Thursday, January 31, 2013

Cost Past Customer Satisfaction

An article in this week’s Time magazine bemoans the costs of shoppers switching retailers. “New ways companies are getting us to stick with lousy service,” reads the article title.
     When those “companies” are large retail businesses, the small to midsize retailer has an enhanced opportunity to woo new customers by giving excellent service. We’d like to minimize switching costs for shoppers who want to change from another store to shopping with you. At the same time, we’d like to maximize costs to shoppers who want to switch from your store to another.
     Research findings from Santa Clara University, University of Maryland, and University of Texas-Austin found that switching costs exert a stronger influence than does customer satisfaction on whether a consumer will continue to patronize a retailer. The researchers also identified three sorts of switching costs in retailer-to-consumer and business-to-business sales:
  • Procedural. The loss of time and effort. Consumers are uncertain how things will work out with the new retailer. It takes time to gather information and mental effort to analyze it. The end consumer asks, “How difficult will it be for me to change my habits if I shop at the other store?” The business consumer asks, “How hard will it be for me to set up new accounts if I change retail suppliers?” A retailer can increase procedural switching costs by satisfying a broader range of the consumer’s needs. 
  • Financial. The loss of money or money equivalents. “Will I lose frequent shopper points, quantity purchase discounts, or deposits if I switch now?” “Are there deposits I’ll need to make to do business with a different retailer?” Financial switching costs are higher when the retailer has multilevel loyalty programs and purchase protection plans. 
  • Relational. The loss of a steady identity which comes from association with the retailer. Customers of small to midsize retailers enjoy seeing store staff they recognize and who recognize them, or even call them by name. A barrier to switching is the consumer’s discomfort with having to become acquainted with a new set of store staff. In addition, people often augment their self-identity using the personalities of the stores they frequent. For this reason, changing stores can be psychologically disruptive. If your customer has done business with you for a long time, the relational switching costs are higher. When you continue to offer distinctive products and services, you’re building resistances against your customers abandoning you. 
Click below for more: 
Switch Thinking About Switching Costs

Wednesday, January 30, 2013

Flip Off Showrooming Using Second Opinions

Consider a flip-around tactic which can work for all sorts of retailers, although I’ll start by using a health care example: Let’s say you run a medical clinic and face the reality of prospective clinic patients going online to see if they can diagnose and treat their physical maladies on their own before consulting with you. “Health Online 2013,” a project of the Pew Research Center says 35% of American adults use the internet to try to figure out what medical condition they, a family member, or someone else might have.
     As the medical clinic operator, do you have a problem with that? If so, instead of considering this internet research as a customer traffic bottleneck, think of it as qualifying the prospects for your services. The patients who do come to your clinic arrive with motivation and information. To be sure, the information might be erroneous. In the Pew study, about one out of five online diagnosers followed up by talking with a clinician who did not agree with the diagnosis or gave a different opinion. That’s where the shoppers’ motivation comes in. You can document your value by satisfying their drive for accuracy. In fact, you might decide to encourage shoppers to do their research before coming in.
     This flips showrooming around. Instead of consumers coming to you to get information and then purchasing elsewhere, the consumers get their information and then come to you. You’re charging for a second opinion. Staying with health care examples, ExpertConsensus is an example of one way to do this. A patient diagnosed with lung cancer can contract with ExpertConsensus to convene a panel of top specialists to critique and possibly suggest augmentations in the treatment plan developed by the patient’s physician.
     Giving second opinions is nothing new or unusual in product and services retailing. Consumers shop around and ask for free quotes. They’re collecting second, third, and fourth opinions. The true value-added from additional opinions is the consumer’s peace of mind that they have made a great purchase decision.
     Generalizing beyond health care, use the flip-around of showrooming to highlight the post-purchase extras your store has to offer which are challenging to find online. Setup at the home or business. On-site training, for a fee or as part of a large purchase. Without grandstanding, display your expertise. You might not get this one sale, but the consumer will build admiration.

Click below for more: 
Sell Second Opinions 
Showboat a Bit with Showrooming Shoppers

Tuesday, January 29, 2013

Dress for Profitable Staff Performance

The clothing you and your staff wear when serving shoppers affects not only the shoppers’ impressions of you, but also your impressions of yourselves. Both those can influence your retailing performance.
     Researchers at Northwestern University had people put on a white lab coat and complete tests of perceptual attention. Those people told it was a “doctor’s coat” did better on the task than those told it was a “painter’s coat.” Another set of people, who only looked at the “doctor’s coat,” but didn’t put it on before the task did not do better than people not shown the coat. The wearing of the coat combined with the symbolic significance of the coat changed people’s thinking and behavior.
     The test of perceptual attention consisted of looking at two photos which were slightly different and identifying those differences. This specific task is different from most of what you ask yourself and your staff to do when serving shoppers. In addition, the research study didn’t look at whether the effect wears off when a person wears on and on the same clothing day after day.
     The general principle still holds, though. What we wear affects how we act. A couple of years ago, the British Broadcasting Corporation got static for allowing female newsreaders to show lots of leg and the men to wear turned-up jeans. Older viewers recall that when Lord Reith was in charge, even the newsreaders on radio had to wear dinner suits. The objective was to give the news reading the proper gravitas.
     There’s an indirect effect, too. What we wear affects how people respond to us, and that influences our retailing behavior. Desmond Morris, whose career work is central to the field of evolutionary psychology, wrote, “It is impossible to wear clothes without transmitting social signals. Every costume tells a story, often a very subtle one, about its wearer. Even those people who insist that they despise attention to clothing, and dress as casually as possible, are making quite specific comments on their social roles and their attitudes towards the culture in which they live.”
     And their attitudes towards the culture in which they work.
     Employee dress standards are part of the service we offer customers. Take a leadership role in deliberatively designing dress codes for your stores, offices, warehouses, and outside sales teams. Think through the functions dress serves for you and incorporate those in the standards.

Click below for more: 
Design Dress Codes Deliberately 
Accessorize to Project Expertise

Monday, January 28, 2013

Accent the Emotions when Imminent Usage

Ask shoppers how soon they plan to start using what they’re considering. Knowing this allows you to present the most compelling balance between desirability and feasibility benefits, between the emotional appeal and the objective assessment. Whether in advertising, signage, or talk, you don't have time to tell the prospect everything. Home in on what makes a sale which will benefit both the purchaser and your bottom line.
     About one month prior to the graduation ceremony at a college, researchers at Columbia University and Singapore Management University described to groups of juniors and seniors at the college two sorts of apartments, then asked each of the students to say which apartment they’d prefer if actually renting it upon graduation.
  • A small apartment attractively decorated, with pretty views out the windows 
  • A large apartment located close to activities the graduate enjoys 
     The college seniors were more likely to select the first alternative than were the college juniors, whose graduation was further in the future. The researchers suspected this is because decisions on purchases consumers plan to use soon are based on emotional assessments. On the other hand, the research evidence suggested, if the consumers won’t be using the purchase for some time, they’ll place more importance on an objective, non-emotional assessment.
     Other research indicates that ease of use is an important component in the emotional appeal. When customers shop for a product or service for future use, they'll pay special attention to the distinctive features. But when they plan to put the item to work soon, they're especially interested in ease of use. That's true across cultures. Researchers at University of Illinois and Korea University Business School explain that when, for instance, people are looking at word processing software they'll start using in a few months, they give great weight to the range of capabilities of the software. However, if they plan to start using the software within a few days, their primary criterion is ease of learning the software.
     In some cases, you can guess how soon the shopper plans to start using the purchase. Certain items are likely to be last-minute searches. Floral bouquets and hot water heaters come to mind. With these, you don't need to depend on sales staff contact to get the message across. In your advertising and signage, feature ease of delivery, ease of installation, ease of learning, and other angles on ease of use.

