Saturday, June 30, 2012

Strip Out the Benefits of Customer Costumes

ABC News was among the many media outlets reporting on the ultimate “come as you are” shopping event: To draw interest to the grand opening of Priss, a grocery store close to the German-Danish border, the first 100 consumers received a €270 shopping spree—if they shopped nude. To the surprise of the store manager, there were about 250 takers, some of whom had camped out overnight. To curb the bedlam, which seemed to include even more photographers than naked consumers, police monitors were recruited.
     I’m thinking that the presence of those photographers and police grew the hype for Priss exponentially. I’m also suspecting some of those bare-bottomed buyers were enjoying the exposure as much as getting the free groceries.
     Maybe you’ll not want to include strip-downs in your special events. Instead, you could have people wear a costume. Consider the benefits:
  • The silly look. If your wardrobe requirements are outlandish, you’ll draw the sort of media attention we call free publicity. 
  • The naughtiness. Some retailers give incentives to shoppers for dressing in pajamas. People associate wearing pajamas with relaxing their inhibitions. Actually, almost any costume can work. Think about adult Halloween parties! And when consumers relax their inhibitions in your store, they buy more. 
  • The celebration. E-commerce retailers could have fans post photos or videos of themselves in costume in order to earn a price discount. Those are fine techniques. However, it’s certainly more fun to wear your crazy costume to a store where you can bask in the reactions of others to you and express your reactions to the others there. 
  • Compliance. This one gets deeper into consumer psychology. When the customer agrees to dress up, they are changing their behavior to follow the directions of the retailer. This is a type of foot-in-the-door technique, in which the customer becomes more willing to follow subsequent directions the retailer will give. 
     A skilled practitioner of the costume approach is Chick-fil-A with their annual “Cow Appreciation Day,”  Come fully dressed as a cow and you get a fully dressed combo meal for free.
     Still, your shoppers might not be willing to go all the way, whether it’s coming in nude or dressing up like a cow. Make provision for that, as Chick-fil-A has: “People dressed in partial attire will be awarded an entrée vs. a full combo meal.”

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

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Beef Up Promotions with Wardrobe Incentives

Friday, June 29, 2012

Synchronize Marketing with Consumer Habits

According to YesMail Interactive, based in Portland, Oregon, the best days and times to launch your social media marketing campaigns depend on the platform:
  • Mondays work well when the platform is YouTube. 
  • Save Tuesdays for Facebook. And across days, the highest level of customer engagement is during the 10 PM to 12 AM Eastern Standard Time slot. 
  • For Twitter tweets, Fridays should be your last place choice. The best time slot across days for customer engagement is 5 AM to 8 AM. 
     I suggest taking these as starting points for your own attention to synchronizing social media marketing with consumer habits. Find out when your shoppers are accessing each of the platforms. The YesMail Interactive research appears to be thorough. It analyzed campaigns over three months at retailers including Abercrombie & Fitch, Aeropostale, American Apparel, American Eagle, Ann Taylor, Banana Republic, Diesel, Eddie Bauer, Express, Forever 21, The Gap, Guess, H&M, J Crew, Kenneth Cole, The Limited, Old Navy, Ralph Lauren, Tommy Hilfiger and Urban Outfitters. However, the recommendations for days and times are overall conclusions, not intended to take account of your business’s distinctive characteristics.
     The secret to success is in the timing, and YesMail Interactive says many retailers are missing out. For example, most of the Twitter campaigns analyzed launched on a Friday.
     Tony Curtis, who died at age 85 after having appeared in more than 140 movies, is quoted as having said, “…(M)y longevity is due to my good timing.” I don’t know who first advised, “Timing is everything,” but Albert Einstein associated time with everything when saying, “The only reason for time is so that everything doesn't happen at once.”
     To help shoppers sort it out, attend to timing:
  • Researchers at University of Connecticut and University of Virginia found that women shoppers vary between thinking, “It’s time for me” and “It’s time for others.” Analyze how your shoppers cycle between these two, then adjust your marketing messages to fit. 
  • Before the sale, emphasize the number of functions the product can serve and have technical specifications easily available. Once the sale has been completed, state benefits in terms of making it easy to use the functions and reassuring the customer they’ve made the right choice. Researchers at University of Maryland-College Park found that consumers tend to choose the most feature-filled models, but then after purchase, tend to get frustrated with the complexity of what they chose. 
Click below for more:
Time Your Statements of Benefits

Thursday, June 28, 2012

Noises On for Creativity

Background music in your store affects your shoppers’ behavior. How about background noise which is not music? Researchers at University of Illinois-Urbana/Champaign, University of British Columbia, and University of Virginia recommend you test out the results of moderate levels of ambient noise when you want to increase the attractiveness of novel products.
     In their studies, the researchers used noise with the content and volume your shoppers might find in a mall or café that has lots of activity. Study participants exposed to the moderate noise rather than virtual silence tended to favor innovative products over mundane alternatives. For instance, the participants were much more likely to choose a pair of running shoes which had unfamiliar features rather than a traditionally designed pair.
     Related to this, consumers exposed to the moderate levels of noise in a laboratory setting were more likely to think of creative uses for mundane products like a mattress. This finding suggests that your shoppers will become open to a wider range of product alternatives and think of more benefits for each product if you guide them toward parts of your store that have moderate levels of noise.
     The researchers’ explanation for these results is that moderate levels of noise distract the consumer from a natural tendency to ponder about why the traditional is better than the new and untested. This distraction frees the consumer’s brain to think more abstractly, develop reasons to be creative, and then take a chance with ideas and purchases.
     Other research suggests an additional explanation for the beneficial effects on sales from background noise: Excitement. People who are more stimulated are more interested in buying. But the noise can’t be too loud. The Illinois/British Columbia/Virginia researchers found that the effectiveness of noise faded away when the noise was extreme. Then it becomes aversive such that shoppers want to escape the store fast. Best are the levels of din emitted by people wearing party hats, but not sounds more like the sudden blasts of party poppers and whistles.
     In designing the sound environment for your store, you could alternate between segments of recorded music and segments of shopping sounds. In the research studies, recorded noises, not gaggles of shoppers, were pumped into the lab, so the recordings might work fine.
     Also keep in mind the impacts of culture and age. Certain cultures and certain age groups prefer higher noise levels more than others.

Click below for more:
Balloon Your Profitability with Music 
Dampen Excessive Noise

Wednesday, June 27, 2012

Assess Shoppers’ Cloaks of Confidence

“Keep watching HENRYS’ cloaks!” That admonition is my adaptation of a warning currently appearing on the Bloomberg blog. A HENRY is a “High Earner, Not Rich Yet,” and the Bloomberg analysts say it is HENRYS whose retail purchases gave promising signs of an economic recovery during 2011. But it may have been a misleading comfort.
     HENRYS are those with an annual income between $100,000 and $250,000. They’ve been accounting for about 36% of total consumer spending. The Bloomberg posting refers to HENRYS as the “heavy lifters” of the consumer economy.
     Still, it’s HENRYS’ psychographics more than demographics which draw special attention from retailing analysts. HENRYS interact with a broader range of retail brands than do other target populations. They’ll shop at premium mass brands like Ann Taylor, Banana Republic, and Williams-Sonoma as well as upscale stores like Tiffany and Restoration Hardware.
     What’s energized their buying has been a cloak of confidence containing an insulation of income. They believed times were bad but that they had a sufficient cushion to make it through until things got better. It’s what consumer researchers call the “relative wealth effect.”
     The retailing analysts are saying there are signs the insulation of income is now wearing thin to the point where HENRYS might become scared they’ll get caught out in the cold financially naked. These consumers’ desire to make upscale purchases depends on them thinking they are relatively wealthy.
     Many of the retailers catering to the luxury markets are noticing that sales are coming from the incredibly wealthy more than from HENRYS. The uber-rich do trust the thickness of their protection against penury.
     As you service your customers, assess their cloaks of confidence and steer the customers toward merchandise and services with which they’ll be comfortable.
     The luxury shopper can be a significant source of profitability for you. In deciding how your merchandising can appeal to the luxury segment, consider the different meanings that indulging in luxury carries for shoppers. Some years ago, SRI Consulting Business Intelligence identified a set of major motivations. Here’s my update of that list:
  • Luxury as show. Be sure the luxury brand name is conspicuously displayed whenever the item is used in public. 
  • Luxury as a password. Subtle cues allow the rich to recognize each other while not tipping off the outsiders. 
  • Luxury as functional. Your shopper pays more in order to guarantee lasting value. 
  • Luxury as a sudden celebration. 
Click below for more: 
Satisfy Desires for Luxury 
Curb Your Enthusiasm About Economic Recovery

