use shopper psychology.
  • Some shoplift for the thrill. You'll take special caution in stores and areas that generate excitement because of loud rhythmic music, bright colors, fast movement. You'll recognize that merchandise classes associated with the forbidden are especially likely to be stolen: Tobacco products and underwear are among the most frequently shoplifted items.
  • Some shoplift because affection and attention are missing in their lives. So feel sorry for them and let them steal all they want. No, that won't work. But there's evidence that when you treat all customers with respect, concern, and empathy, people prone to shoplifting are less likely to steal from you, even when the opportunity is there.
  • Some shoplift to show off to friends. Doing it on a dare is most likely among teenagers, so without hassling the teens or prejudging, you'll want to be alert when a group of teenagers enter the store together. Being alert includes greeting them so they know you know they're there.

Tuesday, September 8, 2009

Give Your Retailing Local Quality

Stop & Shop and Giant Food, both of them parts of Dutch conglomerate Royal Ahold, announced that Starbucks kiosks in a number of the stores would be replaced with another coffee supplier. Discussions about this by retailing consultants, such as on the RetailWire membership site, reminded me of the value of all retailers keeping local quality.
     Here's what I mean: With some of the current Starbuck's installations, the replacement is Dunkin' Donuts, whose home is Canton, Massachusetts. That's much closer to the Stop & Shop/Giant stores than Starbucks, which although often seeming to have a presence on every street corner in the world, is most strongly associated with the aroma of Seattle.
     Keeping it local is an intention of even the largest of large retailers, Wal-Mart, which gives a bow towards the neighborhood with their Local Supplier initiative. And last time I checked, McDonald's in Bangor, Maine offered lobster sandwiches, but in my California hometown, that slot on the menu board is taken by burritos. When your shop—McDonald's or not—offers hamburgers in Pittsburgh, you'll sell more potato chips if you stock only local favorite Utz than if you stock only Frito-Lay, even though Frito-Lay makes the best selling potato chips in the U.S.
     Better to stock both brands. It's also best to realize that keeping it local works only when local is associated with attractive quality. Some of the retailing experts discussing the Ahold decision said that the staff manning the Starbucks kiosks acted more like grocery clerks than baristas; there was no WiFi; and the kiosks didn't accept Starbucks gift cards. This was not the Starbucks experience.
     What are you doing to keep the local quality in your retailing? Quality meaning the local touch, and quality meaning the full value of the shopping experience for the customer.

Monday, September 7, 2009

Dissolve Cautions About Private Label Goods

Private label goods—house brands—have advantages over nationally advertised brands. Retail profit margins are usually higher, even while you're offering a better price to the customer. And when the products are produced to your private label specifications, you can maintain customer brand loyalty and advocacy even when needing to change to a new manufacturer or supplier.
     But realize that some cultural groups carefully avoid private labels in certain product categories. Research based at University of Memphis suggests that African-American consumers tend to steer away from private label brands in clothing, particularly boys' clothing, because the private label lacks the cachet of widely advertised brands. Other research finds that Asian-Americans expect much more information about product features and consumer ratings when considering house brands than when considering national brands.
     You can establish high-quality images by showing in advertising, signage, and shelf placement all the ways the private label alternative compares favorably to the nationally advertised prototype. Supermarket chain Harris Teeter did that with their Premier Selection lines.
     Here are some tips for dissolving cultural cautions about private labels:
  • Aim for advertising in media likely to be seen by people who are both in your target market and are members of the cultural group who tend to have hesitations about private label brands in that product category.
  • Make favorable comparisons between the private label and the name-branded items only if you've good evidence the comparisons are true.
  • Even if your comparisons are justified, don't overreach. An Advertising Age survey found that saying a Nissan Altima is as good as a Mercedes-Benz was more likely to earn an "Oh, sure!" than an "Oh, wow!" So if your private label brand is the Nissan Altima in its product category, better stay with comparisons to the name-branded equivalents to the Altima.

