Friday, September 30, 2011

Play Up Your Potential

Shoppers at your store place more importance on your potential for helping them in the future than on what you’ve done for them in the past. Sure, both are important. Your record of accomplishments is evidence of what you can do from now on. Also, it makes good sense for a consumer to weight purchase decisions more heavily on prospects for the future.
     What might not make sense at first glance is the strength of this tendency in human decision making.
     An example is a study is which participants read either of two versions of a scouting report on a basketball player. The participants were to decide how much the player should be paid. One of the reports described the player as a veteran and gave his performance statistics for his last five years in the league. The other version described the player as a rookie and included the same performance statistics as in the report on the veteran. These statistics, however, were presented as predictions of how the rookie would perform during his first five seasons.
     Study participants who read the report on the veteran said, on average, he should be paid $4.26 million. Those who read the report with the predicted stats said he should be paid $5.25 million. That’s 23% more.
     When people are presented with a letter of recommendation, those who read about the job candidate’s high potential will be more impressed than those who read about the candidate’s equally high achievements.
     The lesson for retailers is to play up your potential. Say what you can do for the customer today and tomorrow. Use as evidence your past performance, but figure that the consumer is operating according to the mutual fund disclaimer: “Past performance is no guarantee of future results.”
     Why does the consumer believe this?
  • As time goes by, superb performance gets worse. The basketball player five years into his career is more likely to have peaked than is the rookie who is younger. With this same logic, the retailer who has performed at the top has nowhere to go but down from the peak.
  • Thinking about the future is more exciting than thinking about the past. The letter of recommendation talking about potential stimulates our interest because of the courage of the prediction. When the retailer makes promises for the future, that’s more interesting than the retailer who’s only bragging about past triumphs.
For your profitability: Sell Well: What Really Moves Your Shoppers

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Keep Your Promises
Create Your Future by Anticipating Resistance

Thursday, September 29, 2011

Clarify Expectations with Friendship Customers

Smaller retailers are more likely than large ones to have customers who think of themselves as friends of the store owner or staff. The customers form what researchers at University of Geneva called “close business attachments.” They develop personal bonds with the retailer and are comfortable exchanging information about family and mutual acquaintances. This goes beyond “secure business attachments,” in which the relationship is limited to depending on the retailer for quick answers to questions about purchases.
     When serving customers who consider themselves to have a personal relationship with you, clarify expectations and obligations.
     Researchers at Lingnan University in Hong Kong and Chinese University of Hong Kong presented study participants with a scenario: You’ve asked the owner of a restaurant with whom you have a close business attachment to hold an ocean-view table for your birthday bash. When you arrive, the owner explains, with a tone of regret, that all the ocean-view tables are taken.
     Each study participant was asked what their reaction would be. Past research had indicated the restaurant customer would be empathic, since the owner was, after all, like a friend. And indeed, for many of the study participants, this was the reaction. They demonstrated understanding toward the owner. However, for others, the reaction was anger at being betrayed by a friend.
     What made the difference was whether the study participant, taking on the role of a customer, had clarified in advance their own expectations and obligations and those of the retailer. With this clarification for transactions based on a close business attachment, there was more likely to be customer empathy for the owner’s needs.
     University of Toronto researchers looked at the same sort of issue from a different angle. At a health club, study participants were offered a reward for completing a one-hour survey. For some participants, the reward was a free one-hour class at the health club, while for the others, it was a $15 discount on a purchase at the club. The researchers considered the free class to be more similar to the benefit given the club by the survey respondent—one hour of time.
     Respondents in the study who had a friend-of-the-family type relationship with the club were more comfortable with getting the $15 discount. They thought that friends deserve to make choices. On the other hand, those considering themselves to be no more than customers were more comfortable with the free class.

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

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Distinguish Customers from Friends
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Wednesday, September 28, 2011

Symbolize to Prime Purchase Intentions

Show me a tree with spreading branches—or even a picture of a large tree—at the entrance to your store and I become more likely to consider the items in your store to be healthy.
     That’s the logic discussed in a Fast Company article about how Whole Foods Market stores use flowers at the door, unnecessary ice beneath the cucumbers, and fruit displayed in crates. The objective is to prime shoppers to think freshness.
     Symbols of feelings and concepts influence our purchasing behavior. There is, however, a wrinkle in all this: Broad individual differences among consumers. When I see a tree bearing branches and blossoms, I’ve the subconscious urge to breathe deeply. There are other people who will be primed to buy allergy meds.
     The image of the tree might bring to mind strength. In the picture above, I think I see branches flexing their muscles at the top. I’m moved a bit closer to buying the strongest detergent on the shelf. Other consumers won’t see that in the tree.
     Or as I look at the relatively dark circle directly under the tree, maybe I’ll start thinking, “Oh my gosh! I forget to water my lawn this morning,” thereby diverting my attention toward buying a sprinkler system.
     Which works out nicely if your store happens to carry detergents or sprinkler systems.
     Primes work best when presented as a set, stimulating the brain from different angles. If we’re aiming for the impression of healthy as a purchasing prime, we’ll show not only the image of a tree, but also images of people exercising and of nutritious food. Whole Foods is doing this with the multiple primes for impressions of freshness.
     The primes must be subtle, never overwhelming:
  • Delivering the prompts below the level of awareness makes the primes more influential over a shopper’s behavior. According to research at University of Florida-Gainesville, if shoppers become aware of the priming, they are more likely to feel manipulated and fight back. Subconscious primes result in fewer counterarguments.
  • If the set of primes is too strong, it causes the shopper to subconsciously sense they’ve already satisfied a need. A research team from City University of New York, Loyola College, and Duke University found that when a healthy salad was added to a list of side dish choices, diners separately identified as high in self-control actually became more likely to order the French fries.
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Tuesday, September 27, 2011

Evaluate Buyer Psychology Tactics

A terrible truth is that some classic consumer behavior research conclusions are proving to be mistaken when applied in stores. Findings proclaimed as the foundation for profit-making tactics might turn out to be downers when implemented.
     This happens if research findings are applied too broadly. For instance, a classic research finding is that customers buy more when the salesperson exudes happiness. So it looks like the happier the salesperson, the higher the shopping cart total.
     But wait! Subsequent research from Northeastern College of Business Administration finds that a customer who is in a bad mood is especially unlikely to buy from a salesperson who clearly appears to be in a much better mood than the customer is.
     Okay, so be just a little more upbeat than your customer.
     But hold on! There’s an exception to this rule. The research says that when shoppers are feeling truly desperate, they have no objection at all to dealing with a highly cheerful salesperson. This is an instance where misery does not want company, but instead prefers a can-do attitude.
     So how to get the best from research? Experiment with the tactics and evaluate the results. Here are some pointers:
  • Ask, “Better or worse than what?” Set a baseline. Before implementing a tactic, measure how things are now. How many units sold last month, when you hadn’t started the intervention. How many units did you sell for the first month after the intervention was fully and competently implemented?
  • “Measure twice and cut once.” To the carpenter, this proverb means to double-check for accuracy before sawing the piece of wood. To the retailer trying out a technique, I suggest you take the proverb to mean, “Measure for success or failure in multiple ways.” Maybe the technique didn’t produce a noticeable difference in average purchase size, but there was an important boost to repeat business.
  • Ask, “In what ways is it working, and how well is it working in each of those ways?” The answers to these questions are more fruitful than the answer to, “Is it working?” That question is too simplistic. You’ll maximize profitability by fine-tuning the tactics as you learn from experience. And by revising the tactics broadly or even discarding them as you anticipate changes in consumer sentiments. The answers to the more complex questions help you do that by giving you an understanding of the “why,” not just the “what.”
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Experiment
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Monday, September 26, 2011

