Saturday, May 7, 2011

Break Ties When There’s Limited Selection

A recent St. Louis Post-Dispatch article discusses the success of stores that have a business model based on limiting the selection of products available to shoppers. Because the store footprint is smaller and inventory management is easier, retailers who offer a limited selection can keep prices down. The Post-Dispatch article uses an Aldi grocery store as an example. Each store carries about 1,400 SKUs, compared to about 30,000 in a typical supermarket.
     A difficulty with having a limited selection is that shoppers are called upon to make tradeoffs. This can lead to them getting frozen into indecision. Consumers in Western countries resist being confined in their choices.
     Here are some ways to head off and unfreeze the ties:
  • Diversify what you offer within the limited selection. Aldi carries a health-oriented line called “Fit & Active” and a gourmet “Grandessa Signature” line. Just the presence of this diversity gives the shopper a feeling of more control.
  • Consumer researchers talk about helping customers develop a consumption vocabulary so the customers can better describe to the salesperson what they're looking for. The vocabulary allows the shopper to appreciate the differences among products. To someone without the words, it all seems the same.
  • Add a gift to accompany one of the alternatives. Researchers at University of Chicago and Columbia University find that with financial investment decisions, it even works to offer a small gift with both of two alternatives because this moves the decision toward the riskier choice, breaking the tie. The researchers call this the “mere token effect.”
  • Offer a clearly inferior alternative. A customer comes into an electronics store to buy a printer. The customer narrows the choices to two, but can’t decide and finally says she wants to look at other stores. The salesperson replies, “May I show you one more model that I think would help you decide? I hate for you to need to go shopping somewhere else.” The salesperson presents a model from a manufacturer that does a lot of advertising, but has recently not received high ratings for their printers. If asked, store staff don’t give the model high recommendations. Still, they carry the model because people ask for it based on familiarity with the advertising. Researchers at University of Toronto report that the introduction of an inferior alternative in this way often dislodges a tie and results in a purchase decision.
Click below for more:
Give a Vocabulary for Richer Shopping
Dislodge Indecision with New Choice

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