Tuesday, June 26, 2012

Bring Fourth Your Patriotic Merchandise

Roll out patriotic items to increase your July profitability. The National Retail Federation’s “Independence Day Survey” project, conducted by BIGinsight, concludes that, overall, 23% of American adults will be on special lookout for those items between now and July 4. This is a slight increase over last year’s 20%. The drive is strongest among Americans under age 35, the more wealthy, men, and people living in the Western states.
     It’s not only flags, banners, and bunting which consumers see as patriotic. There are the fireworks for purchase, and for those who prefer to put matchstick to barbeque instead of fuse, there are the portable chairs to watch the show and the sunscreen to use at the parade. Just be sure the store décor establishes the association with celebrating the U.S. of A.
     Why are people feeling an extra surge of patriotic zeal this year? Could be the election season. Or something else.
     Researchers at Duke University, Cornell University, and University of Waterloo discovered that when Americans feel their country is under verbal attack, they became more likely to buy American. Study participants perceiving that America was being threatened were more likely to choose a Chevrolet than a Toyota, everything else being equal. They chose Nike over Adidas, even though they very well might not have been consciously thinking Adidas is based in Germany.
     This preference for American brands was substantially stronger under a certain condition: When the consumer believed not only that their country was being threatened, but also that America was having trouble responding to the threats.
     The same phenomenon will go beyond July 4 and beyond loyalty to country. Researchers at Southern Methodist University and University of Texas-Austin watched what happened when people from UT were assigned to purchase a present for someone who wanted an item carrying the logo of UT archrival Texas A&M. The reactions were compared to those of a comparable group assigned to buy a gift emblazoned with the UT Longhorns logo.
     While selecting the item for the Texas A&M fan, the shoppers fidgeted, chewed on their lips, and averted their eyes. They crossed their arms, as if to distance themselves from what they were doing, and at the cash/wrap, they actually stepped away from the item, as if to say to anybody watching, “Don’t think this item represents who I really am.”
     Feature items which allow customers to affirm their desired identities.

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Salute Sales to Concerned Patriots 
Sell Identify Affirmation to People

Monday, June 25, 2012

Train Your Staff for Other Employment

In the style of an investigative exposé, a recent New York Times piece describes what might be considered exploitation of employees by Apple Retail Stores:
  • An employee who sold $250,000 worth of merchandise monthly was paid only $11.25 per hour. 
  • There’s no real career track to allow a range of employees to move up and earn more. 
  • Any staff member who misses four days of work in a three-month period, regardless of the reason for the absence, is at risk for termination. 
  • The technicians at the Genius Bar are expected to spend no more than ten minutes resolving any problem with an Apple device. 
     Yet, there’s no shortage of job applicants at Apple Retail Stores, and the annual retention rate for the Genius Bar technicians is about 90%.
     Exploiting employees is wrong. However, to keep adequate profitability, small to midsize retail stores often find it necessary to pay employees less than the owners would like to pay, and they can offer employees no real career track. The way Apple does it provides hints for you: Train your staff to do well in future employment.
  • People like to have “Apple” on their résumés because of the prestige associated with the company. Keep the reputation of your store sterling so that having worked for you gives employees a badge of honor to present to other employers of all sorts. 
  • Apple sets firm employee standards. These standards are designed to make money for the company, which does take in more per square foot than any other U.S. retailer. But the standards also can teach prioritizing in a busy work climate. When you do this sort of thing, it cultivates marketable skills in your employees. 
  • Apple coaches employees to meet the standards. In your store, don’t assume that one-time training is enough. Effective coaching includes refresher training and asking each employee to recommit to your standards. Maybe you think employees will object to all this, but the truth is that most employees are more comfortable at work when they know what’s expected of them. 
  • The NYT article quoted Apple Retail Store employees as saying they felt their work contributed to a greater good, so they were willing to accept the downsides. I’d expect that sort of talk from workers in a nonprofit, but would I also hear it from the employees in your store if I asked why they enjoy working for you? 
Click below for more: 
Train Staff About Dress Standards 
Train Staff to Implement Your Standards

Sunday, June 24, 2012

Portray Freshness in CPGs

People are pretty much feeling okay about containers for consumer packaged goods (CPGs). A recent Marketing Daily posting, based on a Packaged Facts survey, reports that only 1% to 2% of American consumers surveyed expressed overall dissatisfaction with the packages for most products. The highest degree of dissatisfaction expressed in the survey—for breakfast cereal, snack chip, cookie, and salad containers—was just 5%.
     Still, low amounts of overall consumer dissatisfaction leave plenty of opportunities for you to distinguish your store by attending to areas in which consumers do see a need for improvements. The survey research suggests one way is to portray freshness.
  • Packages you carry on your shelves which include green in the label are more likely to be perceived as fresh. Show consumers from throughout the world green product packaging and you'll probably hear descriptions like new, organic, healthy, and refreshing. If the packages themselves don’t have green, you can use green in the signage or even on the shelf tags. The freshness appeal of green is stronger when the store environment is tidy and there is a scent of pine. 
  • With elderly consumers, a smaller package size for perishable products is associated with freshness. Perishable products can spoil too quickly if the customer is no longer living with a full family. Another freshness feature important to senior citizen shoppers is the ease of securely closing a container when the remaining contents are to be used later. And have intact packaging from the beginning. Frequent complaints about meat and poultry in the Packaged Facts survey concerned containers which were leaky. 
  • With consumers who aren’t elderly or disabled, a package which is challenging to open signals freshness. In a classic study based at University of Texas-Arlington, researchers found that potato chips in a difficult-to-open polyvinyl bag were preferred to potato chips in an easy-to-open wax-coated bag. The chips were actually all from the same batch. 
  • With parents of younger children, the ways in which the package maintains freshness makes a difference. In the Packaged Facts survey, a common complaint about soups and related items was the use of bisphenol A (BPA) in the container. BPA has been identified as a toxin of particular danger to growing children. If you sell this product category in BPA-free packaging, be sure to let consumers know. 
  • Rotate out of the shelves, CPGs for which the expiration date has come and gone. 
Click below for more: 
Hook Going Green to the Excitement of Nature 
Downsize for Elderly Shoppers 
Leverage Barriers to Increase Value 
Purge Expired Products