Offer Illusions Which Bring Pleasure

It was a summer while I was an undergraduate at UCLA that I first performed brain surgery.
     I wasn’t doing this solo. I worked under highly competent supervision. My surgery assignments were part of a neuropsychology honors program at the prestigious Brain Research Institute.
     I also should tell you that I performed the surgery not on people, but on laboratory rats.
     The purpose of the project was to explore what is called intracranial self-stimulation. I implanted small electrodes in pleasure centers of the brain. Then the rat could give itself a tiny electric pulse through the electrode by pressing a bar.
     What we found was that this direct stimulation of pleasure centers altered behavior without the need for traditional rat payoffs like food. The electric pulse was so rewarding that, in many cases, the rat had to be disconnected from the apparatus periodically. Otherwise, the animal would press itself to the point of collapse, never taking time to drink, eat, or sleep.
     Even if we don’t want our customers to shop until they drop, let’s stimulate the shopping pleasure centers. A recent CBS-TV “48 Hours” segment featured behavioral scientists describing an often overlooked truth about the stimulation: Since we won’t be literally hard-wired into the human shopper’s brain, as I’d done with the rats in the Brain Research Institute studies, pleasure is more strongly associated with what the consumer thinks they are experiencing than with what they are actually experiencing.
     Researchers at Stanford University asked people to taste five wines and to rate their quality. They also were told the costs of the wines—five prices which ranged from relatively inexpensive to relatively expensive. What the study participants did not know was that the five wines tasted actually came from only three different bottles. One pair was presented as two different wines, both at a $45 price point and at a $5 price point. This was also true for another pair of wines.
     Brain scans showed that when people were tasting the $45 wines, there was enhanced activity in an area of the brain associated with consumer decision making based on emotions. Compared to when a study participant tasted a wine identified as low priced, the participant tasting the identical wine identified as high priced experienced greater pleasure of the sort that translates into an increased likelihood of buying the wine.
     Offer to shoppers illusions which bring them pleasure.

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Sunday, September 25, 2011

Decide Whether to Limit Purchase Quantities

When you’re selling a product in high demand, you’ll want to decide whether to limit the number of items each customer can purchase. From a strictly business perspective, it would seem that if you allow shoppers to buy as many units as they want, you’re more assured of making quicker profit on the entire inventory.
     From a shopper psychology perspective, there are additional considerations:
  • Customers who come to your store looking forward to getting the high-demand item will feel betrayed if they encounter an out-of-stock.
  • On the other hand, customers who otherwise have an allegiance to your store and encounter an out-of-stock become more likely to come to your store promptly when sales on high-demand items are announced.
  • On the other hand, if the purchasers of large quantities then turn around and resell the items online—as USA Today reports is happening with the Missoni line featured by Target—your regular customers might conclude that they don’t need to wait in line at your store.
  • On the other hand, if the prices charged online are twice as much as your store’s purchase price—again, as is happening with Target’s Missoni line—that adds value to purchasing from you.
     Scarcity offers opportunities to you for higher profit margins. Customers will accept paying substantially more for items which are scarce, as long as the customers accept that the reason for the scarcity is genuine.
     In a classic consumer psychology study, participants were presented a set of Nabisco chocolate chip cookies and asked to answer questions like:
  • How attractive are the cookies?
  • How much do you like the cookies?
  • How much would you be willing to pay for one of these cookies?
     For some participants, two cookies were presented, while for the others, ten cookies were there. Which group gave higher ratings to the attractiveness, liking, and price willingness?
     Yes, the group that saw only two cookies.
     Moving from cookies in the laboratory back to fashions in the store, Target is saying their stores will limit purchase quantities of high-demand gift items during the Christmas season, but not at other times. According to the USA Today article, Abercrombie & Fitch and Saks Fifth Avenue do make it a policy to restrict large-quantity buys of items for which they predict online reselling.
     Target’s Missoni episode is a reminder to retailers to strategically develop in advance a policy on large-quantity purchases of high-demand items.

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Offer Scam-Free Scarcity

Saturday, September 24, 2011

Minimize Customer Turnover

Inventory turnover is great for a retailer. A moderate degree of staff turnover is always good for a retailing business, although excessive turnover both signals and creates problems. Customer turnover, on the other hand, is to be minimized.
     A pair of business analysts at INSEAD-Belgium and Boston Consulting Group suggest techniques for doing this. They started by identifying three top drivers of customer turnover:
  • Infrequent use. Funeral homes, landscape architects, and real estate agents are examples of services retailing businesses that must draw a continuing stream of new prospects in order to succeed. Strategic partnerships with other businesses can help. Real estate firms often build cross-referral networks and a system of referral commissions with banks and insurance companies.
  • Long duration of use. The retailer who sells refrigerators, automobiles, or a trade school education might not see the same customer for the same item often if there’s a high rate of customer satisfaction. Encourage each satisfied customer to make a referral to others. Carrying a variety of products is also important when long use duration results in high customer turnover. Trade schools can create alumni groups, and appliance retailers can establish user programs. The social facilitation of the group energizes participants to make referrals. In addition, group gatherings face-to-face or online can be employed to introduce follow-on products and services which keep customers buying.
  • Narrowness of customer demographics. Baby stores, bridal shops, and retirement communities each appeal to relatively narrow demographics. This is a clear advantage when it comes to creating distinctive offerings and targeting the marketing initiatives. However, these retailers can suffer from a dearth of repeat business. The answer is to satisfy customers thoroughly and then encourage each of those satisfied customers to recommend you to others in that demographic group. Rewards to customers for successful referrals will build business.
     Beyond these techniques, the business analysts recommend having migration paths for current customers:
  • The retailer carrying Gerber baby foods could carry all six product lines, starting with Birth+ and moving on with the same set of customers to Supported Sitter, Sitter New Tastes, Crawler, Toddler, and Preschooler.
  • The retailer carrying Lego blocks intended for children could also carry the Duplo line targeted to toddlers.
  • The retailer could add more advanced levels to the loyalty program, keeping the customers returning by upping the challenge. If you have a silver level and gold level now, add a platinum reward level.
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Give Loyalty Program Members Prestige