Click below for more: 
Sell Ease of Use to Last-Minute Shoppers 
Emphasize Emotions with Older Consumers 
Appeal to the Heart 
Satisfy Sad Shoppers with Prompt Rewards

Sunday, January 27, 2013

Respect Your Elders

Ten million people just in America alone have primary caretaking responsibility for their elderly parents, according to researchers at Oregon State University and Bordeaux Management School. Americans 85 years and older are the fastest growing age segment of the population. Considering this, there are ample opportunities for retailers to profit by caring for the elderly. This will be most successful when the care is delivered with acknowledgement of the common infirmities of the elderly and attention to the distinctive capabilities of the individual service recipient.
     It begins with what you call the elderly person. Researchers at Ghent University and Vlerick Leuven Gent Management School in Belgium had a range of older consumers evaluate the attractiveness of various names. The participants were comfortable with “senior.” Least popular were “elderly” and “third age.” That latter label appears in uses such as the Third Age Foundation, in which childhood is considered to be the first age and the second age covers family and career. Perhaps the negative reviews for “third age” were because it sounds like something out of a J. R. R. Tolkien book. Hmm, actually that is one place we'll find the term. It was the 3,021 years of the waning of the elves.
     After disciplining yourself to use “senior” instead of “elderly” out of respect, go on to respect the ways in which these service recipients most commonly resist efforts to limit their independence. The Oregon/Bordeaux researchers identified three patterns:
  • Continue to do activities, such as driving, which they’d done previously, keeping this hidden from their caregivers. 
  • Do a risky activity in front of the caregiver and then argue against restrictions, using their performance as evidence of capability. 
  • Pressure the caregiver to participate jointly with the elderly person in performing activities the caregiver has identified as risky, such as by accepting assistance from the caregiver. 
     Not all senior-age service recipients do resist acceptance of their infirmities. But for those who do resist, the third of the three patterns seems safest all round.
     And whenever the jointly performed activities consist of bricks-and-mortar store shopping, patronize the right designs. Shorter aisle lengths require less walking and look less intimidating. Long aisles should be divided up by cul-de-sacs where the senior can choose to step aside to let other shoppers pass. A bench on which a shopper can take a brief break is even better. Small boxes within easy reach complete the package.

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

Click below for more: 
Market to Seniors, not to Elderly 
Downsize for Elderly Shoppers

Saturday, January 26, 2013

Take Charge of Your Pricing

At the recent National Retail Federation BIG Show conference, there was a sense that retailers are depending too much on others to set their prices, with keystone pricing as a result. Keystone pricing is the practice of charging a multiple of the supplier’s price as the base retail price and then doing markdowns when sales are slow or competitors undercut. Historically, a common formula was for the retailer to start by doubling the supplier’s price.
     When I hear the term “keystone pricing,” it reminds me of The Keystone Kops, those stock players in silent movie comedies from Mack Sennett’s Keystone Film Company. The Keystone Kops went in all directions at once, jumped up and down, and drove their vehicles recklessly, all while failing to apprehend the perpetrator of the crime.
     Like the Keystone Kops, keystone pricing should be considered as history. This method of setting margins violates the teachings of behavioral pricing research—teachings which allow you to maximize your profitability. Shoppers pay you for the value they place on the item, not for some multiple of what you paid for it.
     Unlike the Keystone Kops, keystone pricing is an example of too little activity, not too much. Take charge of your pricing. Devote time to setting proper margins. They are your lifeblood.
     The price you charge the customer for an item certainly bears a relationship to what you paid the supplier. And shoppers are particularly likely to accept a price increase when you explain the increase is due to your costs from the supplier going up.
     The problem with keystone pricing is the automatic formula applied across the board, across the shelves and racks. Set your margins as close as possible to the level of the individual Stock Keeping Unit (SKU).
     Consider having one person be your retail pricing specialist. Maybe one of your staff. Maybe you. When being a retail pricing specialist:
  • Assess the demand for each SKU or group of SKUs by watching and listening to shoppers in your store and in other stores selling similar merchandise, and then by analyzing sales figures and trends. 
  • Identify where profit margins can be increased to compensate for where profit margins must be dropped to attract shoppers. 
  • Set up the price tags, step back to confirm that pricing of adjacent or related items makes sense, and continue to revise the pricing using the right blend of consistency and responsiveness. 
Click below for more: 
Cop Keystones as Historical Mementos 
Explain Price Ups & Downs to Customers 
Analyze What Your Shoppers Say and Do

Friday, January 25, 2013

Tempt the Right Shoppers in the Right Ways

What are the signs you can use to tempt the right shoppers at the right times? The most recent Shopper Engagement Study from Point of Purchase Advertising International (POPAI) sketches out four types of shopping behavior, each with a distinctive approach to temptation, along with other characteristics a retailer can use to categorize. Here’s my interpretation of the study findings:
  • Time Stressed Shoppers. These shoppers’ mantra is, “I need to get in and get out.” Still, the POPAI study concluded they are easily tempted. A combination of reasons accounts for this: Always in a rush, they are the least likely of the four types to prepare a shopping list. Plus, perhaps the chief reason they’re in a hurry is that they’re likely to be shopping with children and often are employed full-time. Time Stressed Shoppers use circulars and coupons only rarely. Tempt them with point-of-purchase displays. 
  • Explorers. Impulsive and easily tempted, these shoppers do depend on circulars in making purchase decisions. Therefore, push the temptation button before their store visits and also have circulars available at your store entrance. Of the four types, Explorers have the lowest average household income, so feature tempting items which both serve a useful function and carry low price points. Watch how Explorers come back to your store and spend long periods there if you carry a variety of product types and product sizes. 
  • Trip Planners. Trip Planners are not impulse shoppers and may very well be irritated by personal selling which they view as trying to tempt them. They seem to pride themselves on being controlled and restrained. You’ll see Trip Planners looking at their shopping lists while moving briskly and systematically through the aisles, shelves, or racks. As experienced retailers might expect, Trip Planners are more likely to be male than female. 
  • Bargain Hunters. Like Explorers, these shoppers peruse circulars. They also have the highest coupon use of the four types. Importantly, Bargain Hunters often change their minds. Before coming to your store, they’ll use media to plan their shopping trips, but then there’s a good chance they won’t buy items they planned to buy. For a set of reasons, you might choose not to tempt the Bargain Hunters: Their purchase habits aren’t highly predictable. They have low store loyalty and get dissatisfied with minimum provocation. And, being Bargain Hunters, they have the lowest total basket expenditure average of the four types. 
Click below for more: 
Structure Your Layout for Shopper Mission 
Clench Your Fists to Fight Temptation