Saturday, June 23, 2012

Amaze Your Shoppers with Ease

A recent Retail Customer Experience posting recommends the IKEA idea: Design your store so shoppers move through the aisles as though they are navigating a maze, with the one-way path abundantly clear. One argument is that mazes let you demonstrate to shoppers the products in use before offering the products for sale. Arouse the desire to buy, then show the product to buy. By having little showrooms, beat showrooming—where consumers come into your bricks-and-mortar store, draining the brains of you and your staff for advice and training, and follow up by leaving your store to make the purchase online.
     The shortfall in this advice for you might be that you aren’t like IKEA. The maze layout with showrooms requires a large store footprint and shoppers who are willing to spend at least half an hour navigating the maze. Plus the reality is that most retailers are often already asking shoppers to navigate a psychological maze. What we can learn from IKEA, though, is the virtue of easy navigation.
     Findings from researchers at New York University remind us that with any unfamiliar item, the shopper has at least a little extra trouble navigating the maze that leads up to purchase. Help the shopper get there. In ads, signage, and face-to-face selling, work in phrases like, “…the same way as with the brand you’re accustomed to using…,” and “…once you do this a few times, it will be as second nature to you as what you’ve been doing up to now….”
     To accompany the new item, have ample easy-to-understand instructions. Don’t worry if shoppers give the instructions only a glance. For one thing, there is research showing how knowing written instructions exist can be sufficiently reassuring for the customers. They don’t need to read them to feel comfortable. For another thing, we want to make it easy for the purchaser to learn how to use the product or service when they have questions later.
     Keep familiar elements in the format of the marketing and merchandising, too. Sure, when introducing a brand or product line, you can boost excitement by premiering a fresh look in your ads and in the layout of the department. But unless you’re launching a completely new business format, leave enough the same so that customers don’t forget who you are.
     People complete mazes most quickly when there are signposts and benchmarks they can recognize and understand.

Click below for more: 
Showboat a Bit with Showrooming Shoppers 
Use Familiar Routines to Sell the Unfamiliar

Friday, June 22, 2012

Plan for Multifunction Marketability

The NPD Group, whose ability to anticipate retailing trends is respected, predicts significant growth in BB Creams. The “BB” stands for “blemish balm.” Although only about 2% of beauty shoppers are purchasing this cosmetics category currently, about 40% of beauty shoppers say, when asked, that they’d consider buying a BB Cream in the future, and 77% of past purchasers say they plan to buy a BB Cream again.
     Digging into the data, The NPD Group concludes that an important component in the success of this product category will be multifunctionality. As you’d expect, the single most important expectation of consumers is that a BB Cream provides natural-looking coverage of skin blemishes. But 47% say they expect a BB Cream to moisturize the skin, and 42% want sunscreen protection included.
     The general message for retailers is to plan for the marketability of multifunctionality.
     Carrying multifunction products has advantages for you beyond marketability. You can reduce the total of different items you need to have in stock. If you’re out of the toothpaste that just cleans, you could point the shopper toward the one that cleans plus more.
     But this works out only if the shopper accepts the quality of the combination offering. Northwestern University found that although shoppers are attracted to multi-solution products, a number of those shoppers believe such products are inferior in each of the capabilities when compared to single-solution products. The product which promises to be a jack of all trades risks being seen as a master of none.
     The researchers found that one way to overcome the inferred inferiority is to set a premium price on the multifunction product. The extra cost helps convince shoppers that the product can indeed do more.
     In today’s retailing environment where consumers are so highly price sensitive, you might choose to take a different approach. Research findings from Singapore Management University and Korea’s Kyung Hee University suggest a technique: Describe to the potential purchaser how well the various functions work together. Instead of focusing on the different capabilities, focus on the added benefits that comes from the synergy.
     The Singapore/Kyung Hee research indicates that this is especially useful with items the shopper considers to have a high level of technological performance. It is more important with smart phones than with toothpaste. In fact, the researchers concluded that at low levels of technological performance, people overwhelmingly preferred the combination products.

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Pitch the Synergy of Multifunction Items 
Set Healthy Margins on Multi-Solution Products

Thursday, June 21, 2012

Use or Sidestep Political Polarization

Your store is a brand, and brands are often either Republican or Democrat. Marketing consultant firm Buyology had more than 4,000 consumers decide which of 200 brands they preferred. By requiring very quick choices among paired combinations, the methodology was designed to tap into subconscious forces which strongly influence purchase intentions.
     After cross-tabulating the choice results by a consumer’s political affiliation, the Buyology researchers proclaimed they’d found Republican brands and Democrat brands. Because of the highly polarized political climate in America now, associations of a merchant with a political party have notable impact. The Pew Research Center reports that value gaps between Republicans and Democrats in America are the highest the Center has seen in 25 years, and those gaps are currently greater than Americans’ differences in values based on social class, age, race, or gender.
     Whether your store is seen as a more comfortable roost for red elephants or blue donkeys could be affected by the brands you choose to carry. More important in understanding where your store stands on the political spectrum, however, comes from appreciating why the brands ended up in the columns they did.
     Here’s my version of the explanation for the results, much of it in agreement with what the Buyology neuropsychologists are saying:
  • Republicans prefer to have decision making decentralized. They think of political leaders as reliable and practical, but as not paying enough attention to what’s best for the locals. Democrats see politicians as intelligent, empathic, and interested in individual needs, so the Democrats are more willing to grant centralized authority. The Republicans like Subway, where you make a series of discrete choices yourself. Democrats go down the street to Wendy’s, where you’re encouraged to order by prepaid package number. 
  • Republicans, more than Democrats, fear for the future of free enterprise. They prefer Allstate, which has mounted fear-based ad campaigns, to Progressive, which features Flo’s smiling reassurance. Democrats prefer Progressive to Allstate. They fear we’re losing a healthy environment. For them, Jeep trumps BMW, and Starbucks beats out Dunkin’ Donuts. Republicans see it the other way around. 
     For some retailers, it makes sense to acknowledge the vibrant political polarization and choose sides. For other retailers, it makes more sense to sidestep it. One way to accomplish this is to stock prototype brands—those which are most popular, usually because of marketing muscle. Coke was preferred over Pepsi by Democrats and Republicans alike.

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Party Right…Or Left or Middle 
Display Unfamiliar Brands with Prototype Brands
Attack with Credibility

Wednesday, June 20, 2012

Let Go of the Unprofitable Logo

A CBS MoneyWatch posting presented the case for assessing how well your store logo is working for you and for redoing a logo which doesn’t make the cut. I agree. A well-designed store logo can influence people of all ages.
      Researchers at University of Minnesota found that a prestige logo on even a mundane product generates confidence. For the young child, the right logo might be a picture of Hello Kitty to impress friends, while for the teenager, the choice could be a rock star or special heartthrob. The Minnesota researchers were evaluating what happens with adults, and determined a Massachusetts Institute of Technology logo works well.
     However, as you let go of the unprofitable logo, take care that you don’t make things worse. When clothing retailer Gap Inc. introduced a new logo in 2010, the reaction was monumentally negative. Within a week, Gap announced they were keeping the old logo.
     Tropicana Pure Premium orange juice changed logos to the new and then back again. The old one was a straw sticking into an orange. The new one was a glass of orange juice. It wasn’t that an overwhelming majority of shoppers liked the old image better. It was that Tropicana soon discovered the most vehement objections to the change were coming from their most faithful customers. You never want to offend your fans.
     Of the suggestions given in the MoneyWatch posting, here are two supported by experimental research:
  • Design it to appear consistently in a variety of formats. You could be using the logo on business cards as well as posters. It could be appearing in grey scale as well as in living color. However, the MoneyWatch advice was incomplete: It said to always make the logo easy to interpret. Research at Boston College finds that easy interpretation works if you want your logo to primarily project trustworthiness. But a logo that takes a little effort to figure out works better if you want to project innovativeness to consumers interested in innovation. 
  • Be distinctive. Researchers at Rutgers University, California State University-Long Beach, and Ohio State University measured the proportion of study participants who think exclusively of one brand’s products when asked about a given brand name. They found that a single exposure to a logo similar to the logo for the given brand name, but for a different business, diluted exclusivity about 35%. Logos should carry identity. 
For your profitability: Sell Well: What Really Moves Your Shoppers

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Design Business Logos For Fan Enthusiasm
Guard Against Trade Name Dilution
Heal Shattered Confidence with Playthings
Analyze Errors Accurately

