Sunday, February 28, 2010

Be Distinctive in Multiple Ways

Questions and suggestions from chapter 5 of Making Money Is Not Illegal, Immoral or Fattening:
     “What specifically do you do in your business that’s going to boost your success and maximize the chances your business will still be operating a few years from now? You’ve got to be absolutely world-class at something. Otherwise, some competitor will come in to rip market share away from you. Before you know it, your business is gone from the face of the earth.
     “Think of it in terms of what’s called an elevator speech. Let’s say that as you’re waiting for an elevator, the person you’re standing with asks, ‘Why should I shop at your store?’ And then the elevator doors open, you and the other person get in, and you’ve got about thirty seconds, while the elevator is moving, to answer the question. What do you say? Keep it focused because you don’t have much time.
     “Okay, now I’ll give you more time than thirty seconds, but in exchange, I’ll make the question a little more complicated: What are the top ten reasons for somebody to shop at your store? See, you really need to have multiple differentiators. The more competition that comes into your market area and tougher the competition gets, the better it is to have multiple differentiators.
     “You must be the biggest, the least expensive, the most distinctive, or the best at customer service. Being the biggest deals with ranging or assortment. When you aim to be the least expensive, it is all about price. Do you want to be the most distinctive? That means having a niche, stocking items or product lines that the competition does not carry, at least as completely as your store carries it. Or do you want to be the very best at customer service?”

Saturday, February 27, 2010

Sell Impulse Items to Serve

If you’re like most retailers, you identify certain items as suited for impulse purchases. You price these items to yield especially high profit margins, and you merchandise the items in places like the cash/wrap. One rationale is that the customer is ready to pay, so open to adding on some extra purchases. And the underlying tone among certain retailers is that we’re tricking the person into buying more by catching them off-guard.
     But selling what we call “impulse purchase” items depends less on tricking the customer than we might have thought. Research indicates that most shoppers make plans to make unplanned purchases. The University of Pittsburgh and Baylor University study was conducted at several Texas grocery stores. Before starting their shopping, participants were asked to estimate how much they planned to spend. For more than 75% of the shoppers, the amount they thought they’d spend altogether was more than the amount they estimated to be the cost of items they planned to buy. These shoppers had prepared themselves to come across both needs they’d forgotten to include on their shopping list and items they wouldn’t realize they wanted until the items were in front of them or in their hands. Some of the study participants even explicitly said they intended to make impulse purchases.
     Then the researchers found even more evidence that shoppers carefully plan to do the unplanned: It turned out that the shoppers were very accurate in predicting how much they’d spend altogether. The average overall difference between predicted spending and actual spending was only 47¢.
     Most of your customers intend to spend a certain amount of money on impulse items. Accommodate them by stocking the right sorts of items in the right places and offering the items in ways that carry an impression of service, not trickery.

Friday, February 26, 2010

Keep It Tempting to Be Good

We all want to be good. Well, most of us do. At least for most of the time. Okay, maybe it’s not so much that we want to be good as that we want to view ourselves as intending to be good. In any case, it can be so very tough.
     Make it easier for your customers to pull it off. Tempt your customers into being good, and their gratitude could improve your profitability. Both the challenge to doing this and a straightforward way to meet the challenge were highlighted by researchers at Washington State University and University of Texas-Austin The researchers noticed how consumers who intended to buy animal friendly cosmetics, sustainable wood furniture, and fair trade clothing very often failed to ask about those issues at the point of purchase. The consumers would use the information to make their selections if the salesperson told it to them, but otherwise seemed to prefer to stay unaware of it. To tempt your customers into being good, tell them at the point of purchase about the ethical aspects of the products you sell.
     And tell them how your products can protect the health of their family members. A Wall Street Journal article earlier this week noted how refrigerator manufacturers are designing their products to avoid health risks that range from a little bit of mold to a whole bunch of E. coli. It turns out that people don’t clean out their refrigerators often enough. Remedies include General Electric amping up the ability to spot the crud in the appliance with ten lighting sources instead of the usual three and Whirlpool microscopically etching the shelves so liquid spills are contained.
     But if you’re selling those appliances, it is up to you to point out how it is now easier to be good.

Thursday, February 25, 2010

Emphasize Pride or Contentment in Customers

To maximize your opportunities for retailing profitability, keep current on the unending stream of consumer research findings. That’s why I encourage you to regularly check this RIMtailing blog. Even a few of the tactics in my newest book—Retailer’s Edge, due to be published next month—already could benefit from fine-tuning based on the latest consumer psychology research.
     One example is the tactic “Use advertising, signage, merchandising, and personal selling to develop positive attitudes in the shopper.” The overall research finding has been that happy shoppers are more likely to buy your products and services. One big reason for this is that shoppers who are feeling positive—for whatever reasons—generalize the positive tone to the products and services they’re considering, so they see what you’re selling as being valuable. They’re also willing to pay more for your products and services because part of the value is now the positive tone associated with your store.
     Researchers at Arizona State University and University of Minnesota call this the “rose-colored glasses effect,” and point out that research has usually assumed it applies equally to all sorts of products and services offered by the retailer. But their findings—due to be published next August in Journal of Consumer Research—say that the lenses in those glasses come in at least two different hues:
  • When the shopper has been made to feel proud and ambitious, they’ve a greater interest in products they can show off to others, but their interest in functional products—such as appliances unlikely to be seen by friends or family—doesn’t increase nearly as much.
  • When the shopper’s positive feelings consist of contentment and satisfaction with the ways things are now, their interest in functional products grows much more than does their interest in items with social esteem.