Sunday, September 6, 2009

Go Out There and Make More Money

In my postings on this RIMtailing blog and in collaborating with Art Freedman to produce Making Money Is Not Illegal, Immoral or Fattening, I've aimed to give you tested ideas for improving your profitability. But if you don’t implement any of the ideas, you've not used your time profitably. Because you're busy, implementation might mean taking small steps each day, not waiting until you have all resources in place to take gigantic steps.
Here's how the book makes that point in the last paragraphs:
"How much time every week do you spend planning to be better? I would hope you'd have an answer for me. It should be right on top of your head, right there. 'Here's what we're doing every day. Here's what we're doing every week. Here's what we're doing every month to be better because that is how great retailers build their businesses.'
"They've built the business by getting a little bit better every day. You know what? If you are looking for the one great idea, the one thing that will take you from here to there, that one absolutely phenomenal idea, it doesn't exist any more. It's not out there. We'd be looking for something that is not there anymore. What we need to do now as competition gets tougher and tougher and tougher is to make little baby steps every single day so that at the end of the week, we're that much better, and at the end of the month, we're even better.
"The top two reasons that the owners of small to midsize retail businesses do not make more money is that they lack the courage it takes and the ability to make the tough decisions. Now's the time to go beyond thinking to doing. Go out there and make more money."

Saturday, September 5, 2009

Treat Employees in Terms of Career Goals

Different staff members have different agendas for their careers. Treat all your employees equitably with respect, concern, and empathy, but also treat them as individuals. Research at the University of Southern California identified four sorts of orientations to career goals that retail employees have:
     Onwards & upwards. This employee wants power and achievement. They'd like to learn not just supervisory skills, but also managerial skills. If your retail business is large, you might have a place for this employee when they're ready to move up. In the small retail business, you might end up training the employee to move on to another job. But if you meet their needs for power and achievement, they'll give you their best while they're with you.
     World's foremost expert. This employee wants to continue to learn more about their current job, not move up or on. You win their motivated efforts by giving them the tools to master their trade well. They can be extremely valuable long-term contributors at their current level. Some are good at training new hires, but others of them don't know how to share their abundant knowledge.
     Surprise me. If they're working in sales, they've one eye on what the bookkeeper does. If they're preparing the advertising circular, they're wondering what it would take to succeed on the sales floor. Because they'll know how the different areas function, they can become excellent senior retail managers.
     Don't tie me down. Variety and independence drive this employee. The motto for some of them is, "It's just a job." Others see your store as a chance to learn before moving on or returning to school. If they're not performing well, give them feedback, but you'll probably find yourself guiding them towards the door and out of the job they hold in your store.

Friday, September 4, 2009

Build Store Advocacy Beyond Customer Loyalty

You can't afford to focus on the wrong objectives. Your time and money as a retailer are too limited for you to do that. Keep your focus on building store advocacy, not just customer loyalty. Store advocacy means how often and how strongly your customers praise you to other potential shoppers with specifics. Beyond "I love to shop there," to "I get an excellent price on top-quality herring," "Almost everyone there listens to my questions and gives me useful answers," and maybe most important of all, "I don't go out of my way to recommend stores to people, but I feel real good about recommending this one to you."
     The trouble with you stopping at customer loyalty is that retail analysts have been pointing out for some time now how customers aren't all that loyal, even if they ever really were over the past few decades. Current customers may enjoy shopping with you, but with the exception of your family and close friends, unless you work consistently and vigorously to maintain that habit, current customers are not highly resistant to giving their business to somebody else.
     The term "customer relationship marketing" is excellent shorthand for reminding us retailing professionals of the importance of every interaction between the shopper, on the one hand, and on the other hand, the staff members, the signage, the reward programs, the cleanliness of the parking lot, and on and on.
     But as researchers from Memorial University of Newfoundland point out, customers don't often describe their interactions with retailers as "relationships."
     Give your customers lots of specifics to praise you about as they talk to others. Go ahead to ask them to tell others about their experiences in shopping with you. To encourage them to practice doing this, regularly ask your customers how you are doing.