Tuesday, June 19, 2012

Know What Irritates Your Shoppers

What drives your shoppers crazy? Know what the causes are, since these are the same negative experiences which drive shoppers out the door of your store, never to return. Sidestep prods to craziness by finding out in advance what sorts of things are irritating to shoppers and eliminating those things. But you may need to prioritize because you can’t correct all the problems at once.
     The National Retail Federation magazine Stores featured an article titled “Driving Shoppers Crazy,” which reported findings of a project conducted by Prosper Technologies. The project used a distinctive methodology: Rather than give the 6,000 respondents a list of possible complaints, the researchers asked each participant to write in the name of a store they judged to be providing bad customer service and then write what led them to that judgment. Prosper Technologies used content-analysis software to classify the responses.
     Here are the top four categories:
  • Rude, impolite, unfriendly staff. This was the most common type of complaint overall, although for older shoppers, it took second place to “Problems getting help.” Among young adults, almost 30% of shoppers complained that the person at the cash wrap was chatting on the phone or with another employee while ringing up the sale or was otherwise rude. 
  • Problems getting help. Shoppers are attracted to stores and away from e-commerce by being able to talk with polite salespeople and then by getting personalized help. Other research indicates that consumers are willing to trade away easy access to help if they can get substantially lower prices. But they don’t like it. 
  • Staff who aren’t knowledgeable. When customers know you’re out-of-stock before your sales staff do, the customer might think the sales staff are dumb bunnies. So it’s of concern that more than half of sales associates say that mobile devices and online shopping tools are allowing customers to be better informed than the sales staff are about a store’s inventory levels. 
  • Long waits to pay for the merchandise. Adequate staffing helps avoid this one. In addition, Harvard Business School research finds that mirrors in waiting lines make the time go faster, since people will get involved in looking at themselves. Merchandising the waiting line can also help for the same sorts of reasons. Young adults were notably less likely to complain about this one than other age groups. 
For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Impress Customers with Your Staff’s Expertise
Make Waiting in Line Interesting

Monday, June 18, 2012

Hope for Fears About Technology

Extend a hand of hope to consumers. A multinational survey indicates that a substantial number of them are worried about just the types of technology which can enable you to operate more profitably as a retailer. A MediaPost commentary noted that the fears were sharpest among the young adults called Millennials, Gen Y, or Echo Boomers by consumer researchers. Millennials are prime target markets for many retailers.
     The “Digital Life” survey, sponsored by Euro RSCG and conducted by Market Probe International, covered 19 countries, with a total of over 7,000 respondents. Millennials were defined as those between ages 18 and 34. About 51% of the overall sample consisted of Millennials, with an approximately equal balance between males and females.
  • More than one out of four of the respondents, and about one out of three Millennials, said social networking is making them less satisfied with their lives. In some cases, the reason given was envy, and envy can become a shopper motivation. But the underlying theme was a pessimism about technology in general. About 42% of the respondents said it’s too soon to tell if digital technologies will have a negative effect on the world. 
  • About half the number of respondents said they’re concerned digital technologies are impairing consumers’ critical thinking skills, and about two-thirds said that, with the overabundance of information available via digital technologies, people are losing the ability to prioritize. Unscrupulous retailers might view such dumbing down of consumers as wonderful openings to mislead. But such tactics, even if effective in the short-term, would come back to haunt a retailer who plans to stay open in town for a while. 
  • Consumers overall felt that the digital technologies hand extended by retailers toward them is now too often not to invite supportive contact, but instead to exploit the consumer. The Millennials had particular concerns about how hard retailers push consumers to surrender privacy when using digital technologies. 
     For you, the opportunities from all this are to reach out to consumers with hope, optimism, and a genuine desire to create a sense of community. Research findings from Quinnipiac University in Connecticut and Providence College in Rhode Island indicate that a retailer should state to customers what information you’d like to gather about them, how you’ll be using the information to make their individual shopping experiences more efficient and fruitful, and how you will safeguard the security of that information.

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Build Trust Before Asking for Information 
Sweep Millennial Women Off Their Feet

Sunday, June 17, 2012

Avoid Recommending If Strict Return Policies

Do you find it necessary to maintain strict return policies in your store? If so, research findings from Purdue University and Cornell University indicate that you should keep from offering unsolicited advice to shoppers about what to buy.
     All this might be seen as evidence that two wrongs do make a right. Retailers are usually advised to give personalized recommendations to shoppers and to maintain lenient return policies.
     The advice does still hold, generally. And the Purdue/Cornell researchers did find that giving recommendations to shoppers goes well with lenient return policies whenever what the customer gets turns out to be less than perfect. The result is more positive evaluations of products after purchase compared to what happens with the combination of strict return policies and ample retailer recommendations.
     The reasons for these outcomes have to do with what consumer psychologists call “locus of control” and “counterfactuals.” Locus of control refers to the party in the transaction the consumer holds responsible when usage of a purchased product shows it to have some negative attributes along with the positive ones. The consumer might say, “The salesperson’s at fault for not sufficiently pointing out the negatives when making the recommendation,” or might say, “I’m responsible for what I purchased because I had the opportunity to find out more before spending my money.”
     Counterfactuals are “what if” statements consumers say to themselves: “What if I’d asked more questions?” and “What if I’d shopped around more?” are examples of “upward counterfactuals.” They help the shopper feel better by giving ways to improve future shopping. Examples of downward counterfactuals include, “What if I’d been unfortunate enough to get a product with even more shortcomings?” and “What if I hadn’t discovered these problems with the product until it caused some real harm?” Downward counterfactuals improve the consumer’s outlook by leading to them deciding they escaped a worse situation than the one they have.
     When a retailer abstains from making recommendations to the consumer, the locus of control moves away from the retailer toward the consumer. Then if post-purchase problems arise with an item and there is a strict return policy, the consumer starts creating more downward counterfactuals than if there’d been a lenient return policy. The consumer holds himself responsible and says, “Well, at least it wasn’t worse.”
     If, in your community, you need to be closed-minded about accepting returns, also be close-mouthed about giving advice.

Click below for more:
Simplify the Shopping 
Sell More by Being Less Certain

Saturday, June 16, 2012

Discuss Family Advantages with Hispanic Women

U.S. consumers from Hispanic cultures pay special attention to the effects of their purchases on their families’ well-being. One form this takes now is diligent hunting by Hispanic women shoppers for the best possible prices. According to WSL/Strategic Retail, other shopping segments might be following, but the Hispanic women are leading notably:
  • About 75% use paper coupons to get the lowest price. Among non-Hispanics, the figure was 68%. 
  • About 54% buy discretionary items only if the items are on sale. The figure was 45% for non-Hispanics. 
  • Almost two out of three Hispanic women survey respondents said they’re putting the time into traveling further to shop if this saves them money overall. 
     Even if you don’t consider Hispanic women as the cutting edge of a trend to cut shopping expenditures, acknowledge that these shoppers are, in themselves, an important market. According to 2010 U.S. Census Bureau data, the Hispanic population has grown about 40% over the past decade, while the non-Hispanic population has grown only about 5%.
     To help preserve a pricing structure that yields good profitability for you, emphasize with Hispanic shoppers the advantages of your offerings to their families. This might require you to tweak your product line. For example, 43% say they’ll buy a pre-owned product if it lets them get a brand that they couldn’t afford new.
     The adjustments in your store should be a change in accent rather than dramatic alterations in what’s been working for you up to now. Here’s why:
  • The distribution of Hispanics in America is not uniform. About half the number of Hispanic consumers live in California and Texas. And within any city, Hispanic-Americans are more likely than Asian-Americans, for example, to live in primarily Hispanic-American communities. While American retailers overall will see their target markets include mushrooming numbers of Hispanic-Americans, this might not be the case for your store. 
  • Overall, there are still about four times as many white non-Hispanics as Hispanics in America. You succeed as a retailer by appealing to consumers’ values. There are some differences between those who identify with Hispanic culture and those who do not. You’ll not want to ignore the majority values system. You’ll want to gracefully accommodate both. 
  • Although the WSL/Strategic Retail report was widely released only weeks ago and the survey methodology looks to me to be sound, the data were gathered last December. It’s possible the report’s conclusions are out-of-date. 
Click below for more: 
Accent Values of Your Hispanic Target Markets