Thursday, January 24, 2013

Count on County Origin If Quality’s Clear

If a retailer highlights where an item was made, shoppers often take this into consideration when deciding whether to purchase the item. But does the shopper’s mind operate differently if the manufacturing location is presented as a nation rather than as, let’s say, a county near the retailer’s store? Researchers at Drexel University and Concordia University say it does in at least one way: The consumer assessing a locally produced item will place an especially high importance on accurately assessing the quality of the item.
      This is less true when the site of production is a nation. Shoppers associate certain countries of origin with desirable product characteristics. Cheeses and perfumes from France have a special cachet, as do cutlery and timepieces from Switzerland. Babson College researchers found, not surprisingly, that customers entering a store predict Scotch whiskey will be better than whiskey from India. Quality is less likely to be questioned when the item has the recognized national pedigree.
      Community Supported Agriculture’s marketing message is, “Buy local to ensure higher quality in products and higher quality of life for your neighbors.” This is substantially different from the message of The 3/50 Project with its tag lines “Pick 3. Spend 50. Save your local economy” and “Saving the brick and mortars our nation is built on.” The mission is to convince consumers to each select three independently owned businesses they would miss having available if the businesses disappeared, and then spend a total of at least $50 each month at those businesses. No mention of item quality at all.
      It’s true that consumers can be motivated to buy local because of their local loyalties, or stop buying if the neighborhood touch gets lost. When InBev bought St. Louis-based Anheuser-Busch to form the world’s largest brewing company, with operations in over 30 countries and sales in over 130 countries and then fired 1,000 St. Louis area employees, the St. Louis populace found it tougher to view Bud as a local brand made good. Over the next two years, the number of taps serving Schlafly Beer, brewed only in St. Louis, climbed more than 30%.
      The lesson from the Drexel/Concordia research findings is that loyalty to the local is most powerful when the retailer has worked to convince the shopper there’s no reason to question item quality. Realize this takes more effort than when counting on a country-of-origin name to signal quality.

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

Click below for more: 
Localize Your Merchandise 
Feature Country-of-Origin Advantages 
Lick ’Er Country-of-Origin Stereotypes 
Subscribe to Community Supported Retailing 
Give the 3/50 Project a 360

Wednesday, January 23, 2013

Insure You Speak the Right Sales Language

Bloomberg Businessweek is reporting this week on how, amid the other retailers on Roosevelt Avenue in Queens, New York, UnitedHealth Group has opened a store to sell health insurance. The Queens store joins seven similar UnitedHealth Group stores in various areas of the U.S. and sixteen temporary stores which are being made permanent. The whole idea of selling health insurance through storefronts is being joined by companies like Blue Cross/Blue Shield of Florida and Highmark.
     The impetus is the federal Affordable Care Act with its provisions for millions of consumers to shop for their own health care packages. More than the selling sites will need to change. Techniques effective for business-to-business (B2B)—the health insurer selling to a store owner or a human resources director—won’t work well when selling to individual consumers. For instance, UnitedHealth Group has learned that Medicare members shopping for coverage expect simplified step-by-step explanations.
     When new developments bring opportunities for your retailing or threats to the ways you currently do business, follow the UnitedHealth Group way: Change how you’re talking to prospects, and maybe change where you do the talking.
     For another insurance industry example, consider the history of the workers compensation carrier Employers Insurance Company of Nevada (EICN). On January 1, 2000, what had been called the State Industrial Insurance System (SIIS) got a new name and new challenges. Up to that point, the organization had been a virtual monopoly run by the State of Nevada: Either you self-insured, as the large casinos did, or you got your workers compensation coverage from SIIS. After January 1, 2000, other carriers could enter the market.
     Since no longer operating as a monopoly, EICN staff had to quickly master two major skill sets—marketing and customer service. You don’t need to excel at either of those when you’re not competing for business. EICN contracted with University of Nevada-Reno College of Extended Studies, where I’m on the teaching faculty, to conduct the necessary organizational institutes for all management staff. About a year later, EICN was completely privatized. It is now part of Employers Holdings, Inc., a publically traded company.
     EICN learned to speak the language of marketing and customer service. UnitedHealth Group is learning to speak different languages, too. At the Queens store, there are staff available to help in a whole range of Chinese dialects spoken in the neighborhood.
     Insure you’re speaking the right sales language.

Click below for more: 
Speak Languages of Mexican-American Consumers 
Broaden Target Markets Beyond Yourself 
Scare Customers into Buying

Tuesday, January 22, 2013

Trade Ethics with Consumers

If you’re in business for the long-term, being seen as ethical helps. Many consumers are willing to pay a premium for an assurance they won’t be cheated. But if you’re marketing yourself on the basis of being ethical, you’ll want to activate in members of your target audience a desire to patronize an ethical retailer. Revenues from stores positioning themselves primarily as ethical typically are less than revenues from stores hawking luxury or value attributes.
     Researchers from Florida State University, University of British Columbia, and Simon Fraser University find that one effective way to arouse consumers’ desire for ethical retailing is to activate consumers’ self-accountability and a consequent sense of obligation. In advertising, publicity, and social media postings, give specific examples of your attention to business ethics and describe how good your customers felt as a result. On shopper surveys, ask how what consumers experienced in your store fits with their personal ethical standards.
     Most important of all, in your face-to-face interactions with each customer, trade on your ethical practices. Business researchers at Harvard University and University of Notre Dame analyzed instances in which retail businesses cheated customers. The researchers concluded that in many cases, the owners/operators did not intend to do wrong. The slippage was unintentional, at least at the start.
     One example the researchers give is from the auto repair shops at Sears, Roebuck and Co. With the objective of increasing employee productivity and, some say, wanting to serve customers more promptly, management set a goal for the automotive mechanics: Each was to do at least $147 of billable work per hour.
     The result was not faster work, however. Rather, the mechanics looked for items to repair that weren’t really broken. They also jacked up charges for legitimate repairs.
     The Harvard/Notre Dame researchers classified the ethical lapses. Here’s my version, along with suggestions for heading off the ethics slippage:
  • Ill-conceived goals. The Sears auto repair episode is an example. Before setting standards, encourage suggestions from those responsible for the implementation. 
  • Indirect blindness. A retailer might outsource tasks and then fail to monitor the work quality. Keep accountability for outsourced work. 
  • Slippery slope. In many cases, a minor transgression is okay, but do check back to ensure the minor transgression doesn’t become a revised base for what is acceptable. 
     When you are ethical and deliver full value, consumers will, in exchange, want ethical retailing. That’s a fair trade.