Friday, September 23, 2011

Fence In Consumer Anxiety

When shoppers are worried about intrusions to their well-being over which they have little control, they often seek boundaries. Including physical boundaries.
     Researchers who were based at the University of Pennsylvania exposed study participants to loud sirens, bells, and alarms. Some of the participants were allowed control over the amount of the anxiety-producing noise, while the rest were not.
     Later, each of the participants was asked to express preferences between two sorts of items. Some of the items had borders; the others did not. For instance, the participant could choose a postcard to keep. The sole difference between the two cards was the thick border around one of the cards.
     Yes, the study participants who had been granted no control over the noise were more likely to select the postcard with the border around it. In subsequent experiments, people who felt little control preferred retail settings that the researchers report as being “highly bounded.”
     Circumstances in which your shoppers might feel especially anxious include:
  • After experiencing—or maybe reading about—a disaster occurring close to them
  • When coming into your store to solve a pressing problem involving loss or potential loss, such as after the death of a loved one or when a family member is seriously ill
  • Toward the end of a paycheck cycle in a financially strained community
     In these circumstances, here are a few ways to fence in the consumer anxiety to make the shopping experience better for your customers:
  • Keep shelves orderly and fully faced. That’s like avoiding gaps in the fence.
  • Unclutter aisles regularly.
  • Wherever shoppers need to wait, make it abundantly clear who has what place in line.
  • Remind customers of any time limits, and perhaps even establish time limits. “Please remember that this offer is good for the next three days.”
     At first glance, it might seem that setting additional limits would add to the shopper’s anxiety rather than ease it. However, as the University of Pennsylvania research findings indicate, reasonable limits are reassuring.
     The researchers found that consumers who come shopping with a strong structure in their lives have less need for the retailer to do the fencing. Please think again about the participants who were not given control over the sirens, bells, and alarms in the study. It turns out that those who had previously reported having strong religious beliefs were not as likely afterwards to select highly bounded items as were the other participants.

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

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Thursday, September 22, 2011

Sign Up Customers for Store-Self Identity

While I was shopping for a new Toyota years ago, a salesman asked me to sign my name on a blank index card. I’d made what I considered to be my final price offer. He said, “To show that you’re serious, I’ll ask you to put your signature on this index card. I’ll take it along with your offer to show the sales manager.”
     As a set of University of Alberta researchers point out, the act of writing our signature has more than legal implications. The act is tied to our psychological identity.
     In one study, the researchers selected a group of consumers who considered running as a sport to be an important part of their self-image and another group who did not. Some of the people in each of the two groups were asked to print their names as part of a task, while the rest of the people were asked to write their signature. Then each of the study participants was asked to shop for a pair of running shoes while the researchers watched.
     Among those people who considered running an important component of their self-identity, those who had written their signature ended up spending more time in the store and trying on more running shoes than those who had been asked to print their name.
     Wait a second! Was spending more time in the store trying on more shoes a good outcome? Wouldn’t we prefer to have customers come in, make a purchase quickly, and leave? No, not really. Those who spend more time in the store are likely to see more items to buy. The research findings indicated that signing the name accomplished this by strengthening an association between the customer’s self-identity and the personality of the store. So we’d expect to see more repeat business.
     All this was not true, however, for the study participants who did not associate their identity with running as a sport. In fact, those who had signed their names spent less time in the store than those who had printed their names.
     That car salesman’s execution of the tactic with me was flawed. I refused to sign a blank index card. Still, the tactic itself has research support: If a customer identifies with your store or a product there, having them sign their name—such as to register for a prize drawing—usually strengthens the store-customer or product-customer identification.

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Name Your Customers

Wednesday, September 21, 2011

Take Wing with a Shopper’s Swallow

If you see a prospective purchaser swallowing hard during negotiations, you could take this to mean they’re gagging on the price of the item. However, researchers at Northwestern University find that the hard swallow might better be interpreted as the prospect drooling over the possibility of purchase. When that’s the case, let your selling continue to take wing rather than assume you need to descend to a lower price point.
     In one study, the researchers showed a group of men photographs of physically attractive women and asked these men to decide which one they’d prefer to take out on a date if ever given the opportunity. A matching group of men were asked to think about getting a haircut at the barber. Although we might consider the first group the fantasy condition and the second group the boring-life condition, the researchers were aiming for something else: They considered the first group as developing more of a mating goal than the second group.
     Once this difference was produced, all the men in both groups were asked to look at images of high-end sports cars while hosting in their mouths the type of cotton rolls you encounter in the dental chair. The objective was to measure any differences in amount of salivation.
     Sure enough, the men in the mating goal group salivated more when viewing the sports car images than did those in the haircut group.
     Thinking about purchasing mouth-watering foods could fill a cotton roll to overflowing. The effects can spread to anything associated with the mouth-watering foods. I admit it sidesteps the dignity of your customers to consider them as experimental animals like Pavlov’s dog. You do remember Ivan Pavlov and how when he paired the sound of a bell with feeding a dog, pretty soon the bell caused the dog to salivate? It’s called classical conditioning. Your shoppers make many purchase decisions without much thought, and in these low-involvement decisions, they are influenced by principles of classical conditioning.
     A mouth-watering sports car is operating on the brain in the same sort of way as the mouth-watering food. The Northwestern University research finds that the effect is greatest when customers feel they have relatively low psychological power. This brings us back to the retailing negotiations. When a customer perceives they’re in a weaker position, the repeated swallowing could mean they’re unconsciously expecting the purchase to give them more influence.

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Tuesday, September 20, 2011

Set Your Sights on Doing Even Better

What was your biggest missed opportunity for retailing profitability ever?
     That question came to my mind while reading an article in The Atlantic about a project in which 105 accomplished African-Americans responded to the question, “What is the most racist thing that has ever happened to you?”
     The most common answer was a variation of, “Probably something I don’t know ever happened. An opportunity not available to me because the racism kept it hidden.” Yale professor Elizabeth Alexander said, “The most racist thing that ever happened to me would likely be a continual underestimation of my intellectual ability and capacity, and the real insidious aspect of that kind of racism is that we don't know half the time when people are underestimating us.”
     From the perspective of cognitive psychology, I’d add to Prof. Alexander’s insight the reality that at least half the time, those doing the underestimating also aren’t aware of the distortion in their thinking. Much prejudice is intentional, but much of it results from a failure of intention. The intention to probe beyond first impressions.
     Like those who shop with us, we are cognitive misers. We resist putting our brains to work beyond what’s necessary for a satisfactory solution. Research at University of Cincinnati highlighted how often we make interpersonal, purchase, and business decisions based solely on whatever information is easily available. Then, to make ourselves cognitively comfortable, we’ll become more certain of our conclusions after we’ve made them, looking for confirming evidence.
     That’s a description of prejudice.
     Suppose my purchase decision was a ticket at a horse track betting window. In a classic consumer behavior study at a race track, researchers found that after somebody bet on a horse, they became even more confident the horse would win.
     To say that we resist putting out the extra effort is not to say that we won’t do it. We need to be motivated, such as by a driving desire for profitability. When participants in the University of Cincinnati studies were reminded of the potential value of missing information, their cognitive biases declined.
     Avoid prejudice against yourself. Resolve never to accept your greatest success up until now as the upper limit of your possibilities. You may never know your biggest missed opportunity for retailing profitability. Still, you can minimize the number and scope of any oversights by probing beyond the obvious. Set your sights on doing even better.