Friday, June 15, 2012

Entertain Exceptions to Discounting Rules

Your use of discounts should increase your overall profitability. Therefore, it might seem to be really bad business to surprise a customer with especially low prices on items the shopper had already intended to buy. After all, they’ll buy the items at the prices they had expected, so why give up any of the profit? But consumer behavior researchers at University of Arizona, Arizona State University, and University of Pennsylvania found that just such a practice, used with care, can end up building your profits.
     The reason is that customers who are grateful to you will buy more from you, and nothing brings out gratitude in a customer more than finding a surprisingly low price on an item the customer had already intended to buy. They’ll buy more from you over time, and they’ll also spend more than they’d originally planned to spend during the shopping trip where they found the surprise special.
     The researchers discovered evidence that what’s behind the extra purchasing is a desire to reward the merchant. It’s not just a matter of getting items at a better price. That’s why the shopping cart total goes up. And on top of all this, these shoppers become more likely to tell others about the excitement they experienced when in your store. That makes it more likely you’ll have those others coming to you as well.
     The key to doing this effectively is to maintain the element of surprise. Don’t discount most items on the person’s shopping list, and don’t stop advertising the low prices on those popular items which will draw traffic into your store. But knowing you offer surprise specials will motivate all the traffic to move up and down the aisles on a treasure hunt, and what better way than this to make shoppers aware of all the products you offer them?
     In most cases, you’ll design your discount policy to generate good will because you’re aiming for repeat business. Here, too, there are exceptions. In certain instances, you’ll aim to draw in one-trip business from a consumer demographic slice who are unlikely to visit your retail outlet at all. Consider the admission fee structure at the International Quilt Study Center & Museum at University of Nebraska-Lincoln. Want a senior discount? You won’t get one there. But if you’re a teenager, you can count on being charged only half the regular price to get in.

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Earn Goodwill in Giving Discounts
Have Unannounced Discounts on Common Purchases

Thursday, June 14, 2012

Ferkauf Shnell!

Eugene Ferkauf set off waves of trouble for small retail businesses. His recent death, though, is an occasion to ponder bold tactics which might help many retailers succeed. A New York Times article, rich with details, started me recalling these:
  • Mr. Ferkauf founded the E. J. Korvette store chain, which deeply discounted merchandise, pushing countless smaller retailers out of business. Two years after consulting with him, Sam Walton founded Wal-Mart. To survive and thrive in the face of competition, let us, like Mr. Ferkauf did, track the trends to create the future. He saw the growth in disposable income of consumers after World War II, the desire to move from cities to suburbs, and the transition in power from newspaper and radio advertising to television advertising. 
  • Move forward to preserve opportunities. The NYT article recalls how on his second date with Estelle Silverstein, Mr. Ferkauf proposed marriage. In business, too, he acted quickly, exemplifying a ready-fire-aim approach which will suit some retailers ideally. His drive to discount dramatically led to a business estrangement from another retailer quite close to him—his father.
  • Arouse drama and create stories that get people talking about your store. In his personal life, the story became that his marriage proposal consisted of him presenting Miss Silverstein with a small case carrying the monogram E S F, as he said the suitcase would suit her because she’d be marrying him. On the business front, legends arose as to how a man named Eugene Ferkauf would have a store named E. J. Korvette. “It consists of the initials of eight veterans of the Korean War,” some people claimed. Mr. Ferkauf’s version—that the “Korvette” was an intentional misspelling of the corvette class of naval ship—was equally memorable because it made no more sense. 
  • Manage the clutter strategically. Korvette stores had a minimum of customer service and an abundance of clutter. This isn’t a success formula for all retailers, but do ponder how you manage clutter and how this impacts your profitability. Over the past year, Wal-Mart has been intentionally backtracking on the clutter cleanup they began earlier. 
  • He was a benefactor to his community. The name of the Ferkauf Graduate School of Psychology recognizes his contributions of funds and management expertise to Yeshiva University. 
  • The most successful retailers have selling in their blood. Mr. Ferkauf had it in his name. In Yiddish, “Ferkauf” means “sell.” 

Click below for more:
Distinguish Accelerating from Slowing Trends 
Fire with Small Steps Before Aiming 
Mythologize Your Store 
Clear Up Clutter Ambiguities

Wednesday, June 13, 2012

Expand Marketing to Credit Risk Consumers

For much of retailing, a resurgence is being led by the luxury segment. Still, it’s important for you to remember potential customers toward the bottom of the pyramid.
     This is what a number of wireless carriers are doing. Larger ones like Verizon Wireless and smaller carriers like Cricket are increasing their marketing to people who don’t require a solid credit rating in order to use the service. The traditional business model for these carriers has been to sell a subscription. As part of the two-year contract, the purchaser gets a phone at a great price. Now the growth will be coming with prepaid plans in which there’s no commitment, the companies are predicting. A USA Today article reports that experts say this market will increase about 7.5% each year for the next four years.
     The trend for long-term contract customers is in the opposite direction. The numbers dipped for the first calendar quarter of 2012 compared to the last calendar quarter of 2011. This is the first quarter-to-quarter decline in the history of the wireless industry.
     The USA Today article views the move to prepaid as expanding the market to people who fear commitment. Doing this makes sense to me from a shopper psychology angle, but I’d dig deeper to determine why there is this fear of commitment. My guess is that it has to do with the continuing shocks to personal finances coming from the Great Recession. Many consumers have good reason not to be as sure about their credit worthiness as a few years ago, and those granting the credit ratings share in the doubts.
     The connections between retailers of wireless services and the lower levels of the economic pyramid have been around for a decade. In 2002, global consulting firm Booz Allen Hamilton published "The Fortune at the Bottom of the Pyramid." The paper argued that because there are so many poor people in the world, they are a lucrative market for retailers, even if each person spends only a very little. An example of the viability of this view was the success of “cell phone ladies” in Third World countries who received small, no-collateral loans from Grameen Bank to run businesses on the model of selling brief use of the phone to villagers.
     What are ways you might expand your target markets toward the bottom of the pyramid, to those who are credit risk consumers?

Click below for more: 
Feature Economical Justified Luxuries 
Subscribe to Community Supported Retailing 
Credit the Appeal of Cash 
Give Low Income Customers Dignity

Tuesday, June 12, 2012

Boss Employees Around At The Start

Supervisors in retail stores get the most from their employees when they invite the employees to huddle with them in making important decisions. But it’s best for a supervisor to be highly bossy when new.
     This is the conclusion of organizational researchers at Clarkson University. Leaders hired from the outside to oversee an existing team are often granted low status by the direct reports. And new leaders promoted from the ranks can have difficulties changing perceptions from a role of equal authority to one of hierarchical authority.
     Set the course and tell the subordinates what to do, say the researchers. In one study, inexperienced leaders were rated almost 20% higher on effectiveness when directive than when collaborative.
     In a second study, participants were assigned to teams. The team members weren’t told that their leader had been instructed what management style to use. With some of the teams, it was a highly participative style, and with the rest, a highly directive style. For half the participative teams and half the directive teams, the team members were given information designed to convince them to grant the leader high status. The rest of the teams were given information designed to convince the members to doubt the competence of their leader.
     All the rigmarole did prove a point: The low-status leaders who were highly directive rather than participative received higher ratings from the team members on scales of effectiveness. On objective measures, too, the teams with highly directive low-status leaders did better. It wasn’t a large difference—17%—but a 17% difference still can give a retailer’s edge.
      These differences did not appear when the team leader had high status. Supervisors who have established themselves can ask store staff for advice, with it appearing to be a method of collaborative teambuilding. However, if the newbie asks for advice, it escalates the doubts about the supervisor’s competence.
     Even with established leaders, there are times to be bossy. Let’s say something has quickly gone horribly wrong in your retail business. It’s serious enough that you’ve switched from open minds mode—in which you invite creative ideas—or open roads mode—in which you’re moving ahead assertively—to open wounds mode—in which you must take prompt, decisive corrective action. Fulfill the role of the boss. Running a retail store is, at best, a collaborative endeavor, but the organizational chart is not that of a democracy.