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Prefer Obligation to Shame 
Anticipate Ethics Slippage

Monday, January 21, 2013

Be Available Conveniently

“I sure failed to be highly satisfied at your shop. I’ll be back soon!”
     According to Consumer Edge Insight survey results, this could serve as the tag line for McDonald’s. Data from the online Restaurant DemandTracker survey of adult consumers were weighted so the results are representative of the U.S. adult population who visit a restaurant at least once each three months. Only 22% of McDonald’s customers said they were extremely satisfied with their last visit. This was the lowest percentage for the twenty Quick Service Restaurant (QSR) chains covered. But 64% of the sample said they are extremely likely to visit a McDonald’s again. This was among the three highest percentages in the project. The top percentage was only four points higher, at 68%, for Subway.
     Why would people want to go back to eat at a place that failed to provide a highly satisfying experience? The answer is that the McDonald’s customers had sought convenience above all. To get convenience, they were willing to settle for food described by Boston chef Michael Schlow as, “Consistently bad. Like leftovers from a hospital cafeteria.” In the DemandTracker ratings, McDonald’s earned first place in the category of “convenient locations.”
     Other consumers place a relatively higher importance on the quality of the merchandise and service. But all of them appreciate convenience, so be ready to deliver:
  • Location. You’ve always been interested in selecting a store location that has good traffic of people constituting your target market. But do you have store vacancies in your immediate area for which you could recruit retailers offering products or services which would draw people who are in your target market? You then become the convenient location for shoppers buying what you sell. 
  • Hours. You can’t be the convenient place if your store is closed when people want to shop. If you’ve been opening later to save staff expenses, think about again expanding hours. 
  • In-stock. And you can’t be the convenient shopping place if you’re out of stock for what shoppers expect to find. As with store hours, you may have been cutting back to preserve dollars. Now’s the time to consider expanding your in-stock position. 
  • Checkout & returns. Can you use single-line queuing like the banks do in order to give a sense of faster movement? Are your payment and return procedures as convenient as they can be while protecting against employee and customer fraud? 
Click below for more: 
Build Up Shopping Convenience 
Structure Your Layout for Shopper Mission 
Get Small with Big Convenience

Sunday, January 20, 2013

Encourage Shoppers to Post Trustworthy Reviews

With digital technology inhabiting many items on store shelves, results from a survey of about 2,000 purchasers of consumer electronics products have implications for a range of retailers. The survey, sponsored by public relations firm Weber Shandwick and conducted by KRC Research, looked at how prospective purchasers use product reviews of electronics products.
     In the survey, 77% of respondents said they pay attention to reviews by other consumers, while only 23% said they attend to reviews by professional critics. With higher-technology products like computers and tablets, there was a greater tendency to look at the professional reviews. But even here, more people paid attention to those reviews by other consumers.
     Shoppers are open to using reviews posted by other shoppers on retailers’ websites, even though fully 80% of the Weber Shandwick survey respondents said they’ve been concerned about the authenticity of a review.
     Encourage your customers to post reviews, but in ways that generate trust. The survey identified characteristics of such reviews:
  • Balanced. Suggest to people that the reviews they post go beyond glowing praise to point out areas for improvement. Balance enhances believability. In addition, reviews which include both strong positives and a few negatives will develop curiosity in prospective shoppers. The curiosity can lead to the shoppers wanting to check things out for themselves at your store or website. Research at Rutgers University concluded that store experience affects how negative information is interpreted. 
  • Well-written. Researchers at New York University evaluated the various factors in online product reviews that influence a shopper’s decision to purchase a specific item. Toward the top was ease of reading. Demand for a hotel was greater when reviews on TripAdvisor and Travelocity got a good grade for grammar from the researchers. Sales of items on Amazon were higher when the reviews would have received a nod of approval from your former English teacher. 
  • Technical. Shoppers who consider themselves to be experts especially want to see technical specifications. At the same time, they often make product selections without prolonged thought. They don’t request features lists because the experts think they already know what the products can do for them. Actually, experts are interested in technical specifications largely to justify to themselves and others that they have made the right choices. University of Pittsburgh and University of South Carolina researchers say experts are notoriously complacent in using the technical information before choosing what they’ll purchase. 
Click below for more: 
Encourage Balanced Customer Reviews 
Mind Your Ps & Qs in Reviews 
Embrace Shopper Expertise

Saturday, January 19, 2013

Fish for Broader Pet Market Profits

There’s gold from them thar dogs. And cats. And rabbits, reptiles, birds, gerbils, fish, and more, according to a Marketing Daily article based on a report from market research firm Packaged Facts.
     Retailers offering items for pets often verify an Eastern Washington University research finding: People are more willing to buy premium items for their pets than for themselves. About 80% of dog owners said they were serious about selecting healthy food for their dogs, but only 65% of the same people said they were serious about their own food selection. A few years ago, sales of designer-label pet clothing and accessories began a growth spurt.
     University of Utah research attributes these trends to us considering our pets to be defenseless. It’s the same dynamic which helps explain why, during the economic downturn, consumers cut back more on expenses for themselves than on expenses for their offspring.
     Adults might not have as much splurge-spirit love for Henrietta the hamster as for Hank the family dog. But the Marketing Daily article says that, compared to owners of a cat or a dog, adults having fish or reptiles are more likely to also have kids around. Nearly 90% of households with a hamster include children. And for those children, there’s no question that Henrietta is worth a splurge. Just be sure you merchandise those indulgent items for pets at the children’s eye level.
     At the same time, there’s a growth in households without children. As this percentage of families with children decreases, the drive to own a pet increases. Some of the decrease comes from people staying single longer, some comes from empty nesters living longer, and some from other sources. Researchers at American Demographic reported that 92% of owners of dogs and cats consider them to be members of the family.
     Whatever your retailing line, it would benefit you to carry some products of special interest to pet owners. Almost any retailer can have at least a limited line for pets. Harley-Davidson, Ralph Lauren, IKEA, and Lands’ End have all done it. Services retailers, too, would benefit by thinking about ways to sell to pet owner markets. People board their birds as well as their dogs.
     And if it won’t work for you to allow the pet to join the shoppers in your store, develop a warm spot in your shoppers’ hearts by featuring photos of pets with their people.

Click below for more: 
Honor Those Who Love Those Pets 
Have Products & Services to Pamper Pets 
Dog Each Track for Pet Food Profits

Friday, January 18, 2013

Cross Channels with Market Mavens

Rather than considering themselves expert advisors on only certain retail products and services, market mavens counsel others about the whole shopping experience and go on to recommend specific stores. Consumer researchers at University of Pittsburgh and University of Arizona have used questionnaire items like the following to identify market mavens:
  • People ask me for information about products, places to shop, or sales. 
  • I like helping people by providing them with information about many kinds of products. 
  • If someone asked me where to get the best buy on several types of products, I could tell him or her where to shop. 
     Because of the power of market mavens to steer shoppers toward your store or away from it, you’ll want to court their approval. I urge you to also ask if the characteristics of market mavenism cross channels of influence: Are the market mavens in face-to-face and telephone interactions with others the same market mavens who show influence in email communications, on social media, and in the online shopping simulations found in virtual worlds like Second Life?
     Well, since I urged you to ask, I want to give you an answer. First off, researchers at University of East Anglia and Lancaster University, both in the U.K., find that there’s a strong relationship between face-to-face mavenism and web mavenism. Therefore, as you identify market mavens with favorable impressions of your store, encourage them to post their views on social media. Offer them materials and internet links they can take away with them as conversation starters to share with a broad network of family and friends. This is especially useful for newly introduced products and items for which the purchaser incurs monetary or self-concept risk.
     The relationship between face-to-face mavenism and virtual world mavenism is substantially weaker. This might be because email and social media are currently much more popular than virtual world pastimes. Therefore, as the brands you sell appear more frequently in online virtual worlds, you may want to encourage your market mavens to show their influence there, too.
     In identifying your market mavens and then encouraging them to spread the word about you, stay aware of their distinctive take on individualism/collectivism: Research finds that market mavens show considerable individualism. They want to be given personal credit for their recommendations. At the same time, market mavens seek out other market mavens and will accept what they consider to be assistance.