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Monday, September 19, 2011

Clock Customer Actions to Fit Time Metaphors

People who enjoy the activity of shopping will spend more time in your store when they’re happy than when they’re sad. But those seeking a specific item spend less time in your store when they’re happy than when sad. That’s the implication of University of Illinois research findings about how shoppers perceive time.
     On the other hand, if a shopper’s aiming for “retail therapy,” the outcome of a bad mood changes. Retail therapy refers to the intentional use of shopping by sad people to improve their mood. People who benefit from retail therapy are likely to spend more time in your store when downhearted than when happy.
     This is one of the many examples of how different shoppers experience time. Researchers at University of Western Ontario, University of Missouri-Columbia, and University of Virginia use a set of metaphors to describe five common patterns, each with hints for the best ways to make a sale:
  • Time is a pressure cooker. The pressure cooker shopper may be accompanied by children or a spouse and talks about spending time with others. They respond best to methodically considering one purchase choice at a time.
  • Time is a map. These consumers appreciate a salesperson who relates the individual consumer’s past needs to current purchase alternatives to future consequences. Their shopping pace is relatively leisurely. Because they can multitask, they often engage in comparison shopping.
  • Time is a mirror. These shoppers are like the “time as map” consumers, but want more emphasis on learning from the past and less on anticipating future consequences. If they’re your regular customer, they’ll resist changing to another store. If they’re not your regular customer, they’ll need extra incentives to switch loyalty to you.
  • Time is a river. Compared to consumers fitting one of the other orientations to time, these shoppers are more spontaneous and open to making unanticipated purchases. Women seeking retail therapy are likely to have a “time is a river” style.
  • Time is a feast. “Eat the dessert first. There’s always time for the entrée later.” That’s the motto of the extreme “time is a feast” shopper. Those who are less extreme still aim for sensory pleasure and novel alternatives when at your store. Not surprising, their focus is much more on the present than on the past or future. Perhaps surprising is that they tend to be less spontaneous than the “time is a river” group.
For your profitability: Sell Well: What Really Moves Your Shoppers

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Sunday, September 18, 2011

Weigh for Self-Expressive & Other-Expressive

In face-to-face selling, there are so many customer factors to assess all at once that it’s handy to have shortcuts.
     A time-tested one is Columbia University psychology professor E. Tory Higgin’s prevention-focused versus promotion-focused concept. Prevention-focused shoppers put top priority on products and services which help them avoid losing what they have now. Promotion-focused shoppers put top priority on products and services which help them gain more than they have now.
     Northwestern University and Stanford University research finds a useful refinement of the prevention-focused/promotion-focused concept: For each customer, we are to weigh the degree of self-expressive and other-expressive tendencies. Then, as necessary to achieve our objectives, we influence the relative balance.
  • Self-expressive shoppers start by looking for high-priced items with enhanced features. When they succeed in making such a purchase, they’ll become emotionally involved with it. If they aren’t able to find—or afford—what they’re first seeking, they tend to go to the other extreme. Their objective is to save money and other resources on this particular purchase in order to splurge resources on the next. They’re open to taking risks. They are promotion-focused.
  • Other-expressive shoppers prefer to avoid risk, so gravitate toward the compromise option in quality and prices of purchases. They are cautious in expressing their emotional product preferences to salespeople and even to themselves. They are prevention-focused.
  • Retailers can move shoppers toward the self-expressive side by proper use of advertising and signage. Highlight slogans like, “What have you done for yourself today?” Bright décor, product, package, and signage colors in unexpected hues also bring out the self-expressive.
  • Asking a shopper what others are likely to think of the purchase being considered will pull the shopper in the other-expressive direction. This finding has implications for the situation where the retailer would like the shopper to purchase an extravagant gift for someone else. Research findings suggest that the best sequence is to encourage the shopper first to think about what they themselves like, then think about how others would look at the shopper if they make that purchase. On the other hand, if we believe it best for the shopper to proceed cautiously in gift shopping, suggest that the shopper consider how the preferences they’re expressing actually came from others.
     Please note that this self-expressive/other-expressive balancing is related to a consumer psychology concept you might read about called “self-monitoring.”

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

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Saturday, September 17, 2011

Sell Exclusive Offerings by Combining

When the retailer is the only one carrying a particular item, price shopping is more difficult for the consumer. If this is to work, the retailer must be able to demonstrate that each exclusive item is functionally as good as the more widely available items.
     A secondary motivation for retailers to carry exclusive items is to advertise the store and allow purchasers to demonstrate their loyalty to the store. For this one to work, the exclusive product must be clearly superior to the more widely available alternatives. The objective is for all the purchaser’s friends to say, “Where did you get that wonderful item? I haven’t seen anything exactly like that anywhere!”
     Large retailers are better able to negotiate with suppliers for exclusives than are smaller retailers. A technique the smaller retailer can use to gain the advantage is to offer distinctive combinations:
  • Combine individual items into customized packages. When I shop at a florist for a bouquet, I expect to pay more than if I bought the same flowers at a plant nursery and paraphernalia at a crafts shop and then put the bouquet together myself. I’m paying for the expertise of the shopkeeper in knowing what fits well and how best to arrange it.
  • Combine your merchandise and services with a distinctive customer focus. When I go into a store and I’m called by name, my shopping has a feel of exclusivity. Get my name right, though. If you’re not sure, ask me. Actually, you might even leave out the name. There’s research evidence that what is more important to the shopper is that the staff remembers the shopper’s distinctive preferences.
  • Combine with an in-stock guarantee. After all, I’ve come to you because of the exclusives I discovered you carry.
For your profitability: Sell Well: What Really Moves Your Shoppers

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Friday, September 16, 2011

Show Complainers Respect, Concern, & Empathy

Customers who feel they’re treated fairly when they complain tend to become more loyal to your store. They develop gratitude for the high quality resolution and often a bit of guilt for making a fuss. Researchers at Università Commerciale Luigi Bocconi in Milan, Italy found that as this guilt about complaints develops because of the retailer’s fair treatment, the customer’s amount of negative word-of-mouth dips.
     In making use of this finding, it’s important for you to realize what produces perceptions of fairness:
  • Fairness of outcomes. Ask the complainer, “What do you suggest I do to make things right?” Then see how close you can come to delivering that. When you redirect the conversation from argument to teamwork, the request for corrective action can be both feasible and equitable.
     Still, the reality is that sometimes the complainer’s request is neither. There are customers around who extort retailers by using complaints. These customers make unreasonable demands under threat that unresolved complaints, justified or not, will go viral on internet social networking sites. Stand firm against consumers who extort retailers by using unjust complaints.
  • Fairness of procedures. Establish complaint-handling policies consistent with the personality you want your store to project. Use those policies to generate procedures which are easily understood by your staff. Then train your staff in following the procedures. Include in your performance evaluation of each employee how well they handle customer complaints.
     Even with this, though, there will be times the customer’s irritation prevents them from understanding and appreciating the fairness of the procedures.
  • Fairness of interpersonal interactions. Treat each shopper in your store with respect, concern, and empathy.
     Classic research at Tulane University indicates that even when a complaining customer considers the outcome and the procedures unfair, the customer will still be satisfied if they perceive fairness in the interpersonal interactions. This turns out to be especially true when the complaint is about services, and store-based retailers do all provide services. Although the customer might be coming for the product, the purchase usually includes consulting and delivering. Some retailers—such as appliance repair shops and travel advisors—primarily sell services, with any dollars that result from product sales perhaps being almost an afterthought.
     Researchers from Chinese University of Hong Kong and Fudan University in China found that empathy toward customers influenced satisfaction to a greater extent than did service outcome factors, such how well the clothes dryer works after being repaired or if the cruise ship vacation met expectations.