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Ask Customers & Staff for Ideas
Draw Out Advice & Opinions from Shoppers
Bind Yourself to Your Plan

Monday, June 11, 2012

Raise Prestige of House Brand Premium Label

Consumers think differently about private label, house brands than national label brands.
     Researchers at Monash University explored the situation in which a retailer introduces a value version of a house brand to add to a premium version on the shelves. Here’s what happens:
  • Prior to introduction of the value version, the premium version is likely to be considered by consumers to be of standard, not premium, quality. 
  • After introduction of the value version, consumers’ quality assessments of the premium version increase. 
  • If a premium version is introduced to an existing value version, the assessment of the value version doesn’t change noticeably. 
  • The price consumers expect to pay varies directly with their perceptions of the quality. 
     On the other hand, researchers at Miami University and France’s ESSEC Business School found that addition on store shelves of a value version to a premium version of a national label product will lead to lower quality ratings of the premium version. The researchers used as examples the introduction by Charmin of a lower-quality Charmin Basic product and Foster’s Beer producing a lower-quality Foster’s Grog.
     In the current price-sensitive retail marketplace, it is good for you to make bargain alternatives available. At the same time, you want to preserve the quality image of items that yield higher per-unit profitability. The Miami/ESSEC findings and other research suggest ways to reduce the damage to the image of the higher-priced national brand alternative:
  • Check that the value version does still competently fulfill functions the shopper is seeking. The price is lower, so the purchaser expects compromises. But if there is not sufficient value, do not carry the item.
  • In ads and in-store selling, give shoppers examples of the breadth of product line you offer. This message encourages consumers to think of the bargain alternative as an opportunity to choose rather than as a reflection of the brand quality.
  • Put more gusto behind the marketing of the better and best versions than behind marketing of the good, but bargain, version. Consumers have a natural tendency to credit the brand with characteristics of its best example. Support this tendency.
  • Physically segregate the bargain version from the flagship version and any premium version. A stigma can rub off from cut-rate merchandise to other merchandise that is adjacent. 
Why the difference between house brands and national label brands? Much of it is due to the heavy manufacturer advertising for the nationals.

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

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Insulate Bargain Alternatives’ Image Damage

Sunday, June 10, 2012

Keep Polling Shoppers About Your Pricing

Here in the U.S., we’ve been digesting the results from primary elections while fortifying ourselves for the political shenanigans in the lead-up to November’s big vote. Across the pond in London, excitement’s building about the Olympic Games starting there the end of next month. Mix elections and Olympics together, and you’ll get a provocative perspective proposed by marketing and business researchers at University of London and Harvard University: Have your shoppers vote on what prices you should charge.
     The challenge for the London Organising Committee of the Olympic and Paralympic Games was the need to set ticket prices well in advance of the events. Preparing and selling 8,000,000 tickets takes time! So during Spring 2011, people were invited to submit requests for tickets at price points ranging from £20 to £2,012. When the requests came in, the Committee was able to evaluate demand and decide on the number of seats to allocate at each price level.
     Demand was not the only consideration. There had to be enough high-priced seats to offset losses from sale of the lowest-priced tickets. Those lowest-priced tickets were there because the Committee was committed—committed to their slogan, “Everybody’s Games.” They knew Londoners would be saying, “Our tax monies paid for building the Olympic Games facilities, access roads, and the rest. For many months, we suffered the bother of the construction. We expect to be able to purchase tickets within our budget so we can see the events.”
     The people sending in their requests for tickets were voting on how much they’d be willing to pay. Might it work for you to ask your shoppers how much they’re willing to pay?
     Actually, whenever you offer items at specific prices, you’re asking your shoppers how much they’re willing to pay. If the price you’ve set is too high, you won’t sell many units, so you’ll know to reduce the price. Maybe you’ve not thought about this as polling shoppers about your prices. The London/Harvard researchers suggest you do. This should remind you of the importance of educating the electorate.
     The London Organising Committee of the Olympic and Paralympic Games announced that everyone purchasing a ticket would be able to see the event, but those who paid more would have a better view. “Now what are you willing to pay?”
     How well are you explaining the reasons for variations in pricing among similar items in your store?

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Decide Whether to Limit Purchase Quantities

Saturday, June 9, 2012

Be Sorry, Not Misunderstood

Seven-year-old Bri wanted to apologize to Santa Claus. Rather than put pencil to paper, she put fingers to keyboard, posting her note on emailsanta.com. The note read, “I’m sorry for putting all that Ex-Lax in your milk last year, but I wasn’t sure if you were real. My dad was really mad.”
     Since first coming across this tale, I’ve heard it in enough versions to convince me “Bri” might actually be short for “Brian,” that mischievous CPA who loves to post prank messages on all the good websites. Even so, the story lets me introduce the topics of “I’m sorry” and misunderstandings.
     Researchers at University of Southern California, Northwestern University, and Nagoya City University point out important cultural differences in the understood meaning of “I’m sorry.” Specifically, consumers who identify with an American culture understand “I’m sorry” from a merchant to mean, “I accept responsibility for having done something wrong.” On the other hand, consumers who identify with a Japanese culture understand the direct translation to mean, “I regret this occurred.”
     A survey of college students from the two cultures finds the Japanese apologize about 245% as much as Americans do. In Japan, the apology is more likely to be expressing sympathy and a desire to preserve the relationship.
     Then there’s Hong Kong, where business, apologies are common enough for them to be considered meaningless rituals. In India, the equivalent of “I’m sorry” is heard rarely in business, which could give it high significance—or arouse suspiciousness—on those unusual occasions when it is heard.
     That’s within a culture. If we cross cultures, we’ll also need to confront the issue that to someone learning English, “I’m sorry” could be misunderstood to mean, “I feel sorry for you,” which might be considered a demeaning sentiment.
     Regardless of your culture and language, make your “sorry” a commitment to helping to remedy the problem. Maybe, it is best to avoid using the word “sorry” at all.
     A few years ago, an item Best Buy intended to sell for $1,699.99 was offered online, in error, for $9.99. When the problem was discovered, Best Buy promptly shut down order-taking for the item, then posted a statement saying, “We sincerely apologize for this error and make every effort to ensure issues like this do not happen…. While we are truly embarrassed that this occurred, Best Buy will not be able to honor the $9.99 price.”