Click below for more: 
Court Market Mavens for Social Media 
Build Buzz with Market Mavens

Thursday, January 17, 2013

Beware Dynamic Pricing

The current Time magazine includes an article noting the rise of dynamic pricing—a retailer changing prices based upon anticipated demand from a customer or group of customers. Also called “adaptive pricing,” the technique has been used openly by airlines for decades. The people sitting on either side of you on the plane may very well have paid substantially less or more than you because of their times of purchase, for instance.
     The Time article reports the expansion of dynamic pricing practices to St. Louis Cardinals baseball game tickets, golf course tee times, and other retailers with perishable inventory. Once the flight leaves, the game is underway, or the tee time has passed, the value of what’s up for sale goes poof. With merchandise that’s not perishable, the burgeoning use of online price comparisons allows both you and the consumer to negotiate without even talking to each other.
     Yet, beware dynamic pricing. Researchers at University of St. Thomas and University of California-Berkeley analyzed a pricing policy used by Amazon in year 2000, in which some shoppers were offered a discount of 30% on a set of DVDs, while others were offered a discount of 40%. When customers discovered in online exchanges what was going on, there was not much evidence of good will toward Amazon.
     With all the data you’re able to collect on customers, you’ve the ability to customize pricing to the individual. Unlike a large retail business, the small store operation can acknowledge knowing the customer’s preferences well without inducing in the shopper a creepy feeling of privacy having been violated. To reduce any discomfort further, offer a package to fit the shopper’s predilections rather than using dynamic pricing on individual items. This makes it less likely your various shoppers will directly compare what they paid for identical merchandise or services.
     If using demographic information to set a price—rather than the time of purchase or set of interests—avoid any appearances of discrimination. The St. Thomas/UCB researchers presented some study participants with a situation where a dry cleaner gives a discount when cleaning a man’s shirt that is not given when cleaning a woman’s blouse. About 70% of the study participants said this was unfair. Only if the cost differential was called a surcharge—not a discount—and a reason was given—“more pleats, ruffles, or sensitive fabric”—did most respondents consider it to be fair.

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Feather Pricing Changes with Precision 
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Wednesday, January 16, 2013

Organize Organic Item Assortment/Promotion

Retailers carrying organic product lines often find that store sales increase, but much of it from purchases of items not carrying an organic label. The presence of socially conscious products makes it more likely the customer will purchase products that do not embody social consciousness. It’s as if having chosen the store is enough to satisfy the values.
     Studies at City University of New York, Loyola College, and Duke University suggest that even when this sort of thing doesn’t occur within the same shopping trip, it can occur over subsequent shopping trips. That is, if someone purchases a socially conscious item on this trip, they become more likely to purchase next time an item which shows little attention to social consciousness.
     Featuring “organic” is to your advantage even with items beyond foods. A few years ago, Target rolled out what they called green-friendly home and fashion products. But since organic products can command a higher profit margin than nonorganic alternatives, aim to sell those rather than use them mainly as a bait for other purchases.
     Researchers at Özyeğin University in Turkey and State University of New York-Buffalo assessed sales elasticities for 56 product categories of organic and nonorganic items. They were asking what happens when product assortments are increased or decreased and when the amount of price discounts is made large or small.
     What the researchers found leads me to suggest you attend especially closely to item assortment and price promotions with organic items. The elasticities are high, meaning consumers are themselves paying close attention: Increase the item assortment 20% with organic and nonorganic items, and the increase in sales will be greater for the organic set. Discount prices on organic items 20% one week and on the nonorganic parallels 20% a few weeks later; you’re likely to find that the sales boost is greater for the organic than for the nonorganic items.
     One explanation for the higher elasticities among organic items goes back to the CUNY/Loyola/Duke findings. Maybe shoppers who think they should buy organic items, but find reasons not to, are drawn to reconsider when there’s more shelf space devoted to organics because of increased product assortment. Maybe they find it harder to justify bypassing the organic items when there are price discounts. Beyond this, though, the Özyeğin/SUNY researchers also found the increased sensitivity to assortment and promotions among consumers placing a top importance on buying organic.

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Attract with Social Consciousness 
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Tuesday, January 15, 2013

Train Yourself to Profit from Product Training

As Forbes tells it, Samsung’s ready to recruit retailers to go to war over sales of smartphones and related devices. In the third quarter of 2012, Samsung shipped almost twice as many devices as did Apple. Still, Samsung is choosing their battles carefully. At last week’s Consumer Electronics Show in Las Vegas, the company announced that, because of retail partner reluctance, Samsung won’t be releasing their Windows RT device in the U.S.
     The concerns have to do with the projected costs of training shoppers about the benefits of Windows RT over Windows 8 when consumers still aren’t firmly convinced of the benefits of Windows 8 itself.
     If shoppers are convinced of those benefits, though, Samsung could help retailers appropriate a tactical battlefield advantage from Apple Retail Stores: Train customers how to use the products they buy from you. All sorts of retailers can turn a profit by training customers. The opportunities aren’t limited to high-tech items. Food retailers are charging for cooking lessons, and sporting goods retailers for skill-building clinics. Even if you don’t charge a fee, training customers can help your bottom line by increasing product attractiveness.
     Here are a few research-based tips on getting the best from product training:
  • Set reasonable expectations about ease of learning. If you think the process will be tough, give fair warning. If there are multiple skills to learn, teach one at a time before asking the learner to combine them. Researchers at University of South Carolina and University of Colorado-Boulder find that when consumers have reasonable expectations, their evaluations of the products are more accurate. On the other hand, if the learning process is much more difficult than they’d anticipated, they rate the product quality more negatively. 
  • Accommodate different learning styles. An important example of this comes from research at State University of New York-Buffalo and Indiana University: With the people who learn best by following instructions, give brief lessons plus some spacing between. With the people who learn best by actual experience, give longer lessons and/or lessons that come closer together. 
  • Involve a variety of the learners’ senses and capabilities. Tell them in words, give it to them in writing, demonstrate it to them, have them move their muscles to demonstrate it to you or others. A broad range of research over the years confirms that this helps people acquire skills more easily and use the skills in more situations. 
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Turn Product Training into a Profit Center 
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Monday, January 14, 2013