Wednesday, February 24, 2010

Help Product Novices & Experts Learn

People who know lots about a product category or know only a little about it usually ask fewer questions than shoppers who know a moderate amount. People with little knowledge say they couldn't think of questions to ask. Those with lots of knowledge believe they already know all they need to know and/or are afraid of looking to anybody who is with them as less than experts.
     Research at Stanford University suggests that when the salesperson expresses a bit of uncertainty in discussing the products, this draws out both the novice and the expert. Beyond this, though, there are important differences in what the two types of shoppers should be learning:
  • Studies at University of New South Wales suggest that salespeople overestimate the ability of novices to choose the best product to fit intended use. So ask the customer, “How do you plan to use the product?” and then follow up a few times with, “And how else do you plan to use it?” If the customer responds with “What are the different ways in which it can be used?,” describe two or three common usage situations, but bring it back to “How do you plan to use it?”
  • According to Duke University research, a challenge with those considering themselves to be experts is that they too often don’t update their knowledge about the product category. The researchers recommend that salespeople create an incentive for discovering what’s new. Since an incentive for many experts is showing off their knowledge, the salesperson might say to the expert something like, “It is clear that you know a lot about this type of product. May I share with you some of the latest versions we have and ask you what benefits you see that these new products hold for our customers?”

Tuesday, February 23, 2010

Set Your Own Prices

Since margin management is always on the mind of Art Freedman, here’s another of his messages from our Making Money Is Not Illegal, Immoral or Fattening:
     “I don’t fully understand why there are retailers who do not want to take the margin management steps to make more money. There are retailers who won’t do anything more than double the supplier’s cost of the item to set the price at retail. Are you among them? If so, I would tell you cost is only a guide, that’s all. What is most important to you is recognizing what value the customer sees in the item, the service that goes along with the item, the convenience you offer to the customer, and all the rest. What you pay the supplier for the item goes into it. But do not be afraid to mark something up to more than double the cost if that is what customers will pay because that’s the value they set on having the item.
     “I have retailers telling me it is not their job to set prices, it’s the supplier’s job. I have retailers who say they don’t want to take on margin management because they don’t have the time or the right people to do it for them. I say, do not allow somebody else to impact your success to that degree. I say to those retailers, ‘Whose job is it to prevent you from going out of business?’ I know the government might subsidize the airlines, bail out the banks, and keep the auto industry alive. But do you think that if you or I have big financial problems in our businesses, the government is going to rescue us?”

Monday, February 22, 2010

Use Sound Effects to Sell

This week’s U.S. Time magazine includes a feature article about marketers and retailers using the right sound effects. The article is based on research findings from brand marketing consultant Martin Lindstrom. Although the major theme of the article is advertising, there’s also mention of a department store in Japan—named 0101—customizing different patterns of sounds for sportswear, perfume, and formal-wear areas.
     Customers are accustomed to hearing the sound of music while shopping. Substituting sound effects like children at play, birdsongs, lapping water, and a sound Lindstrom says is most powerful of all—babies’ giggles—can arouse emotions in shoppers, although not always pleasant ones.
     Here are tips on using sound effects to create shopping environments that sell products and services:
  • Have sounds fit the other sensations in that store’s department. Lindstrom presents evidence regarding sounds—as he’s previously done regarding fragrances—that when the shopper’s senses are delivering incongruent messages, it gets bothersome. Think about the personality you want to project not just for the product category, but also for the whole store and for the business itself. Then select sounds which fit.
  • Keep sounds gentle. Loud cutting-edge music tells consumers you are trendy. Fast-paced music speeds up the shopper. But with sound effects, the loud and the fast can chase off even people who crave excitement. In addition, if you’re aiming to create different sound atmospheres in different parts of your store, you’ll want to keep the sound effects soft enough to avoid overlaps.
  • Use variety. Unless your target audience consists exclusively of ice cream truck drivers, assume that your shoppers will want to avoid repeated sound tracks. They’ll also want intervals in which all they hear are the sounds of shopping. In fact, excited shoppers can produce the best selling sound effects of all.