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Apologize to Customers for Retailing Errors 
Produce Aha Experiences for Shoppers

Friday, June 8, 2012

Dread the Dead, Sell It First

With Expiration Date Based Pricing (EDBP), the retailer lowers the price of items as the expiration date approaches. The thought is that it’s better to sell the item at a reduced profit than not to be able to sell it at all.
     Researchers at University of Miami, University of Leeds, Athens University of Economics and Business, and ALBA Graduate Business School analyzed EDBP among grocery retailers. However, the practice is not limited to that sector. At the time of Sy Syms's death, his company was operating thirty stores in which, stamped on the back of each price ticket, was the date the item was placed on the sales floor, and stamped on the front was a series of dollar amounts in descending order. Every ten selling days, the price moved to the next lower amount on the ticket. Fashion, too, is perishable.
     Research findings from that tri-national group plus other research on the practice suggests the following about EDBP:
  • If your customers are accustomed to your using EDBP throughout your store and you stop using it, this won’t markedly change customers’ perceptions of the quality of merchandise you carry. 
  • If your store starts using EDBP throughout, shoppers loyal to the store will begin to consider the store to now have somewhat lower-quality merchandise. 
  • This problem can be eased by building trust, such as by having a liberal return policy. Encourage purchasers to return for exchange any unused product that goes beyond its expiration date, even if purchased with the EDBP discount. Researchers at Baruch College find that after someone acquires a product and works through any initial regrets, they hesitate discarding the product past the expiration date. As a result, they’ll use an inferior product, becoming less likely to purchase the item and brand from you in the future. 
  • If EDBP is featured as a socially responsible practice to reduce waste, its use can even generate positive consumer evaluations. However, your customers who take home a product with a date on it can easily be confused as to what the date indicates. “Expiration date” means the last date a food should be eaten or used. But your customers might also encounter “sell by,” “best if used by,” “guaranteed fresh until,” the often cryptically-formatted “pack date,” and the “born on” seen on beer bottles. Confusion can irritate customers. Prepare your staff to answer questions about what these expiration and freshness dates mean. 

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

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Purge Expired Products 
Make Your Shoppers Feel Smart

Thursday, June 7, 2012

Listen to the Voices of the Customers

The small to midsize retail business can’t stock every possible product or provide every possible service. There’s not enough room on the shelves or enough opportunity to keep all those skills sharp. The advice to carve out a niche is not just so you can distinguish your store. It’s also so your operations can be cost-effective.
     Deciding what to carry means prioritizing the needs of your customers and potential customers. In the early 1940’s, while on the faculty at Brooklyn College, psychologist Abraham Maslow described a hierarchy of human needs.
     Four characteristics of Prof. Maslow’s needs hierarchy are important to retailers:
  • It’s based on his conversations with people and observations of their behavior. He steered away from elaborate theories. 
  • Prof. Maslow assumed that people are driven to improve themselves in positive ways. Many of the other needs hierarchies assumed people are motivated chiefly by their desires to escape unpleasantness. Retailers do best to accentuate the positive, even when appealing to shoppers in negative situations. 
  • People are most comfortable making purchases to satisfy higher level needs when they feel their lower level needs are being satisfied. But needs at the lower levels, such as the need for safety, will never be satisfied permanently. Consumers will always be looking for ways to replenish satisfaction of those needs. 
  • The same purchase of a product or service might satisfy more than one need category, and each need can be met in a broad range of ways. 
     Over the years, other psychologists refined Prof. Maslow’s hierarchy. Here’s roughly where the hierarchy stands these days, starting with the most basic needs and moving to the ones it could take a lifetime to even partially satisfy:
  • Breathing freely, avoiding hunger, sleeping comfortably 
  • Staying safe from injury 
  • Having friendships 
  • Being respected 
  • Understanding how the world operates 
  • Appreciating beauty
  • Achieving one’s full potential 
  • Helping others to achieve their full potential
     “Voice of the Customer” has become a term used to remind those who sell that they should attend to the needs of those targeted for a sale. Researchers at University of North Carolina suggest the following questions to ask:
  • What is the essence of the consumer need? 
  • Why does the need exist? 
  • Which benefits and attributes are mandatory? 
  • Which benefits are consumers willing to trade off? 
  • What benefits are available to the consumer? 
  • What benefits does the consumer most desire? 
  • What factors might drive purchase decisions in this category? 

Click below for more: 
Define Your Niches by Your Shoppers’ Desires 
Recognize a Need, Then Fill It 
Broaden Target Markets Beyond Yourself

Wednesday, June 6, 2012

Influence Who Uses Gift Cards

Many people buy gift cards to use themselves. Or they like a deal where a bonus card comes with the gift card purchase. One for you, one for me. Outback Steakhouse restaurants have been regularly giving a $20 reward card, with a time limit on its redemption, along with each $100 gift card.
     Research at Stanford University and Yale University suggests this type of bundling of reward card and gift card will be most attractive to consumers when one of the pair is seen as serving a utilitarian purpose—satisfying the obligation of purchasing a gift for somebody else—and the other is seen as hedonic—giving oneself the pleasure of a no-additional-cost acquisition. It’s like buying a dozen roses in a gift bouquet and also receiving an arrangement of six lilies.
     But who ends up getting the roses and who gets the lilies? Does the purchaser keep the $20 reward card or the $100 gift card? Researchers at University of North Carolina-Charlotte, University of Electronic Science and Technology of China, and University of Texas-Dallas say the answer to those questions will impact your profitability from the use of the reward and gift cards.
     See how much you can influence the decision, keeping in mind these questions I’ve used the North Carolina/China/Texas findings to generate:
  • Who will be more attracted to your high-margin items? Ask the gift card purchaser what sorts of items she likes and what the gift recipient might like in your store. A profitable move for you is to have the larger denomination card go to the one who prefers the high-margin items. This might not be the same one who will spend the value of the gift card quickly. 
  • Who is more likely to buy large quantities of items in advance and stockpile them? That one is the candidate for the smaller denomination card if you’re aiming for greater profitability. With the same reasoning, the researchers would recommend that if you offer a gift card as a reward for a large purchase amount, you consider the type of shopper you have: If your shoppers are usually constrained in their spending, offer a gift card at equally spaced purchase amounts—a $20 card for each $100 spent. But if your shoppers are usually ready to spend freely, the profitable route for you is to offer only one card—a $20 card for the first $100 spent. 
For your profitability: Sell Well: What Really Moves Your Shoppers

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Redeem Gift Card Profitability 
Bundle Utility, Discount Hedonism

Tuesday, June 5, 2012

Credit Those Money-Back Guarantees

A common practice in retailing is to accept products back for a full refund, even if the product has been partially used. The retailer might insist on issuing a store credit for a future purchase rather than making a cash refund. But retailers know a customer is more likely to make purchases at a store offering money-back guarantees (MBGs).
     Researchers at University of Muenster, Catholic University of Eichstaett-Ingolstadt, and University of Texas-Austin have documented how influential the MBG can be. The MBG affects both the shoppers’ logic and their emotions. At the logical level, it is insurance, letting the shopper know that if anything goes wrong, the cost to make things right will be limited to getting the remnants of the merchandise back to you. “Just bring the item in for a full refund.”
     At the emotional level, the influence of the MPG is assurance. When you, the retailer, offer your customer a MBG, you’re encouraging the customer to have high trust the product will deliver on what’s been promised. The researchers find that this second prong—the emotional—is more influential than the logical.
     Because of the power of the MBG, feature this policy in your marketing. Emphasize the assurance you’re offering, with the insurance angle as a subtheme.
     A MBG is a multi-part promise to your customers:
  • What you are promising you will do 
  • The rules for deciding if you’ve kept that promise 
  • The remedies available to the customer if you fail to keep your promise 
     There’s a fourth part as well:
  • How you will answer the customer’s questions about each of the first three parts of the promise. The MBG is one tool for projecting your marketing identity to your target customers. Use your explanation of the guarantee to project clearly. 
     Stay aware of the emotional prong as you analyze what you’re promising and make updates in both the promises and the explanations whenever necessary. There are “serial returners” who use items and then come back to the store asking for a full refund. Survey research finds that many of these consumers do not see what they’re doing as cheating. They’re not consciously attempting to defraud the retailer.
     When you set the rules for MBG returns and give explanations to the serial returners, you’d like to keep them as customers. Show respect, concern, and empathy as you are protecting your business from exploitation, even unintentional exploitation.

