Lay Away Reservations with Layaway

A recent Wall Street Journal article reports Walmart stores are bringing back layaway. As evidence the selling technique is classic, the article provides a definition in the lead paragraph: “Layaway programs let consumers put aside store merchandise and make payments on it until the full price has been met.” At that point, the purchaser takes possession of the items.
     Walmart is not alone. Large retailers like Sears and Toys R Us and small retailers like the three Ritzy Ragz & Thingz stores in Northern California are among those laying away reservations about the technique.
     When considering whether to have a layaway program, keep your business fundamentals in mind. How will you hold onto the reserved items or otherwise have them available for pickup? Storage costs money. How will you handle the situations where a customer places an item on layaway and then doesn’t make the payments? Charge an upfront layaway fee that is forfeited or turned into a store credit if the customer doesn’t keep to the layaway agreement.
     From a shopper psychology perspective, here are some tips:

• Offer higher-ticket items to layaway shoppers. Research at University of Mannheim indicates that consumers are more willing to pay a premium price for a product they desire if the retailer obtains a commitment well in advance of the product’s availability to the consumer. The announcement in advance encourages a longer-term perspective, which in turn relaxes budget restrictions. In addition, when acquisition will occur at a somewhat distant time, the consumer correlates price more strongly with quality.
• Describe the benefits of the layaway fee separately from the benefits of the product. This is called partitioned pricing.
• Strengthen the relationship with the customer by providing brief outlets for frustration. Consumers say they like layaway because it allows them to avoid credit card debt. But merchants who let purchasers pay off an item over time, such as on layaway, depend on the person disciplining themselves. Researchers at Northwestern University and University of California-San Diego documented how shoppers who exert self-control will want to ventilate anger. When the shopkeeper acknowledges the shopper’s frustration, this can ease it. But keep it brief and end on a positive note. Research at University of Maryland and Yale University indicates that too much talking will lock into the shopper’s mind the anger they’re experiencing, and those negative memories make it less likely they’ll buy from you in the future.

Click below for more:
Commit Shoppers from a Distance for Expenses
Use Partitioned Pricing to Highlight Benefits
Ventilate Frustration When Promoting Self-Control