Sunday, February 21, 2010

Manage Staff Performance with Respect

This coming April 15-16, I’ll present “Performance Management” under sponsorship of University of Nevada-Reno. I encourage you to participate. For information, click here.
     One skill we build in performance management training is showing respect, concern, and empathy toward each employee when conducting the performance appraisal interview. That keeps staff motivated to build the profitability of your business.
     Here are a few of the tips to keep in mind:
  • Privacy. The ongoing feedback and coaching you give to staff can be done on the store floor. You wouldn’t do it in front of customers. Still, there are circumstances where it’s helpful to have other employees overhear the coaching of a single employee. Better yet is coaching a group of staff at one time. But when it comes to the performance appraisal interview, meet in a private setting with expectations of confidentiality. This doesn’t mean meeting in a closed-off location, though. Because you might be dealing with strong emotions, be sure both you and the employee have clear access to an exit.
  • Calm, concerned demeanor. Use a normal voice volume, pitch, and pace. Again, because there might be strong emotions, you’ll want to listen to yourself as you talk and stay aware of your posture and gestures. It can be difficult to tell an employee about areas in which they need to make improvements in order to meet expected standards.
  • Accurate accounts of cause and effect. Give examples of situations in which you saw the employee perform. Say what you saw and heard the employee do or fail to do. It is important to then explain what the consequences were for the success of your store. New staff often don’t know this. Long-term staff too often forget it. And the rest of your staff will benefit from being reminded.

Saturday, February 20, 2010

Advertise with Eye on Competition

Consumer psychology research findings from long ago can still be filled with hints for you in today’s competitive retailing environment. An example is a study reported in 1928 by psychologist E. J. Asher. He found that as a retailer spends more money on advertising, consumers became more familiar with the store—but only for certain types of businesses. The correlation was there for drug stores, dress shops, real estate companies, and car dealerships. But when shoe stores, restaurants, jewelry stores, and music stores spent more on advertising, there was no strong increase in consumer familiarity with the business.
     Why? Further inquiry showed that it had to do with the amount of competition for different types of stores. With the types of stores where advertising did improve familiarity, there were a number of competitors. Lots of drug stores, for instance.
     The chief reminder for you from this study conducted more than 80 years ago: If you have limited competition and consumers are already quite familiar with your store, it could easily be a waste of money to advertise with the objective of increasing store familiarity.
     There are some other lessons as well:
  • Choose objectives for advertising that you’re confident will improve your profitability. This study used as a criterion of success an improved familiarity with the advertiser’s business. Will increased familiarity improve your profitability? If not, evaluate other advertising objectives.
  • When developing tactics, eyeball what is likely to be happening in your particular target markets. The Asher study conducted in the 1920’s used as participants a total of 112 Austin, Texas high school seniors. For these kids, there was no real competition among shoe stores. But members of your target markets in 2010 in the localities where you do your selling may have a different view of the competition.

Friday, February 19, 2010

Welcome the Plus Sizes

Debenhams—the UK department store chain that set up a gift registry for people getting divorces—is again on the cutting edge. They’ve announced they’ll be the first British department store to showcase fashions using UK size 16 mannequins. Another major retailer is taking account of their customers wanting more! According to an article in today’s UK Telegraph, nearly all clothing shops in Britain use size 8 or 10 mannequins.
     Retailers like Lane Bryant and Rochester Big and Tall have homed in on the larger market for decades, and many women’s fashion departments have special sections for plus sizes. But the Debenhams move is mainstream. Recognizing that about 20% of the women shoppers at Debenhams are looking for size 16 and that the majority of women in the UK now wear either size 14 or 16, the store’s new additions are showing what the clothes look like on typical customers.
     Acknowledgement of the growing consumer market applies beyond clothing. According to a February 18 Sacramento Bee article, car companies are positioning pedals farther apart for bigger and wider feet. Toilet seats are getting bigger, and a few airlines—like United and JetBlue—allow upgrades—at a price—for more elbow and leg room.
     I realize that profit awaits stores that help their customers achieve physical comfort when using purchases. But the measures to achieve that are not always the same as measures taken to make customers feel emotionally comfortable about shopping for larger sizes. Overall, consumer psychology findings suggest that women enjoy seeing clothing modeled by women who are somewhat thinner, but not dramatically thinner, than they themselves are.
     Debenhams realizes that what they’re doing is a test. Next to the size 16 mannequins are small signs reading, “I’m a size 16. Do you want to see more of me?”

Thursday, February 18, 2010

Look At Average Single Item Sale

Here’s some of what retailer Art Freedman says in Making Money Is Not Illegal, Immoral or Fattening about pricing:
     “I’ll use my store’s experience as an example. Apply what I’m saying to your store’s situation. The average single item sale in my store is under $5.00. This is a very important number to understand because that’s where you can focus energies to be able to make a little bit more money in your business.
     “As the retail price of an item tracks down, say down below $5.00 in my store, it is far more important to be in stock than what the price is, within reason. As the retail price tracks up, pricing becomes more of an issue to the customer. For me, $5.00 is an important price threshold. As the retail price tracks down below $5.00, I am far more concerned about my margins than I am about gross profit dollars.
     “Now, you don’t need to be a CPA to realize you can not take margin to the bank. You take profit dollars if you sell the item. But over time, I sell hundreds of thousands of those lower-priced items. About 70% of the items I order for my store sell for retail at less than $10. We start to look at that and we formulate strategies based on where in our assortment of products we can go to make the money that we need in order to meet our final gross margin objective.
     “All this leads me to a question for you to answer: In your assortment of products that you carry in your business, where are your gross profit dollars coming from? Notice that my question is not about where your sales come from. I want you to think about where your gross profit dollars come from.”