Prune Out Cross-Buyers Who Aren’t Plums

Add-on sales and cross-channel marketing are always good, it would seem. What a surprise that marketing researchers at Georgia State University claim there are consumers who cost you profitability if you push for additional business. In their studies, the researchers found that about 20% of cross-buying customers show one or more of four behaviors:
  • Service demanders. As these customers cross-buy, their demands for support services grow out of proportion to the additional revenue you’re getting. At a retail bank the researchers studied, customers who were engaged into additional financial services more than doubled requests for assistance with online banking and balance transfers. 
  • Revenue reversers. Consumers of this type are serial returners, seeming to assume that since they’re good customers, they’ve an open license to ask for refunds on used merchandise or to back out of service contracts. 
  • Promotion maximizers. Thorough familiarity with your offerings and close tracking of your pricing policies result in these customers cherry picking the loss-leaders and rarely purchasing items or using the shopping channels where your store will earn an adequate return. At a catalog retailer which carried a broad assortment of products and at a multichannel fashion retailer, the researchers tabulated an average annual loss of about $300 for each promotion maximizer. 
  • Spending limiters. For these consumers, the size of the pie doesn’t increase. Instead, the total spending stays the same while spread over a broader range of item and channel types. They are probably the least costly of the four types to support, since your revenue from them stays the same. However, any targeted marketing to them is incrementally more expensive because there are more targets to hit. 
     You might choose to fire these customers or discourage them from doing business with you, since they’re losing you money. I agree that you should prune them out, but I suggest doing it by changing their behavior, not by chasing them away. Turn them into profitable customers. The first step is to identify them by analyzing the purchase habits of your cross-buyers. Next, review the effects of your incentives.
  • Find the sweet spot at which service demanders are sufficiently satisfied, and keep the service to that level with them. 
  • Require justification for returns from revenue reversers and cancel incentives when these customers default. 
  • Design your promotions to minimize cherry picking. 
  • For spending limiters, do your own cherry picking for the marketing hot buttons you’ll hit. 
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Assess the Costs of Customer Satisfaction 
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Sunday, January 13, 2013

Harden Yourself for Sales Rejection

Harden yourself as a retailer for the inevitable “no’s” you’ll encounter in your business. A current Bloomberg Businessweek article profiles Jia Jiang whose rejection therapy consists of making one request each day to which he expects to be told no. He’s asked university instructors to let him lecture in their classes, a flight attendant if Mr. Jiang could give the on-board safety announcement, and a pet groomer at PetSmart to give him a haircut. He asked Bloomberg Businessweek to let him write an article for publication, but then to help ensure he’d get a no, he revealed that he’d never before written for a magazine, plus he had no idea what he’d write about.
     Mr. Jiang’s objective is to harden himself as he seeks financing for his business. If you watch his progression of self-imposed challenges, you’ll see that he’s becoming more confident in his requests and is getting some yes’s rather than no’s. It’s easier when you make a sale a slice at a time.
     The first objective is getting the customer to say yes. In a wide variety of studies, it's been found that once the prospect says yes, they're more likely to continue saying yes. Even getting the shopper to nod seems to help, as long as a nod means yes in that person's culture.
     When possible, present the customer items which can be purchased in pieces or can be augmented later. Researchers at London Business School, Harvard Business School, and Duke University found that people are more comfortable when downgraded versions of products are available for sale. This might mean having a barebones version of the product or service, a smaller package or a sample to try out to start, or showing upgrades on the shelves or easily available via special order.
     Please realize that this doesn't mean the customer ends up purchasing the barebones, downgraded model. It is the availability of downgrades and upgrades which relaxes the shopper's fear of buying the whole pie at once. Again, once the customer says yes to the slice, they're more likely to end up wanting the whole thing at some point.
     Making the sale a slice at a time is a technique Mr. Jiang could do well to refine if he wants to be more hopeful in getting his business financed. He also might benefit from changing the proposed name for his business. It’s currently called Hooplus.

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Make the Sale a Slice at a Time 
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Saturday, January 12, 2013

Account for the Margin of Error

Think what you may, retailer, but a recent report of the public’s affection for cockroaches and the U.S. Congress has a relationship to assessing consumers’ approval of your store.
     News articles, such as on the Time magazine blog, are saying cockroaches get better approval ratings from American consumers than does the U.S. Congress. Those news reports are based on a press release from Public Policy Polling (PPP) about a survey in which 830 voters were asked “What do you have a higher opinion of: Congress or cockroaches?” Cockroaches prevailed with 45% of the respondents. Congress garnered 43%. The others said they were “not sure.”
     The Breitbart blog responded to the reports by saying the whole PPP project was rigged to make the Republicans in Congress look bad, with the objective of making President Obama look good by comparison.
     This Breitbart suspicion might be justified in the case of the cockroach survey question. You see, buried in the PPP press release is the statement “The margin of error is +/-3.4 percentage points.” This means that, in analyzing the survey results, a difference between percentages must be at least 3.4 in order for the results to be considered a true difference. This isn’t the case for the 45% to 43% comparison, so the most we can say is that the survey showed no evidence people rate the U.S. Congress as more worthy of approval than cockroaches.
     This isn’t good news for our federal legislature, but it’s not as bad as if the cockroaches won the poll.
     All reputable public opinion polling firms report the margin of error (MOE) for survey results. Unfortunately, MOE may not be included in customer satisfaction survey results reported to you by a consultant you hire, and that’s what all this has to do with retailing. If you hire a firm to survey customer satisfaction and you’ll be making important decisions based on the outcomes, be sure you’ll be told the margin or margins of error. Knowing this, you can interpret the survey results more accurately. (There are instances in which statement of a MOE would itself be misleading. In these instances, have the consultant explain why.)
     With surveys you do yourself for which you’ll use the results to make important decision, I recommend you have someone with statistical expertise show you how to calculate an MOE and teach you when and when not to calculate it.

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Survey Consumers Person-to-Person 
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Friday, January 11, 2013

Keep It Clean In Talking to Staff

About five years ago, Kevin Peters asked, “How often do you go to the bathroom while shopping for office supplies?” His answer was, “Almost never.”
     That’s the same Kevin Peters who resigned this week as Office Depot’s president for North America. The occasion for Mr. Peter’s rhetorical question was what he saw as a need to change the metric by which Office Depot stores were graded. Mystery shoppers were assessing the cleanliness of the rest rooms. But more important than bathroom cleanliness in an office supply store are factors like in-stock position, logical locations for products, and prompt checkout.
     Still, a survey sponsored by Cintas Corporation reminds retailers of the danger to profitability of dirty restrooms. Cintas Corporation sells cleaning supplies, so you might suspect a bias. However, the survey was conducted by Harris Interactive, a respected evaluation firm, and the methodology seems sound.
  • About 80% of consumers said they’d actively avoid future business with a restaurant or hotel where they encountered a dirty restroom. A shopper psychology explanation for this high percentage is that people think of a restaurant or hotel as being an extension of home. Therefore, there might be significance in the fact that about 20% of consumers would give the place a pass in spite of encountering a restroom they considered to be dirty! For these 20%, Mr. Peters may have been correct in thinking that factors other than restroom tidiness weigh heavily in a consumer’s decision where to shop. 
  • For 77% of consumers, experiencing a dirty restroom in a healthcare facility would be a turnoff. Again, it’s worth noting that the percentage isn’t higher. 
  • For general retail stores, it was 45%, and at car dealerships, about 40%. 
     The wording of items on the Cintas survey asked people the results of encountering a dirty restroom. Mr. Peter’s point of view was that, even if an Office Depot bathroom is filthy, few store customers care because few are using a bathroom. What this reasoning overlooks is that many of the employees will be using a store’s bathroom. What’s the message if management gives filth a pass there? Conscientious employees won’t want to work in this sort of store, so the consequences influence every shopper and, thereby, the store’s bottom line.
     Don’t talk dirty to your store staff. Talk instead about the importance of cleanliness throughout, including in areas visitors to your store never or rarely visit.