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

Click below for more:
Resolve Customer Complaints Carefully
Accentuate the Positive Customer Feedback
Get Second Chance for Good Impression
Ease Customer Anger at Delivery Delays
Emphasize Empathy in Providing Services

Thursday, September 15, 2011

Negate the Social Risk of Negative Reviews

A survey sponsored by Boston-based brand consultants Cone finds a significant increase in the power of negative online reviews. About 85% of respondents said they’ve changed their minds about making a purchase based solely on negative information they found on the internet. This compares with about 65% last year. The sample consisted of 1,054 U.S. adults selected to reflect the demographic composition of all U.S. consumers.
     Based on the pattern of findings, the Cone researchers conclude that the increase in the influence of negative information is because of more widespread internet access. I’ll go beyond this to suggest that what we’re seeing is not so much that the shopper can access ratings as that the shopper figures their friends and family can access the ratings. Consumers are concerned that if they select a product with negative reviews online, others will think less of them.
     It’s a matter of social risk: “If the people I admire know I’m using this product or service, what is the danger I’ll fall out of favor with them?”
     What to do? Here are three tips, with a bonus tip attached to each:
  • As a retailer, acknowledge the negative review. Researchers at European University Viadrina find that when a salesperson does this, the shopper becomes more likely to trust everything the salesperson says. But keep the words and logic simple. The researchers find that if there’s too much complexity, the shopper won’t hook the talk of negative information to the salesperson’s credibility.
  • Offer a liberal money-back guarantee known about and trusted by the shopper. Research findings from University of California-Berkeley and Hebrew University of Jerusalem indicate that if your store does this, any negative reviews become much less important to making the sale. Then for any return, ask the customer the reason. This improves merchandising and curbs fraud. Make it a service-oriented inquiry, not an inquisition. Keep questions brief. If a customer asks, “Why do you need to know this?,” reply “So we can do a better job of stocking the right merchandise for your needs.”
  • Once the customer makes the selection, talk about positives. But if the shopper seems to be backing off from the purchase, ease the stress, while not letting the customer leave altogether, by saying, “I suggest I help you find some of the other items you’re shopping for here today, and then we can come back to considering this decision.”
Click below for more:
Reduce Unwanted Risks for Your Shoppers
Disclose Product Cautions
Simplify Item Returns for Customers
Attend to Negatives When High Time Pressure

Wednesday, September 14, 2011

Educate During Life Changes

In cross-selling, we aim to sell to the purchaser additional related products and services. Suppose there were a way to increase your cross-selling success by 56% in the short-term. Researchers at Indiana University and Carnegie Mellon University found such a way.
     That’s the short-term. You’re in retailing for the long-term. The researchers report even more compelling statistics here, saying they were able to increase the long-term response rate to cross-selling marketing by about 150%, resulting in an increase of almost 180% in long-term profit.
     The setting was a financial institution. The cross-selling consisted of educating the customer about other financial products which could benefit them. What made the difference, the researchers say, was the timing of the education. People go through life changes in rather predictable patterns. With financial services, the researchers found that consumers begin their relationship with a firm by seeking convenience, then move toward wanting flexibility in money management, and then toward stimulation from investment risk. When the nature of the education was timed to fit life changes, cross-selling was dramatically more successful.
     Whatever your product or service offerings, apply this tactic of educating during life changes. If you'd like to encourage brand switching, do 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.
  • 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. In setting up those registries, educate about items which offer distinctive features for users and good profitability for you.
  • Educate via advertising and store signage to people in your target markets who will be looking for evidence that they’re doing okay in new roles. Research at University of Minnesota showed how recent immigrants seek out brands to give themselves acceptable status in their new culture.
Click below for more:
Use Customer Life Changes to Switch Brands

Tuesday, September 13, 2011

Catch the Power of Contagion

The release of the sci-fi thriller “Contagion” is a cue to consider the power of what is called “contagious magic.” Researchers at Arizona State University and New Zealand’s University of Aukland used guitars as examples. Why is it, the researchers asked, that a purchaser of a guitar would find that having a respected rock star sign the guitar caused the guitar to produce better music? This was especially true when the guitar was a replica of the instrument used by the rock star autographer.
     Contagious magic refers to the belief—commonly encountered in consumers and usually subconscious—that two inanimate objects which touch will exert an influence on each other. It operates not only to enhance the attractiveness of the merchandise you sell, but also in the other direction. As an example, suppose you sell toys in your store:
     Your order of toys arrived. The distributor gave you an excellent purchase price, great store displays, and even videos to train staff on selling the toys. You ordered these toys because you'd learned customers are buying them well in other market areas, and you're the first in your area to carry them. You expect to see high sales profits.
     Then today as your staff were stocking the first group of the toys onto the store shelves, you saw a front page newspaper story saying a dangerous defect has been found in some toys from this manufacturer. Now you notice that each time a child picks up a box to look it over, an adult with that child tells the child they can't get the toy because of the manufacturer.
     You do your own checking and find that none of the toy product lines you're selling has been found to contain defective items. There is every reason to believe these toys are perfectly safe. Knowing this, what can you do to improve sales of those toys?
     Plenty. And one method that might not occur to you is to space out the boxes containing the products. University of Utah research findings suggest that when a product is feared to have a defect, putting the boxes further apart leads shoppers to think the one they purchase is less likely to have the defect.
     Going back to the guitar example, the researchers concluded that the contagious magic increased the confidence of the performer and reduced their anxiety, thereby producing an objective improvement in performance.