Wednesday, February 17, 2010

Short & Wide for Reusable Containers

With some trendy retailing practices, you might choose to wait and see rather than jump in. Here’s an example: Asda in the UK is allowing customers in some of their stores to pay less if they bring in their own container to purchase fabric softener. Asda says that they’re thinking of expanding the option to more stores and considering how other liquid products might be sold in a similar way.
     Bring-your-own-container has been used for supermarket sales of water for years. Moving on to fabric softener and then maybe to shampoo, fruit juice, and olive oil is a natural extension. And filling up the jug you bring with you fits well with the growing bring-your-own-shopping-bags spirit.
     But there are important differences between having customers bring in their own shopping bags and having them bring in and refill their own containers. Customers won’t spend more than a few seconds tidying up shopping bags before reuse, but if it’s a container that contained fabric softener, they’ll factor in the time to clean it out. On the store side, setting up the dispensers is an expense, and you’ll want to account for cleaning up spillage from clumsy customers, plastic bottles being used once too often, and kids trying out the dispensers.
     If and when you choose to participate, consider selling the reusable containers.
  • Decorate the container with the name of your store in large letters so that the container becomes a token testimonial to customer advocacy as others watch the container being filled.
  • Make the container short and wide. Research at University of Michigan finds that when customers hold a container—as they will when refilling it—rather than just look at it, they will perceive the container as having more when it is that shape rather than tall and narrow.

Tuesday, February 16, 2010

Satisfy Each Customer’s Self-Concept

When a shopper considers making a purchase that is more than habitual, they weigh the amount of risk involved. All shoppers seek some risk, and all shoppers have limits on the types and amounts of risk they’ll accept. Consumer psychologists have identified different sorts of risks, such as financial (“Will I get my money’s worth?”) and physical (“How safe is this product to use?”).
     One other type is self-concept risk. This is the chance taken by the shopper that the purchase of the product or service will threaten the image that shopper wants to maintain of themselves. Is purchase of a Casio watch compatible with the self-image of luxury living? If the flag-waving guy from Nebraska buys a Hummer automobile in this era of petroleum politics, can he still consider himself to be patriotic?
     Shoppers are fairly skilled at manipulating in their minds the self-concept meanings of items they want to buy. For instance, researchers at University of Innsbruck in Austria, University of Wisconsin-Madison, and York University in Toronto found that in fact, owners of Hummers viewed themselves as defending the American ideals of the rugged individual exploring the boundless frontier.
     Still, you can help reduce self-concept risk and increase sales by showing how purchase of the item and shopping at your store is consistent with the shopper’s values. Different cultures have different values, so assess which patterns fit your target markets. Once you’re aware of that, use the appropriate sets of values words in your advertising, signage, and personal selling. Researchers at University of Oregon, Culverhouse College of Commerce, and California State University-Long Beach identify nine sets. Here are the names I use, based on their research findings:

  • Fun
  • Excitement
  • Security
  • Accomplishment
  • Self-fulfillment
  • Self-respect
  • Respect from others
  • Belonging
  • Warm relationships

Monday, February 15, 2010

Go Upscale for the Pet Market

Retailing sector observers are predicting that the pet market will prosper. What can you do to profit from this? Almost any retailer can add at least a limited line for pets. Even IKEA and Lands’ End did it.
     When you deal in pet items, you’ll probably notice the trend toward the upscale. It’s not just that suppliers of small pet items include high-fashion brands like Gucci, but also that consumers are willing to pay for merchandise and services they believe to be healthier for their animal companions. According to a February 5 article in the Boston Globe, the natural pet food market has more than doubled over the past four years. K9 Water Company has been around for a while supplying vitamin-enriched drinking water for dogs. WellPet and Nature’s Variety are up-and-coming.
     It’s in our human nature to nurture. So as the percentage of families with children decreases, the drive to own a pet increases. Some of the decrease comes from people staying single longer, some comes from empty nesters living longer, and some from other sources. Researchers at American Demographic report that 92% of owners of dogs and cats consider them to be members of the family. If as a retailer, it won’t work for you to allow the pet to join the shoppers in your store, feature pictures of pets with their people where you’re selling the pet items.
     But be aware that there are limits to how cute your regular customers will let you get. And some are likely to consider your store to be foolish for catering at all to health-oriented pet items. One sarcastic comment posted in response to the Boston Globe article reads, “I feed my goldfish organic, wild caught (not farmed) fish food. I am hoping they live 7 months instead of 6.”

Sunday, February 14, 2010

Selectively Keep Information From Customers

Valentine’s Day today is a good time to remind ourselves it’s sometimes best to withhold information in a relationship. That applies not just between lovers, but also between sellers and customers. As many people on first dates could later testify, when the relationship is between potential lovers who are seller and customer at the start, the relationship can be sabotaged by letting the information gush. Don’t flood out customers with what they’d prefer not to know. Share information selectively.
     If the intent is to mislead or betray, that’s sinful. But in fact, presenting information selectively usually assists the consumer. Researchers at University of Twente (The Netherlands), University of Indiana, and University of Cincinnati set out to confuse study participants by adding to the sales pitch technical jargon, unfamiliar words, illogical product groupings, and dollar prices restated as cents. The result was that the participants chose items more quickly and with more certainty than would be in their best interests.
     Adding extra information also can build brand loyalty for trivial reasons. Researchers at Harvard Business School and Hong Kong University of Science and Technology asked consumers to select a package of rewritable compact disks. But one group of the consumers were asked before choosing to also decide how many different colors of CD cases they wanted in their package. This preliminary decision increased the probability of repurchase of the same brand from 47% to 74%.
     Keeping prices secret until the last is a classic sales technique. It’s even being selectively done now by online vendors like Amazon.com. “To see the price, add this item to your cart.” Is the primary intent to help the consumer? Well, I guess you could argue that the technique protected Valentine’s Day shoppers from the equivalent of presenting a gift with the price tag still attached.