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Demystify Mystery Shopper Review Oddities

Thursday, January 10, 2013

Describe Cases Resembling Shoppers’ Situations

Consumers respond emotionally to claims they see as affecting them personally, and it’s emotions which propel sales. This argues for you talking to consumers about cases like their own rather than using statistics.
     Researchers at Hong Kong University of Science and Technology looked at consumer estimates of disease risk. Study participants were presented population statistics about rates plus information about individual cases. When the base rate statistics indicated a high frequency of the disease, but the case information indicated a low risk, the consumers judged themselves as less likely to get the disease than would others. With a different set of consumers, when the base rate statistics indicated a low frequency and the case information indicated a high frequency, the consumers judged themselves as more likely to get the disease than would others.
     The case study information was more influential than the base rate statistics. The effect is stronger when consumers consider the people in the case studies to be similar to themselves. The implication for salespeople, whether promoting disease prevention or video games, is to describe cases which are similar to the shopper’s situation.
     Tactics which use case studies and frequencies do get a bit more complicated, however. A University of Maryland-College Park and Georgetown University study began with asking university students how often they played video games. One set was asked the question in the form, “Please tell us how often, using a scale that ranges from ‘Less than once a week’ to ‘More than once a day.’” Among themselves, the researchers referred to this as the “high frequency scale.” The rest of the students were presented what the researchers called the low frequency scale: “… using a scale that ranges from ‘Less than once a year’ to ‘More than once a week.’”
     Compared to the students presented the low frequency scale, students presented with the high frequency scale were less interested in trying out a new video game. The high-frequency-scale group was only half as likely to accept the offer of a free trial of a video game.
     Why? The researchers are convinced it’s because the high frequency scale made students think other students played video games very often, while a low frequency scale made students think other students didn’t play video games so often.
     When discussing predicted frequency of use with shoppers, talk about each shopper as an individual rather than compared to a group.

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Wednesday, January 9, 2013

Sustain Mystery, But Not for Too Long

What internationally respected designer may be as responsible as Valentine’s Day cards for popularizing the heart symbol to proclaim love? A hint: He created the “I ♥ NY” logo.
     All right, I won’t prolong the mystery. It’s Milton Glaser. He designed the “I ♥ NY” logo for a New York State Department of Commerce tourism campaign. Among countless distinctions, Mr. Glaser is also responsible for store layout, store signage, and logo designs at supermarkets, restaurants, shopping malls, and other retail environments.
     Mr. Glaser might very well have not supported my decision to reveal his name to you so promptly. In the documentary “Milton Glaser: Inform & Delight,” he attributes the success of “I ♥ NY” and many of his other creations to what he calls “sustained mystery,” whereby a consumer absorbs the design message better because of needing to figure out what the design means.
     When done well, sustained mystery is surprisingly effective. For example, mystery arouses the consumer’s interest in a small to midsize retail business that wants to distinguish itself from larger competitors. Research findings from Indiana University and University of Colorado-Boulder indicate the value of a mystery ad format, in which you wait until the end to announce the retailer’s name. Start off with an unusual story or absurd humor that dramatizes the category of retailer, but hooks the ad’s viewer or listener into thinking “Who’s this commercial for, anyway?”
     The researchers found mystery ads were significantly more effective than traditional ads in making the name-category link memorable. Don’t sustain the mystery for too long, though. Be sure to announce the name at the end boldly. Advertising pioneer David Ogilvy said long ago, “Use the name within the first ten seconds.” Mystery ads change that advice to, “Drill in the name within the last five seconds.”
     In design, too, prolonged mystery can lead to misdirection. Recall that the “I ♥ NY” logo was intended to promote New York State tourism. It turned out the mystery had more to do with the “NY” than with the “♥.” The T-shirts, tea cups, and other paraphernalia were interpreted as touting New York City. The association was so strong that, after the terrorist attacks of 9/11, Mr. Glaser designed another version of the logo, reading “I ♥ NY More Than Ever,” with a small black spot on the heart, positioned to symbolize the World Trade Center’s location on Manhattan Island.

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Tuesday, January 8, 2013

Resist the Lure of Misfit Pricing Tactics

Smaller retailers can learn from pricing tactics used by large retailers. During 2009, Lands’ End offered discounts as small as 5%, indicating your own shoppers might be so sensitive to pricing that you didn’t need to adhere to the usual rule of discounting no less than 15% to 20%. Applebee’s charges an identical price on a set of dessert items, opening your mind to consider parity pricing, in which you increase sales by setting the same cost for similar alternatives a purchaser considers it risky to buy. In the case of desserts, the risks include both extra expense and extra expanse.
     Do always think through your reason for using a pricing tactic inspired by a large retailer. Check that it won’t be a misfit in your business. For instance, most smaller retailers should resist any lure from price wars. Unless you’re a retailer with substantial leverage in the communities in which you do business, price wars are deadly. You lower a price as a promotion. Your competitor lowers it further. You respond by meeting the competitor’s price and then lowering it even more, at which point the competitor meets your additional reduction, and so on. Your customers find themselves expecting prices to continue to slide downwards. When you can’t maintain the drops while maintaining adequate profitability, your customers’ disappointment might cause them to take their footsteps and money somewhere else.
     How about price freeze guarantees? According to the Rochester Democrat and Chronicle, Wegmans Food Market is issuing a list for 2013 of 53 commonly purchased items for which the retailer pledges not to raise prices over the next three months. The program began last year and has been extended in increments repeatedly.
     Wegmans, like Walmart, depends on an “everyday low price” (EDLP) positioning. In fact, Wegmans adapted an EDLP format in response to Walmart starting to sell groceries. As with price wars, EDLP is often a misfit for the smaller retailer. An econometric analysis at Stanford University and University of Rochester found that, on average, running price promotions yielded annual store revenues of $6.2 million more than did an EDLP format. Moreover, changing from a promotional strategy to an EDLP strategy is expensive. When Wegmans did it, they found it necessary to produce countless videos explaining their switch.
     Offer shoppers a sense of sensibility in pricing, but a price freeze guarantee may not be the right way for you.