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Space Out “Bad News” Products on Shelves
Head Off Concerns About Touching Products

Monday, September 12, 2011

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

Sunday, September 11, 2011

Build Each Customer’s Assertiveness

When people shop in groups, each shopper’s cart tends to ring up a higher total than if those same people had shopped alone. They are more likely to make what we think of as impulse purchases. A major reason this happens is that consumers in groups become more willing to take on risks, and it is the fear of risks behind much of resistances to buying.
     However, a recently published study indicates this group shopping effect is currently showing itself much more strongly for men than for women. Analyzing spending patterns in mass merchandise stores, a shopping mall, and a book store, the University of Pittsburgh and University of Alberta researchers found that a man spent about 54% more when shopping with a friend than when shopping alone, while any difference was negligible when comparing a woman shopping alone or with a companion.
     This finding runs counter to the stereotype of a gaggle of women egging each other on to buy more and more, while a hoard of men would be immune to such urgings.
     The recent research suggests another scenario: Men are more likely than women to strive for status and power. When shopping with others, the man shows off power by spending extra amounts. On the other hand, women are more likely than men to demonstrate cooperation and harmony. They feel no need to spend more to impress companions, and in fact, might fear making others feel inadequate if spending lavish amounts in front of them. The woman would prefer to come back later by herself to make the purchase.
     As part of the study, the researchers were able to create a circumstance where women became more likely to spend more when with a companion than when alone: The woman was made to feel in charge of the situation and encouraged to assert her individuality.
  • Encourage shoppers to bring friends. Holding special events and giving group discounts can help. Even if each shopper were to purchase less on that visit than if alone, the increased footsteps are likely to result in greater sales.
  • Then if you see a member of a group express great interest in an item and decide not to purchase it, offer to write down on your business card the item identification and say, “I encourage you to contact me if you decide later you’d like to purchase the item.”
  • Build each customer’s assertiveness.
Click below for more:
Show Impulse Purchase Items for Groups
Have Bilingual Staff for Bilingual Shoppers

Saturday, September 10, 2011

Trick Me Once, I’m Outta Here

Suppose you run a restaurant. A public relations agency for a food company client says: “We’d like to rent your place for five nights to play a trick. We’ll tell invitees we’re treating them to a fine-dining meal, but will instead serve them items prepared from a Marie Callender’s frozen food line. We’ll secretly record their reactions, with the intention to use the praise in advertising and social media campaigns. We will, of course, reveal the whole truth to the diners after the meal is completed.”
     Would you accept the offer? Before deciding, consider what happened, as described by The New York Times: Many of the diners were outraged. And since the invitations had specifically been issued to popular bloggers, the bad feelings overflowed across the internet.
     The old saying is, “Trick me once, shame on you. Trick me twice, shame on me.” With retailing, the customer might not even return to your store after the first trick. However, other tricks can lend positive excitement to the shopping experience. What makes the difference?
  • Degree of deception. The restaurant hoax was elaborate. The dinner was preceded with a presentation by celebrity chef George Duran, who the guests were told was responsible for preparing their meal. You are more likely to be forgiven for brief, simple tricks.
  • Degree of respect. The NYT article reports that some of the bloggers said they’d revealed before the meal their allergies to food coloring and desire to avoid high-calorie foods. But the items that were served had artificial ingredients and were high in sodium.
  • Degree of contrition. After the outrage became clear and the last of the scheduled dinners was cancelled, the director of corporate communications at the public relations agency said, “(T)here were people who were disappointed and we’re sorry. We apologize that they felt that way.” On its own, this indicates little regret. Closer to the mark would have been, “We’re sorry for what we did which resulted in some of the diners being deeply disappointed. We apologize and now understand fully why a number of the diners felt that way.”
     More than 60% of the tricked diners reported having a favorable impression of Marie Callender’s, so might choose to buy the items in the future. But consumer psychology research findings suggest that, if you collaborated in such a trick, those fooled would become more likely to shop for the merchandise somewhere else.

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Intrigue, But Don’t Mislead

Friday, September 9, 2011

Check that Vanity Appeals Aren’t in Vain

According to a recent United Press International posting, a number of British retailers are appealing to men’s vanity by labeling trousers as a smaller size than they really are. Debenhams, Next, and Topman were selling pants up to one inch larger than labeled. “Manity sizing” corresponds to vanity sizing, used with marketing and selling women’s clothing. The objective is to have shoppers say, “I feel better about myself when shopping at that store rather than elsewhere, so I’ll make more of my purchases there.”
     However, manity sizing might not meet this objective. The UPI posting reports the pants patrols are becoming frustrated with how the size-to-label correspondence varies so broadly, shall we say, from one retailer to another.
     So this vanity appeal might actually fall closer to silly soup displays than to vanity sizing: Long ago, I’d hear grocery store operators claim that shoppers buy more varieties of soup when the varieties are shelved in random order rather than alphabetically. The explanation went like this: The shopper is interested in finding a particular variety. Maybe chicken noodle, maybe tomato, maybe clam chowder. They look for the particular variety, but because there’s no order, the shopper’s eyes run over many varieties. As they do so, they start thinking, “Gee, maybe I could use that variety, too.” They end up selecting extras.
     But a random arrangement irritates shoppers when there’s a logical order to the assortment. Let’s say you run a hardware store and somebody comes in looking for a particular size screw. “Oh, they’re all mixed up on the shelves,” you’d say. “Keep looking until you find it.”
     The, umm, biggest practitioners of manity sizing reported in the UPI article were, perhaps not surprisingly, supermarkets. Tesco and Asda were selling pants up to two inches larger than announced. Maybe the larger pants could go along with featuring larger food packages.
     If you’re doing this to appeal to vanity for profitability, it, too, might be in vain. With shoppers who are sensitive about their girth, you’ll make more money from the smaller package sizes. Researchers at Technical University of Lisbon and at Tilburg University in the Netherlands found that people who got started on small packages ended up eating more than did those who dug into the large package. The study participants had said they believed small packages would help them limit their consumption, but the opposite proved to be true.

Click below for more:
Gain Weighty Profits with Larger Sizes
Randomly Arrange Limited Product Sets
Label as Small to Increase Trial
Stock Larger Package Sizes

Thursday, September 8, 2011

Decide on Your Segmentation Objectives Early

For the smaller retailer who wants to conduct a consumer attitude survey, a major challenge is obtaining an adequate sample size. I advise obtaining at least 100 responses for each theme on which you intend to base significant business decisions. If you obtain a response rate of, let’s say, 70%, this means surveying about 145 consumers in order to end up with the 100 responses.
     You also want to choose your sampling strategy and word your items based on how you intend to segment the survey results. After putting all that effort into getting your 100 responses, you won’t want to suddenly face the fact that you surveyed the wrong people or asked the wrong sorts of questions. Decide on your segmentation objectives early in the survey process.
     Among the possibilities:
  • Lifestyle profiles. What beliefs, feelings, and intentions distinguish those who shop at your store frequently from those who do not?
  • Store-specific profiles. What distinguishes people who shop at your store instead of, or in addition to, shopping at other specific stores?
  • Offering-specific profiles. What characterizes the shoppers for the different sorts of products and services your store offers?
  • Demographic profiles. What can you learn from the survey that will help you customize your marketing and selling? What are the differences between your female and male target audiences? The Millennials from the Baby Boomers? The bilinguals from the monolinguals?
     Segmentation keeps you from being suffocated by the data. Instead of looking at consumer survey results for all respondents together, you might pull out the results for all respondents who report a household income greater than $100,000 and say they are grandmothers interested in giving your product to a girl under the age of 5.
     To be a smart user of segmentation, you also can benefit from knowing about a few statistical techniques:
  • Factor analysis and item reliability analyses group items into scales. You don’t want to make important business decisions based on the answers to one item. Instead, analyze groups of items that look at the same theme from different angles.
  • Discriminant analysis identifies which of those groups of items separate the different slices of your consumer pie.
  • Cluster analysis places the survey respondents into groups based on the prior statistical analyses. You could be surprised by what you discover. What you’d suspected to be differences between your male and female shoppers might not be that significant after all.
For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more:
Segment Your Data for Profitable Conclusions
Help Consumers Build Useful Attitudes