Saturday, February 13, 2010

Check Your Dashboard Indicators

Retailer Art Freedman uses the term “Dashboard Indicators” to refer to what tells you the health of your business. Here’s some of what he has to say in Making Money Is Not Illegal, Immoral or Fattening:
     “What are your daily Dashboard Indicators? What numbers do you want to check on for every day you do business? Store sales, I hope. Overall store margins. Average transaction and voids by cashier. Maybe the weather, since when you put it together with sales figures, you can get a better idea how to order inventory in the future. For the same sort of reason, knowing what advertising you had out on the street can be helpful.
     “What do you want to check on every single week? How about payroll, sales by department, margins by department? How about your monthly Dashboard Indicators? Maybe inventory turnover, markdowns, and open to buy versus budget.
     “I call them Dashboard Indicators because, for me, your store is a vehicle, just like your car. It can take you wherever you want to go. But think about what you need to make that car do its job. Well, you need the key to start it up. Without the key, it’s not going anywhere. For the store, it’s money. If you don’t have any money, you’re not going anywhere. Then you need fuel, and that’s why you have a gas gauge on your car’s dashboard. The fuel for your business is your margins. If your margins start to slip, the store that is your vehicle is not going to go very far. With each mile, it dies slowly. Or maybe not so slowly. In your car, you have other critical dashboard indicators. You also need to be aware of these critical dashboard indicators in your business, like payroll, open to buy, etc.”

Friday, February 12, 2010

Notice Customers’ Cultural Aspirations

Consumer psychologists use the term “aspirational group” to refer to a cultural group that a consumer wants to belong to, but believes they do not belong to yet. Newly minted MBAs may aspire to become part of a business professionals’ culture. Hispanic youth attending a U.S. university might aspire to view themselves as mainstream American college kids.
     As a retailer, you’ve an opportunity to sell to these aspiring consumers the products to help them be recognized and recognize themselves as fitting in with their aspirational groups. Apparel for Hispanic youth constitutes one example. Researchers at Auburn University, University of Delaware, and Ohio State University used as subjects Hispanic students at a Midwestern university.
     The researchers looked at the ways in which presenting reminders of Hispanic and of American non-Hispanic culture influenced the choices the students later made in brands of clothing. Would these reminders make them more likely to choose brands associated with the cultural identity of the reminder?
     The answer is that the effect of the reminders was greatest on the students who saw themselves as navigating between their Hispanic heritage and their American non-Hispanic circumstances. One way to interpret these findings is that the bicultural students aspired to continue to be accepted as part of the Hispanic culture and also to be fully accepted as part of a mainstream American culture.
     Research at Baruch College and University of Wisconsin-Milwaukee looked at this issue from a different angle: Their findings suggest that Hispanic consumers who speak both English and Spanish feel more assertive when they are speaking Spanish. An assertive willingness to take educated risks is the sort of thing that can lead to larger purchases and so more profitability for you.
     With bicultural/bilingual customers, communicate in the tongue they prefer, but also speak their language of cultural aspirations.

Thursday, February 11, 2010

Avoid “Not” in Influencing Shoppers

The year the movie “Mary Poppins” came out, I was working toward my doctorate in psychology at Stanford University. This happened so long ago that the word “junkie” was commonly used to refer to somebody addicted to narcotics and probably selling narcotics. I tell you that so you can make sense of adhesive signs I started seeing around the Stanford campus reading “Mary Poppins is a junkie.” Maybe some mischievous Stanford students were taken with Mary’s squeaky clean image in the movie.
     Well, then a juicy rumor began circulating that these signs were popping up all over the nation and Walt Disney himself was so outraged about it, he was hiring detectives to locate the miscreants for punishment. A phony rumor, I’d think, but in any case, I did start seeing a new set of signs around campus. Each one read, “Mary Poppins is NOT a junkie.”
     Let’s move it to the present. A tag line for DiGiorno frozen pizza reads “It’s not delivery. It’s DiGiorno.” Just as the redone signs at Stanford make us think Mary Poppins might be a drug dealer after all, the DiGiorno tag line makes us associate the frozen pizza with the quality of pizza delivered to our home. In fact, one of their current ads reads, “If it looks like delivery, smells like delivery, and tastes like delivery, it’s DiGiorno.”
     The tag line might be a good use of the word “not” in efforts to influence shoppers. However, consider it an exception. Using “not” is risky. Researchers at University of Colorado-Boulder, INSEAD, and Northwestern University find that people tend to forget the “not” and remember the rest. Consumers, especially seniors, who were in a hurry when told that a product had “no added sugar” often remembered the product later as having added sugar.