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Guarantee with Care 
Present Warranties as Insurance, not Assurance

Monday, June 4, 2012

Tier Your Loyalty Programs Apart

Set different levels in your loyalty programs so that your especially profitable customers gain recognition and additional rewards, providing motivation.
     You might be concerned that if you add levels above what you now have, this will irritate your current frequent shoppers. Researchers at University of Pennsylvania and University of Southern California explored what happens when a retailer introduces new award levels in a loyalty program. Suppose that up to now, you’ve had a gold level at the top. Now we’ll add a platinum level above for which only some gold members will qualify because the purchase thresholds are higher. The researchers found that consumers actually prefer retailers who offer elite loyalty program tiers, even when those consumers know they’re unlikely to themselves qualify.
     Here are some tips for maintaining multitier loyalty programs, based on experimental research findings and retailer experiences:
  • For movement to the next level, set thresholds which are out of grasp, but within reach. Consumers dislike a feeling that you’re forcing them to buy what you’re selling. In general, they don’t object at all to being tempted, coaxed, or even challenged by thresholds they feel they can achieve and that they’ve earned. 
  • Provide lots of ways to earn credits for movement to the next level. Referring a friend earns points. “Get extra credit for coming to special event sales, even if you end up purchasing nothing.” The objective is to maintain momentum and a sense of achievability. Do assess the profitability that comes from these non-purchase sources of credit, though. Discontinue those which aren’t working. 
  • Set thresholds on the basis of continuing activity, not lifetime activity with you. You wouldn’t ever want to completely drop a customer from loyalty program participation unless the person asks to be dropped. The loyalty program serves as a way of tracking the shopper, not only for rewarding good customers. However, you maintain purchasing motivation by requiring ongoing actions in order to receive the elite benefits. 
  • Include among the reward choices for elite levels a few options which allow your customer to show off and you to show them off. A five-minute shopping spree in front of other customers or an extravagant event at the customer’s home with media coverage would bring attention to your program. Some of your clientele would absolutely hate this attention. But other would love it, and the publicity can motivate consumers to aspire to those high levels. 

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Help Loyalty Program Members Progress 
Set Moderately High Purchase Thresholds

Sunday, June 3, 2012

Catalog the Advantages of Catalogs

A recent CNBC.com posting documents how catalogs remain an important retailing tool:
  • During 2011, almost 90 million Americans bought an item directly from a paper catalog. 
  • J.Crew has over 300 stores, but still mails out 40 million catalogs annually. 
  • Another apparel retailer, Express, began mailing out catalogs a year and a half ago. They now say that both a paper catalog and an online catalog work for them, but the paper catalog works better in driving sales. 
     Clearly, paper catalogs are less important than they were decades ago. One of the first items to be jettisoned when Sears and Montgomery Ward hit the financial rough seas was their Big Books.
     In my opinion, the percentage of retail sales made from paper catalogs will decrease over time, accompanying decreases in bricks-and-mortar store sales. Consumers will continue moving toward purchasing online. However, just as there will always be a place for the B&M store in the consumer’s purchasing plans, there will always be a role for the paper catalog.
     Research suggests that paper catalogs are at their best with items where sales benefit from large picture spreads and an abundance of textual description. The pictures can be gaudy, and the textual description fanciful. In fact, that could be for the better.
     A Bloomberg.com posting about Stauer, the print catalog and ecommerce retailer of luxury items, described how to do it. Owner Mike Bisceglia was quoted as saying, “We buy large stones with less clarity but at a better price. Guys like being able to afford a big, beautiful 50-carat ruby necklace.”
     Claiming you paid a good price is itself part of the showing off—even if not to the recipient of the gift. Mr. Bisceglia is also quoted as saying, “There are all different levels of pearls, but 99.9 percent of people can’t tell the difference between a string of pearls that goes for a couple hundred dollars and the thousand-dollar pearls.”
     Give the customer tales to tell about the items. The first words in the story count for a lot. In the Stauer catalog, the description for a jewelry item began, “This story breaks my heart every time….” and the one for a watch kicked off with, “When it comes to symbols that stir the heart, you can't beat the American flag.”
     With compelling illustrations and phrases, a paper catalog could be an essential component in your multichannel marketing strategy.

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Distinguish Show-Offs from Connoisseurs

Saturday, June 2, 2012

Hear the Language of Your Shoppers

In AAMCO’s “We Hear You” commercials, people describe their car problems to the AAMCO technician by imitating the noise the car is making. The notion is that this retailer can diagnose your needs, whatever language you’re using.
     A few years ago, I was praising the owner of a San Francisco hardware store located in a neighborhood with many Spanish-speaking residents. “You put a lot of attention into ensuring that your sales staff are fluent in both English and Spanish,” I said. He nodded and then replied with a smile. “I also want them to be fluent in sign language.”
     “Oh, do you have lots of deaf customers?”
     He pointed his two index fingers directly at me, the fingers about three inches apart. Then he began to rotate each finger in an up-and-down circle. “No, not a lot of deaf customers. But we do have a regular stream coming in and telling us things like, ‘I need a replacement part for my ceiling fan. It’s about this long and turns around like this.’ To work in a hardware store, you must understand sign language.”
     Often, those accompanying a shopper on the trip can serve as translators, or at least encourage the shopper to state needs and wants in a range of ways. This is one of the many reasons to tempt customers to shop with you in groups. You’ll benefit from what you hear them talking about. Snoop on the chatter.
     At the same time, keep in mind that you might misinterpret a group’s messages to each other. Researchers at University of Illinois-Urbana-Champaign had thirty students with a music education major and thirty students with a physical education major read a longer version of the following story:
They couldn’t decide exactly what to play. Jerry eventually took a stand and set things up. Karen’s recorder filled the room with soft and pleasant music. Finally, Mike said, “Let’s hear the score.” They listened carefully and commented on their performance. 
     The music education students tended to believe the story described a rehearsal session of a woodwind ensemble. On the other hand, the P.E. students were more likely to say this was a description of playing card games.
     At the end of the latest AAMCO “We Hear You” spot, the guy punctuating his description of car troubles with strange sounds then explains to the puzzled technician that he was just clearing his throat.

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Friday, June 1, 2012

Demand Accountability in Contributions

Asked by journalist Matthew Bishop if he’d someday like to be on a SpaceX ship to Mars, founder of SpaceX, a 40 year-old Elon Musk, replied, “I’d like to go to Mars. Absolutely. I think it would be great to be born on Earth and die on Mars. Just, hopefully, not at the point of impact.”
     Mr. Musk wants to have a lifetime impact, however, through philanthropy. Mr. Bishop’s interview of Mr. Musk occurred at a Giving Pledge meeting which also included Warren Buffett, Bill and Melinda Gates, Ted Turner, Steve and Jean Case, and Pierre Omidyar. Mr. Buffett reported there that 81 people had so far signed the Giving Pledge, promising to donate at least half their wealth.
     With conditions. According to an article about the meeting in The Economist, those conditions are that there be accountability for how the money is used. A hot topic at the gathering was something Mr. Case called “impact investing,” to refer to philanthropy which does good while making profits. A more general theme was to emphasize the difference a donation truly makes over how much is donated. A more specific theme was the value of private-public partnerships in making a difference.
     I expect that few small to midsize retailers are in a financial position to be invited to the next Giving Pledge confab and asked to learn about contributing half their wealth. Still, I also expect you will be in a position to contribute to your community and beyond. So please think about impact investing. How can your contributions make the most profitable difference? How will you know what difference they’ve made and how profitable that difference is?
     For me, the answers to those questions have come from program evaluation. Demand accountability from the programs to which you make contributions. 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. The answers to the more complex questions give you an understanding of the “why,” not just the “what.” This allows for the perpetuation and improvement of programs. The spirit of impact investing is sustainability. By making a positive difference in easily identifiable ways, funded programs can persevere.
     All this is more likely when your contributions are to specific programs as proposed by the nonprofits rather than to organizations for use however they choose.

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

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