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Monday, January 7, 2013

End the Sale with a Decisive Launch

I’m not alone. A Los Angeles Times article says actor Samuel L. Jackson agrees.
    Have you seen the movie “Lincoln”? If not: Spoiler Alert! I’m about to complain about how the movie ends. My comments are for a good cause, having to do with retailer profitability. And, come to think of it, we all do already know how the story of Abraham Lincoln ends.
     This universal knowledge might be the reason director Steven Spielberg decided to close “Lincoln” with a portrayal of Lincoln’s assassination. I’d been more satisfied if those last minutes were edited out, with the final scene being the one where President Lincoln, having completed his dedicated lobbying to end slavery in America, walks down the hall to leave for the theatre. His butler hands Lincoln his hat, and fade to the movie credits, launching the audience toward contemplation, or maybe just the theatre exits.
     How do you and your staff end a sales transaction with a customer? Is it decisive, unlike the endings to 2012’s “Les Misérables” and “Life of Pi”?
     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 profitability tactics I preach.
     During the evening between the two days of intensive training, two of the business advisors from out of town supplemented their retailing knowledge by shopping at an IKEA store. 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, so we want them to take away pleasant memories.
     Be decisive in expressing your appreciation to your customer. Launch each customer off with a happy ending which will make the customer boomerang back soon and often.

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Sound On When the Purchase is Completed 
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Sunday, January 6, 2013

Go Uptown by Opening Downtown

Many retailers are finding that the prosperity, millennial appeal, and other positive characteristics associated with the term “uptown” are coming when they open up an inner-city location. A recent Forbes article surveys the scene:
  • Nordstrom’s Rack stores are popping up in the downtowns of Columbus, Cleveland, Milwaukee, Chicago, Seattle, New York, Boston, Birmingham, and Washington D.C. 
  • Walmart and Target continue to eye urban locations based on a store footprint smaller than in their suburban locations. 
  • In downtown Boston, Federal Realty is developing a commercial complex to include retail stores and apartments. 
     Those are all big players, and it’s true that certain financial advantages—such as tax breaks and real estate incentives—are often available only to large employers. Still, an urban adventure can be profitable for small to midsize retailers as well. If you choose to go uptown by opening downtown, here are a few shopper psychology tips:
  • Complementation over competition. Locate where your product lines complement rather than compete with those of adjacent retailers. Four gas stations, one on each corner of a suburban intersection, might all do well, but that’s in an automobile environment. The same goes for four Italian restaurants on the same block in a suburban area. They might all succeed because most of their patrons drive in from elsewhere. However, urban businesses depend to a greater extent on shoppers who walk in. These shoppers like a variety of merchants in the neighborhood, since this allows them to stay local. For similar reasons, be as close as you can to a related business. If you operate a dessert shop, adjacency to one Italian restaurant is good. 
  • Contribute to the neighborhood. In any city, keeping up appearances outside can be more difficult than handling the interior décor. Store owners often don’t own the building itself so have limited control over the exterior. Concerns about homeless populations and street demonstrations can shift the store operator’s criteria for outside design from decorative elegance toward bland architectural security. Distinguish your store and earn consumer appreciation by dressing up the street appeal. 
  • Fit your hours to the shoppers. If your downtown is a commercial center, the businesses will have staff who are interested in shopping with you during lunch hours. If your downtown is largely residential, evening and weekend hours will draw business. Think when the mindset of your target consumers is on buying and open your doors for those times. 
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Saturday, January 5, 2013

Empathize to Ease the Endowment Effect

If you sell used merchandise or accept customer trade-ins, you face the “endowment effect.” People set a higher value on objects they own than on equivalent objects they do not. Among other consumer behaviors, it explains why people hesitate tossing foods with an expiration date from last week and why people hesitate selling their used items at a price you’d find attractive. In general, people place somewhat more importance on the relative amount of the trade-in credit than on the relative amount of the replacement item price.
     Findings from a set of five research studies at Boston University and University of Pittsburgh suggest you mobilize empathy to ease disagreements due to the endowment effect. When you empathize with the consumer wanting to sell you an item and acknowledge the special value the item has to them, you’ve set the groundwork for fruitful negotiations. The researchers saw the endowment effect result in differences of over 20% between price estimates of buyers and sellers of used merchandise, and then saw these considerable differences reduced significantly when the buyer evidenced empathy.
     Empathizing is easier when you and the consumer recognize your similarities. Or you fake similarities: Researchers at University of Southern Brittany found transaction success when a salesperson subtly mimicked the shopper.
     A University of Toronto study finds that if the shopper has their mate, partner, or children with them, the endowment effect is stronger than if the shopper is unaccompanied when dealing with you. The shopper will hold out for a higher trade-in price. This might be because it’s easier to establish mutual empathy one-to-one. If the person does have family or friends along and you sense the endowment effect arising, see if you can convince the person to go to a separate area for your negotiations. Failing this, find similarities between this consumer’s situation with family and friends and your own, then talk about those for a little while.
     The Boston/Pittsburgh research findings yield one more suggestion for avoiding the hassle of the endowment effect: Some consumers, by the nature of their skills and personality, are good at connecting with others. These consumers show less of the endowment effect when in negotiations regarding the sale of their merchandise to retailers. If you, as a retailer, have regulars who sell you items for resale or trade-in, reach out to those of the regulars who show this ability to connect with you.

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

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Friday, January 4, 2013

Unbox the Resistant Customer

Your shopper’s resisting making a purchase you’re convinced would be in the shopper’s best interest. As you escalate the sales pressure, the shopper digs in, becoming progressively more determined not to do what you’re trying to convince them to do. They start debating each idea you present and step away from you.
     Consumer researchers call it “reactance.” It kicks in when shoppers sense that their freedom of choice is threatened. Reactance occurs across cultures. It’s found not only in places like the U.S., where individual initiative is treasured, but in collectivist cultures like South Korea. It’s found in all age groups.
     Although knowing about reactance is important for retailers, it’s even more important to know how to avoid, or at least delay, its onset. Doing this keeps your shoppers receptive to increasingly assertive sales appeals. Here’s what research findings suggest:
  • Review your own reasoning. Your primary focus should always be on what helps your retail profitability, but as part of this, stay convinced that what you are saying to the customer is truly in the best interest of the customer. Then frame your sales pitch around these genuine benefits. Customer suspiciousness triggers reactance. On the other hand, research findings from Università Commerciale Luigi Bocconi in Milan, Italy indicate that reactance will be delayed when the shopper feels they owe the retailer for being helpful. 
  • Step back yourself. When you see reactance developing, physically step away from the shopper briefly. If feasible, move to a less crowded shopping area or an area in which there is a large selection of products. Researchers at Columbia University and University of British Columbia found that crowded store spaces and limited product assortment heighten reactance. Verbally step back by softening the rhetoric. Researchers at University of Illinois and University of Louisiana found more reactance when using phrasing like, “It’s impossible to deny all the evidence that the TMX-890 is the only choice for you,” than with, “Purchasing the TMX-890 makes the best sense for you.” 
  • Talk of pleasure. Researchers at Georgetown University and Ben-Gurion University had some participants read a message encouraging them to try a chocolate treat. The other participants’ message encouraged them to open a bank account. Those in the first condition responded best to an assertive message, “You must try our chocolate.” Those with the bank message responded best to a non-assertive pitch, “You could open a bank account with us.” 
For your profitability: Sell Well: What Really Moves Your Shoppers

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