Wednesday, February 10, 2010

Spring Your Colors

Spend a little time considering what colors might liven up your store and advertising as warmer weather appears. Then consider springing for some money to use those colors to influence buying behavior. Hotter colors, like shades of red, speed up the shopper, while cooler colors, like shades of blue, give an impression of thoroughness.
     Organizations including Pantone Color Institute, Color Association of America, and Color Marketing Group predict what colors are becoming more popular. According to the forecasters, a big winner across product categories for North America and Europe is turquoise. One explanation is that consumers are looking for escape from winter cold and financial hardships. Turquoise reminds us of ocean resorts.
        Your choice of colors for everything from your merchandise and packaging to your store signage is a big component in communicating to the customer how contemporary you are. Looking contemporary is important in stores that sell women’s fashions, for instance. It’s less important, and can even be a negative, in stores and departments aiming for a nostalgia appeal, such as those selling traditional home furnishings.
     Have the spring colors augment—not overwhelm—the colors associated year-round with your business. Some colors that we’d think of as quite uninteresting in general can project a powerful message in specific instances. Consider brown. In his 1975 book, Dress for Success, John T. Molloy threw the color brown into the pile of hues that communicate boring, uninspired, and uncreative. Brown stayed there for about twenty years. Even black—labeled as powerful with a touch of menace—was winning out over brown. But then came Starbucks and the rest of the coffee culture. Brown was in. In their ads, United Parcel Service asked loud and proud “What can brown do for you?”

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

Tuesday, February 9, 2010

Soften Rhetoricals Around Cautious Shoppers

Stories, humor, and rhetorical questions are among rhetorical techniques used in advertisements and personal selling. The aim is to change and/or strengthen customer attitudes. But researchers at Ohio State University and University of Minnesota find that some of these rhetorical techniques make a sale less likely if the customer has doubts.
     Rhetorical questions are yes/no questions to which the answer is felt to be so obvious that no reply is necessary. Examples include “Wouldn't it be fun to have this couch in your living room by tonight?,” and “Do you want to miss this wonderful opportunity?” The researchers say that if a shopper is concerned about the quality of the store, the salesperson, the product, or the format of the ad that aroused their interest, you should soften any rhetorical questions. One way to soften is to use the questions infrequently. Research findings suggest using rhetorical questions no more than three times in your ad or sales presentation around cautious consumers.
     Another way to soften the rhetorical is to introduce it by asking the customer’s permission and presenting the rhetorical as a statement instead of a question. You could say something like, “May I tell you a question I’ve considered when making this kind of purchase decision?” The customer is much more likely to say yes than no, and by them giving you permission to go on, the psychological barriers to persuasion are relaxed.
     With other rhetorical techniques like stories, you could ask something like, “To illustrate why I think this item is the right one for you, may I tell you briefly about what really happened recently to one of my customers?” With rhetorical techniques like humor, though, asking in advance (“May I say something funny to you now?”) ruins the impact. So with cautious shoppers, cut the comedy.

Monday, February 8, 2010

Carry Distinctive Merchandise

To emphasize the value of carrying distinctive merchandise, Art Freedman tells a version of this story in our book, Making Money Is Not Illegal, Immoral or Fattening:
     “There was a retailer in Colorado named Mike losing sleep at night because there’s a new competitor coming—Lowe’s. I know that Mike is one great retailer. As we’re driving the short distance to visit the Lowe’s store, I’m thinking that Mike’s store is going to take a hit, but Lowe’s isn’t going to put him out of business. I’m thinking that Mike is too good a retailer for that to happen, I’m thinking that I want to be ready to build Mike’s confidence when we visit Lowe’s.
     “As we walk in, I see that the first 96 feet of the store is nuts, bolts, and other fasteners. The entire floor layout of a Lowe’s store is done for a reason. They’ve thought it through, and the store they open today is better than the store they opened yesterday because they evaluate those openings closely.
     “We walk right up into the fastener area. While we’re standing there, a gentleman from Lowe’s comes around the corner. I see from his name tag that he’s David. He greets us with a great smile and asks what’s going on. Then he notices that we have on Ace shirts. He asks, ‘Are you guys from the Ace store right down the block?’ I say we are and introduce Mike as the store owner.
     “David, with that great smile, reaches out to shake hands with Mike and says, ‘I love your store.’ Then David looks over and says, ‘You wouldn’t believe all the stuff he’s got that we don’t carry.’”
     If you’ve read the book, you know that Art has lots of tales from his on-site retail consulting.