Wednesday, September 7, 2011

Dilute Retailer Schadenfreude Charitably

Schadenfreude means delighting in the misery of others. The word made it into a “The Simpsons” episode where Ned’s business is failing. Homer is overjoyed. When Lisa defines schadenfreude, Homer replies, “Those Germans have a word for everything.” Early last year, Ford and GM may have been said to demonstrate schadenfreude when reacting to the large-scale automobile recall by Toyota Motors. The companies offered $1,000 bonuses to consumers who wanted to trade in their Toyotas.
     A Bloomberg Businessweek article about the reinsurance industry applies the concept to business customers: Reinsurance is insurance for insurance companies, helping the companies pay for the sort of unusually high number of claims filed in the face of severe disasters.
     The Businessweek article recounts a conversation from 1998, at a time that the market for the product was soft. “What we need is a good catastrophe,” said one staff member. It’s reported that after Hurricane Andrew hit Florida in 1992, eight reinsurance firms launched business, seeing that there would be a booming demand from insurance company clients. This schadenfreude thread also showed up in an e-mail I received from a reader of my September 1 blog posting about Hurricane Irene. “We love Irene,” the retailer wrote in response, sending me evidence of a gigantic jump in store sales because of the storm.
     The deaths of about forty people have been attributed to the hurricane, the total for the countless millions in property damage is still being tallied, and thousands of people were displaced. The “We love Irene,” like the “What we need is a good catastrophe,” might charitably be seen as cynical humor.
     If we’re to take a charitable tack, though, let’s suggest the retailers dilute their joy at profitability by themselves being broadly charitable in their thinking. 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 which can follow Toyota claiming to be the unsurpassable model of quality and then appearing to fail to walk the talk.
     When applied to retailers, a third explanation for schadenfreude is tunnel vision. The humor distances us from tragedy. Calling a catastrophe a “loss event,” as the reinsurance industry does, serves the same distancing function. The risk is that the retailer fails to stay tuned to the human dimension which distinguishes merchants who end up profiting most in life.

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Brag About Your Retailing Humility
Comfort the Confused

Tuesday, September 6, 2011

Sound On When the Purchase is Completed

A while back, I conducted a two-day “Profitability Tactics for Small Retailers” seminar with a set of business advisors from the Los Angeles Regional Small Business Development Center Network. The objective of the seminar was to equip the business advisors so they can help their retailer clients implement the profitability tactics.
     During the evening between the two days of intensive training, two of the business advisors supplemented their retailing knowledge by shopping at an IKEA store in the area. As it happens, their trip worked out well for me because they were able to provide a compelling example of a tactic I presented the second day. Well, actually, it was a compelling example of a failure to use the tactic I was discussing. My topic was the value of giving customers a clear sense of progress through the purchase process. Sound off, by which I mean to make some pleasant noise.
     But for those two business advisors, the sound was off.
     Here’s what happened:
     At the cash/wrap, the two shoppers experienced an unsettled feeling. There was no sound accompanying the completion of the purchase. No sound of a cash register. No acknowledgement from the cashier, who had moved on to the next customer. No sound of a package going into a bag. As the shoppers learned, this last one was because the store charged for a bag.
     Sounds from the shopping experience can burn themselves into the brains of consumers. Since some of the last sounds the shopper hears before leaving the store are those associated with making the purchase, those sounds are especially important. We want the customers to come back soon and often, so we want them to take away pleasing memories.
     Reward the purchaser with sound effects they’ll find pleasant. This protects the good will you’ve built to that point.
  • Give sounds of confirmation as the transaction progresses. A brief series of tones tells the customer that completion of the sale is getting closer. On the other hand, silence breeds annoying uncertainty.
  • Brand marketing consultant Martin Lindstrom has shown the advantages of signature sensory sensations—visuals and fragrances associated with a particular store name. The same principle holds for sounds. Make the brief transaction confirmation melody echo a little bit of the music that plays in your radio ad, for instance.
  • And yes, top it off with the most pleasing sound of all. Say thank you.
For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more:
Give Customers a Clear Sense of Progress
Reward the Purchase with a Pleasing Sound

Monday, September 5, 2011

Negotiate Through Shopper Rituals

The man enters the furniture store with a woman who appears to be his wife, a boy who appears to be their preteen son, and an older woman who could be the mother of one of the couple. When the salesperson approaches the four, the man shakes his head vigorously and says something to the boy in a language the salesperson doesn’t understand.
     “My father does not want to buy anything,” says the boy. But the quartet then proceed to look carefully at the merchandise, with the man and two women chattering continually and the boy listening attentively. Finally, the boy walks toward the salesperson and, with eyes looking down, says, “My father wants to know what discount you will give him on the furniture over there.”
     This begins a negotiating session between the salesperson and the father, with the boy serving as interpreter. The session ends with the man agreeing to purchase a complete bedroom set.
     How did this happen, and what are the lessons for other retailers?
  • The salesperson realized that the negotiating partner was the man. For successful negotiations, identify the decision makers.
  • The “what discount you will give him” wording was a cue that the man considered negotiating to be an essential part of purchasing this type of item. Respect shopper rituals.
  • The salesperson replied to the request for a discount by pointing out how the value of that item justified the full price. Redirecting from price to value reduces the shopper’s insistence on getting a discount, according to researchers at London Business School and European School of Management and Technology.
  • When the man—through his son—kept insisting on a discount, the salesperson hesitated before each reply. Researchers at University of Maryland found that during the back and forth of negotiating a purchase price, the shopper will feel better about the final decision if the retailer waits a while before responding with an okay or a counteroffer during each round.
  • And when the salesperson concluded that the degree of discount requested by the customer was not realistic, the salesperson said to the boy, “Please tell your father that if he is not able to afford this furniture set, I’ve another set that is at the price your father desires.” The instant the son finished interpreting, the father agreed to the salesperson’s final offer. The words “not able to afford” called up the shopper’s pride.
For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more:
Let Shoppers Go Through Their Rituals
Clarify Item Advantages via Pricing
Wait a Minute Before Purging Customer Waits

My thanks to furniture retailing consultant and SBDC Business Advisor Bruce Sparks for sharing with me a true story which I fictionalized for this posting and for helping me recognize the lessons to be learned from the story.

