Thursday, May 7, 2015

Know How Shopper Fungibility Functions

Most salespeople have experienced situations where a shopper seems anxious to switch purchase categories. After making a selection of one sort, they resist entreaties to buy an add-on or another item in that category, but are interested in purchases from another department of the store.
     Research at University of Notre Dame indicates that in such situations, purchase categories include not only the nature of the item, but also the nature of the reason for making the purchase. It has to do with fungibility, and knowing how fungibility works helps you open the shopper’s mind to continued buying.
     “Fungibility” means substitutability. At the extreme, “shopper fungibility” means the person maintains one overall budget for expenditures. Your shopper believes that the more money she spends on clothes, the less she’ll have available to spend on entertainment, for instance. A dollar spent on one item could have brought equal pleasure being spent on another item.
     It might seem that shoppers fully feeling fungibility would buy less than shoppers who have different categories of expenditures. When there are different categories, a shopper can dip into each one without it interfering with the others, you might think. However, research at University of Chicago found that when shoppers compartmentalize their expenditures, they become more like tightwads. They end up consuming less than they wish they had.
     The Notre Dame studies reveal a way around. If you can show the shopper a different type of reason for buying another item in the same item category, the shopper becomes much more willing to accept. Here’s my version of the four types of reasons identified by the researchers:
  • Sustaining. “What you have now meets your current needs, and by purchasing this other item, you’ll be providing for the future.” 
  • Economizing. “By purchasing this item at the sale price, you’ll be economizing.” 
  • Rewarding. “Here’s an item you might want to purchase to reward yourself.” 
  • Treating. “Now that you’ve found one that fits your needs so well, consider purchasing this adjacent item to give as a gift.” 
     After a customer purchases an item because of economizing, for example, they become a little less likely to purchase another item for economizing compared to an interest in purchasing it for one of the other three reasons. It’s as if there are four different buckets through which disposable income is drawn and what happens to the money in each bucket is somewhat independent.

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

Click below for more: 
Loosen Up Tightwads’ Wallets 
Add Shopper Fun with Fungibility 
Add Variety to Shoppers’ Thinking
Slacken Consumers’ Undervaluing of Time

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