Thursday, September 3, 2009

Personalize the Shopping Experience

With over 400 locations on five continents at last count, Build-A-Bear Workshops stores can be considered testimony to the success of allowing purchasers to personalize their purchases. Each child selects from a range of items in the store to design their own stuffed animal, and upon completion of the toy, the child signs the animal's birth certificate.
     People love the opportunity to put their personal imprint on their purchases. They buy accessories for their iPods and automobiles. A few years ago, online clothing retailer Land's End told Fortune Magazine that fully 40% of Land's End shoppers are willing to pay more and tolerate longer delivery times so they can specify a blend of precise sizes when ordering. Researchers at Colorado State University found that consumers choose to personalize even if it means accepting design quality inferior to what professional designers would produce. Another study concluded shoppers in a marketing atmosphere filled with fears of privacy being violated still will volunteer ample amounts of information about themselves to a retailer if they see the retailer using this to personalize the shopping experience for them.
     Your shoppers appreciate the chance to customize. But what they like even more is the opportunity to personalize. So present the options to your shoppers in terms of them expressing their personal values. Land's End does best to talk about the luxury that comes when having clothes cut to the customer's highest comfort.
     It's easiest for you to offer personalization when you accept special orders. However, that's not necessary, and accepting special orders does bring up complications—such as how to handle merchandise returns—which you might choose to avoid. Offering accessories as add-on purchases is another approach. And in fact, just having sales staff call customers by name is a bit of personalizing the shopping experience.

Wednesday, September 2, 2009

Show Your Value to Your Suppliers

There are times you'll be asking your suppliers for extra help, whether it be adjustments in payment terms, expedited replenishment of items, customized training of your staff, or something else altogether. Your suppliers may be hungry for your business and therefore anxious to please you. But even then, you're more likely to get the long-term cooperation you want if you clearly demonstrate to your suppliers the value you bring them.
     Based on some Arizona State University research about influencing in retailing, here are six approaches to showing your value to your suppliers:
     Reciprocity. Give so that you shall receive. Ask your suppliers how you can help them reach their objectives, and then implement those tactics which will be profitable for both of you.
     Scarcity. What do you offer your supplier that other customers do not? If you are a multi-store retailer, what you have is the ability to place especially large orders. If you're an independent one-store business, you can offer a distinctive flexibility in choosing to showcase items the supplier wants to try out at retail.
     Authority. You're closer to the customer than is the supplier. What valuable advice can you provide about product complaints and market trends?
     Consistency. If you've been a reliable account, placing orders predictably and paying on schedule, be sure your supplier recognizes this. If you've agreed to use point-of-purchase displays, use them as intended and report the results.
     Liking. We like people who are interested in us. You put that truth into action in cultivating the good will of your shoppers. Keep that same truth in mind as the motivation to share mutual interests with your supplier.
     Consensus. Team up with others in your business and with other retailers. Whatever you're doing with and for your supplier, your influence multiplies when others join in.

Tuesday, September 1, 2009

Know the Margins on Your Products

A key to improving your profitability is to set sales margins on the products you sell. Come as close as you reasonably can to setting margins on individual items rather than on product classes. In Making Money Is Not Illegal, Immoral or Fattening, Art Freedman and I describe in detail how to calculate the four types of margin. For our readers, here's a reminder of what you'll find starting on page 63 of the book. For those who have not yet read the book, here's an introduction:
Sitting Margin. If you took a snapshot of your current costs and retails right now, today, it would consider all of your sales on each item for the last twelve months on each of those SKUs. If you sold every item as you did last year, based on your current costs and retails, this is your Sitting Margin. This number will give you indicators of when your margins are slipping.
Back Door Margin. This is what your current retails are when the product comes off the truck minus how much you pay for the product. Some retailers include any value-added taxes, tariffs, transportation costs, and duties in the cost of goods, since they are a part of what you pay for the product. Some retailers will have freight as a line item on their Profit & Loss Statement. Most international retailers include all costs to get a product to their back door in their cost of goods.
Front Door Margin. Subtract from the Back Door Margin the margin impact of sales due to markdowns. This includes any way that you mark down products: Employee discounts, sale discounts, contractor discounts, liquidation or inventory reduction discounts.
Final Gross Margin. Subtract freight, if you have not already subtracted this, and shrinkage from the Front Door Margin.