Sunday, February 7, 2010

Pare Down Assortments Selectively

Did you reduce your total inventory last year? That was an overarching trend for retailers. This year, are you thinking about streamlining your brand assortments? Considering that what is done by Wal-Mart affects much retailing practice, reducing brand assortments might be an overarching theme for your coming year.
     You see, the news is that Wal-Mart is eliminating Glad and Hefty food storage bags from the shelves, leaving only Ziploc and Wal-Mart’s private label brand, Great Value. Advertising Age reports this as being part of a wave of brand consolidations at Wal-Mart, Walgreens, and CVS.
     Cutting the number of SKUs can make life simpler for your retail operations. But to turn simplicity into profitability, pare down selectively.
  • Start out by selecting categories where there isn’t substantial product differentiation. Food storage bags would qualify here.
  • Selectively merchandise desired brands that other retailers have trimmed out. Starting in late 2009, the competing food storage bag brands poured big dollars into advertising, hoping to win the Wal-Mart beauty contest. So even though there might not be substantial product differentiation, the ad campaign probably created longings for Glad and Hefty. If you’d like to draw shoppers from Wal-Mart and not go head-to-head on Ziploc pricing, think about satisfying those Glad/Hefty longings.
  • If you’re a large retailer or a member of a purchasing cooperative, become more selective in your expectations of the producers of your private label lines. Manufacturers pruned out of shelf space under their own name will become more interested in negotiating with you to stay in your store under your name. Keep in mind that with house brand names, customers are most likely to maintain purchasing habits when product specifications don’t change abruptly. But few customers would complain about improvements in quality that could come from your selectivity in expectations.

Saturday, February 6, 2010

Start Customers Using Their Purchases Promptly

Profitability comes from repeat business, and repeat business is more likely when customers begin using what they bought and find the usage to be pleasant. Get customers to benefit from their purchases as soon as possible.
  • Encourage customers to select products with just the features they can comfortably use and the option of adding features later. Researchers at Georgetown University and University of Maryland-College Park found that consumers are tempted to buy products with unnecessary features, but tend to be happier with products that are simpler to use. It’s true that in encouraging customers to select products with fewer features, you’ll be reducing the size of the sale. However, remember that you’re aiming for repeat business. The customer who is happier with their purchase is more likely to return, and they’ll be impressed that you hadn’t tried to sell them more than they needed.
  • When choosing which brands and versions of a product category you will stock, give extra points for the ones which provide clear written instructions on how to get started with use. Researchers at University of South Carolina and University of Colorado-Boulder report that when purchasers find it difficult to learn to use a product, their evaluation of the product’s quality is lower. This would mean your customer feels disappointed in what you sold them, and that feeling gets in way of repeat business.
  • Give customers realistic expectations about learning to use the product. The University of South Carolina/University of Colorado researchers also reported that when the customer expected the product to be challenging to learn and still bought it, the lower evaluation of product quality was much less likely. “How to get started” instructions on product packaging are best, since the shopper can look at those before deciding whether to make the purchase.

Friday, February 5, 2010

Assess the Costs of Customer Satisfaction

Are you wasting money building customer satisfaction? Research at University of Mannheim and University of Texas-Austin finds that compared to repeatedly satisfied customers, those who are repeatedly very highly satisfied will be willing to pay higher prices. They’ll shop at your store even when they realize they’re spending more for the same products than they have in the past.
     However, the researchers find that this is not true when comparing the customer who is barely satisfied with the customer who is adequately satisfied.
     Moving a customer from being dissatisfied to being repeatedly barely satisfied will lead to customer willingness to pay you more than loss leader prices. But once you get the customer to the barely satisfied level, you’d have to push hard to get the willingness climbing further. It stays level until you get to the range of very high satisfaction. And an assurance of payoff comes only when that high satisfaction comes from repeated experiences at your store.
     There are other advantages to customer satisfaction aside from customer willingness to pay higher prices, and some of those come even with a one-time experience. Some consumer behavior studies indicate that for routine purchases that don't cost a whole bunch, a customer who leaves your store at least adequately satisfied becomes more willing to return in the future. Research at University of Western Ontario and University of Alberta finds that much of what we think of as customer loyalty is really customer habit. Customers tend to come back as long as they’re not dissatisfied.
     In addition, many retailers take pride in satisfying their customers. Without the drive, running the business would be less fun for them. The payoff here comes from emotional satisfaction rather than sales revenues.
     But if you’re thinking that spending significant amounts of your money to build customer satisfaction to the point where customers will accept prices higher than that at the competition, you might be wasting your resources. The evidence is that this strategy will work only if you hold out for consistently very high levels of satisfaction.

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

Thursday, February 4, 2010

Brag About Your Retailing Humility

Advertise and publicize how you consider your retail business to be excellent, but not perfect. Say you’re always looking for ways to get even better. If you fail to adequately demonstrate your humility like this, you risk schadenfreude disrupting store profits in the short term and the dreaded doppelganger store brand image doing damage in the longer term.
     Schadenfreude means delighting in the misery of others. That’s one thing happening now to Toyota Motors—and to Toyota dealers by association—in the face of the massive automobile recall. Ford and GM are offering $1,000 bonuses to customers who want to trade in their Toyotas. An MSNBC article about the offer is titled “As Toyota stumbles, schadenfreude lurks: U.S. automakers, long dogged by reliability issues, stand to gain from recall.”
     Psychologists at University of Kentucky say schadenfreude comes from envy. Psychologists at Flinders University in Adelaide, Australia say schadenfreude is rooted in resentment. The sort of resentment that can follow Toyota claiming to be the unsurpassable model of quality and then appearing to fail to walk the talk.
     Schadenfreude has even made it into a “The Simpsons” episode where Ned’s business is failing. Homer is overjoyed, and when Lisa defines schadenfreude, Homer replies, “Those Germans have a word for everything.”
     That brings us to doppelganger—from the German and defined as a ghostly counterpart of a living entity. Researchers at University of Wisconsin-Madison document how Starbucks is suffering from a “doppelganger brand image” in which the company’s branding of the shops as an authentic coffee experience has come around to haunt Starbucks. Many customers after being convinced of the importance of such an experience decided Starbucks was bragging too much about their ability to be authentic. Those customers gave up on Starbucks and aimed for other shops which showed more humility.