Sunday, September 4, 2011

Commemorate Without Exploiting

One week from today is the tenth anniversary of the 9/11 horror. A recent MediaPost article discusses the delicacy of retailers commemorating the occasion. The article reports that about 70% of Americans say they are interested in paying tribute somehow on this anniversary.
  • Judge the degree of importance of 9/11 to your retailing target audience. Those living in the areas of the plane crashes are likely to have a greater awareness of the anniversary than those living far from there. Firefighters, other first responders, and members of the military are likely to feel a greater drive to recognize the occasion than those in other professions.
  • Take your cues from those most affected. A group called 9/11 Day of Service was founded by families of 9/11 victims. Following this prompt, The Home Depot Foundation is sponsoring a “Celebration of Service” campaign directed to enhancing the lives of America’s military veterans, such as by helping with housing needs. Best Buy and Chase are major supporters of 9/11 Day of Service projects. You can commemorate the anniversary by encouraging members of your retailing target audience to serve their local communities via volunteering.
  • Keep it modest to lessen the probability that consumers will view you as exploiting the event. America’s Northeast, where the 9/11 attacks occurred, is now recovering from the disasters associated with a major hurricane. Stories have blossomed of retailers gouging customers, some of those stories now suspected of being exaggerations. Consumers’ sensibilities are raw. The Home Depot is encouraging customers to purchase a “Celebration of Service” gift card between September 11 and Veterans Day, with 5% of the value of the card purchase to be donated to the projects helping veterans. Will shoppers perceive that the percentage of contribution is so low and the length of the sales promotion so long that this has more to do with increasing profits at The Home Depot than with acknowledging a solemn occasion?
  • Maintain a positive tone. How to do that when 9/11 was tragic? The answer is to keep the focus on the future and on people taking action rather than mourning. Think how to hop on the retailing spirit seen in many quarters this last Easter. Easter honors rebirth and renewal. Consumers fatigued with the recession and prolonged winter weather were ready to give shopping another chance. Helping then were new items featured among the evergreen standbys in the product mix.
Click below for more:
Give Elementary Schools Volunteer Time
Renew for Easter

Saturday, September 3, 2011

Size Up the Customer Before Joking Around

As I walked into Linn’s Easy As Pie Café in Cambria, California, my wife Irene was by my side. It was our first time ever there. We saw right away that the menu board above the counter had a few unexpected, intriguing choices for a quick lunch.
     When the three customers in front of us finished ordering and walked away to pick a table, Irene and I were still staring up at the menu board. The fellow behind the counter broke the silence. “Sir,” he said.
     I looked at him and saw he was gently wagging his finger up and down while pointing at Irene. “This one is much better looking than the one you brought in here with you last week.”
     Irene was complimented. I was thoroughly amused. I’ll remember Michael and make it a point to drop into the Easy As Pie Café next time I’m in Cambria.
     Michael was taking a bit of a chance. My guess is that he sized up Irene and me as we were standing there. Different things make different people laugh. Students of the psychological inventory named the Myers-Briggs Type Indicator, in which each individual is characterized by a combination of four letters, say that if an INTJ type tells a joke to an ENTJ type, just that one letter difference in type could easily lead to the story falling flat.
     If a retailer starts kidding around with consumers they don’t know well, the consumers might not get the joke. This could have consequences which are not amusing at all for the retailer’s business. It’s a particular danger when the audience hasn’t been alerted that the retailer’s kidding around. Everybody wants their dignity respected, so if the humor takes the form of teasing a customer, you might lose that sale along with any opportunity to make a future sale.
     Researchers at University of Cincinnati and St. Vincent College in Pennsylvania found that humor in retailing is most effective when it is novel and unexpected, as was true with Michaels’s quip. A joke which isn't immediately understood can still be effective. Research says the shopper's mental energies are taken with trying to figure out the humor, and this distracts the customer from thinking about reasons not to buy. So humor can be useful in moving the indecisive customer to the cashier.
     Still, to avoid offending, size up the customer before joking around.

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Use Humor in Unexpected Ways
Alert Consumers When You’re Kidding Around

Friday, September 2, 2011

Keep Ahead of Computer Algorithms’ Rhythms

A recent BBC posting cautions retailers and consumers about the ascendancy of computer algorithms. These are the decision engines consisting of software that can, among other things, recommend products to a shopper based on the shopper’s past choices or the similarity of the shopper to other shoppers who have made certain choices.
     A couple of years ago, Netflix awarded $1,000,000 to a team with members from Austria, Canada, Israel, and America for developing algorithms which substantially improve the accuracy with which Netflix can predict what movies a subscriber will like based upon the subscriber’s past movie ratings.
     At the time, the Netflix electronic recommendation agent was 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.
     Shoppers who use recommendation agents spend more money than those who don’t use recommendation agents. 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 purchase decisions to the computerized device gets awfully attractive for shoppers.
     This is where a problem can arise for the retailer who wants to guide shoppers toward a choice the retailer believes will better benefit both the shopper and the retailer. The delegating shopper enters a flow state in which they are ready to accept whatever the computer says.
     How to interrupt the rhythm of this robotic-like flow state? Ask the consumer open-ended questions—questions which require more than a yes/no or multiple-choice answer.
     You’re on firm ground in helping shoppers to keep ahead of computer algorithms’ rhythms. Although becoming increasingly sophisticated, they still occasionally commit monumental errors. The BBC article recounts what happened with a book titled “The Making of a Fly.” Flawed algorithms used by Amazon to set book prices based upon demand and the prices of comparable books decided that a purchaser of “The Making of a Fly” should pay $23,600,000.

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Use Search Engines to Influence Merchandising
Maintain Purchase Momentum in Customers
Gather Comments from Your Customers

Thursday, September 1, 2011

Realize Your Dreams

Hey, last week was really tough on my wife. She is a caring woman. Every time she opened a newspaper or passed by the TV, she was confronted with headlines like, “Irene disrupts travel plans up and down the East Coast” and “Irene responsible for countless numbers of people being evacuated from their homes.”
     I am determined that today will be different for her. It’s our 48th wedding anniversary. An occasion to stay away from news reports, celebrate the hurricane of love I have for my Irene, and treasure with her the memories of our years of adventures together.
     Since we first met as teenagers, Irene has encouraged me to realize my dreams. I recognize how that spirit has inspired me to encourage retailers like you to realize your fullest potential for business success. I’m convinced that central to achieving this is to have the sort of grounding which comes from family values.
     Keep a firm conviction to be profitable. A thriving business allows you to provide for your family and offer family members the option of joining the enterprise. At the same time, if offering that option is your intention, you’ll want to cultivate an exciting life outside your store. When children grow up seeing their parents imprisoned by the business, unable to do what they love doing and not being with family often enough, odds are the children won’t want any part of it.
     Family values influence how you relate to shoppers. Some retailers say, “Make our customers feel like family.” I prefer, “Give a sense of family” because research findings seem clear that for maximum profitability, you’ll want to be sure to keep the interactions as a business relationship. Don’t promise more than you’ll deliver. That would be dishonest.
     Giving a sense of family is valuable not only for retailer-to-consumer relationships, but also for retailer-to-business (B2B) relationships. According to research at University of Geneva, there are two dimensions to a business-to-business expectation. The researchers called the first type “secure business attachment.” Your B2B customer may want to rely on you for quick answers to questions about purchases made from your business and for quick solutions to problems with purchases. Very businesslike.
     The researchers called the other type “close business attachment.” Your B2B customers may want to develop close personal bonds with you, exchanging information about family and friends. Something like family members would choose to do.

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Incorporate Family Values into Your Retailing
Convince Shoppers to Reach for the Stars