Wednesday, February 3, 2010

Expect Staff to Appreciate Checking Up

To achieve maximum profitability, store staff at every level need to be checking up on each other. Staff members should appreciate this as long as it is done in a supportive way.
How does this apply to the systems in your business for handling money? Here’s what Art Freedman, my co-author of Making Money Is Not Illegal, Immoral or Fattening, advises:
     “You say, ‘Martha’s been counting that money for a thousand years.’ Just don’t let her also reconcile the checkbook. So you say, ‘Okay, I’ll start reconciling the checkbook, but how am I going to tell Martha?’ That’s simple. Honest people respect checks and balances. You go to Martha, and you say, ‘Hey, you know what? I’m going to start reconciling the checkbook. I want to get more involved in where this money is going.’ An honest Martha will respond, ‘Thank you. I have enough to do anyway.’
     “If Martha replies, ‘What’s the matter. Don’t you trust me?,’ I’ll be thinking to myself, ‘No, not any more.’ That reply is a red flag you can run up a tall pole. I would start auditing every single piece of paper Martha did because I am clearly thinking Martha may have been stealing from me for a long time, and I just don’t know how she’s doing it.
     “If you have ten people working for you, two people are never going to steal from you, no matter what. You could set the money right in front of them, and they’d take the money and say, ‘Here, boss, you dropped this money.’ Two of them are going to try to steal from you no matter what you do. It doesn’t matter. And the behavior of the other six will be based on opportunity. So we need systems in place to reduce the opportunities.”

Tuesday, February 2, 2010

Help Customers Buy Unpleasant Necessities

Sometimes customers would just as soon wait. They know they really should go to the income tax preparer or purchase the refill of that medicine or buy the wallpaper to replace what’s peeling and so no longer appealing. But if the retailer tells them they’ll have to wait for a while, you might hear from those customers a mighty sigh of relief. At least briefly.
     Researchers from Boston College, University of Miami, and Duke University point out that when it comes to buying unpleasant necessities, a longer wait—if handled properly by the retailer—can actually end up making the customer feel better about the whole experience.
  • Offer the consumer options for when to complete the purchase. This gives a sense of control that can in itself ease stress. This works with advance scheduling, such as for dentist appointments. But it also can work when it comes to queuing up in the store. If the customer who is told, “I can check out your purchases over here,” responds with, “I can wait,” the store staff response should be an understanding nod rather than a puzzled or irritated look.
  • Graciously answer the same questions more than once. Some people deal with their ambivalence by seeking more information and developing a plan for making the purchase. However, if the questioning seems to become a never-ending excuse for not making the purchase, say, “You might want to think about it some more on your own and then get back to me.”
  • Be ready for delay to become sudden action. Some people shiver at the side of the pool and then suddenly grit their teeth, think a happy thought, and jump into the freezing water. When that happens, let your customer quickly get into the swim and get it over with.

Monday, February 1, 2010

Update Valentine’s Day Pricing Plans

Are any special Valentine’s Day items in place in your store, and do you know which of your regular products and services you’ll feature—and customize as necessary—to magically transform them into targeted missives of love? Great.
     But I wouldn’t be surprised if you’re still undecided how you’ll set prices on those items for the last week or so before Valentine’s Day. The difficulty comes about because of trend crosscurrents.
  • Cut the prices to build sales among those ambivalent about spending money on Valentine’s Day gifts: Researchers at University of Nevada-Las Vegas and University of Georgia-Athens documented a trend for couples in long-term relationships to come to resent the pressure to buy gifts. Some of the research participants were irritated even at the expectation they’d buy greeting cards. “Valentine’s Day is a great marketing scam by the greeting card people,” said one. Moreover, the research found evidence that retailers who hype Valentine’s Day purchases risk alienating some consumers in ways that would last well beyond February.
  • Raise prices the week before Valentine’s Day because price sensitivity is likely to decrease. Research findings from Stanford University, University of California-Berkeley, and University of Chicago suggest that when a gift is expected, the giver who waits until the last minute gets increasingly interested in avoiding pain. The result is that they’re willing to pay more for a gift and often more willing to upgrade to a fancier gift. The UNLV and University of Georgia researchers might agree this is true for younger lovers, even if not for those in long-term relationships.
  • Keep prices steady. This might be the best alternative, but monitor your sales and customer reactions so you can make last-minute adjustments this year or at least get some baseline information to help in next year’s pricing plans.