Thursday, September 29, 2016

Settle for Being in the Top 10

Sometimes in retailing, as in the rest of life, the juice just ain’t worth the squeeze. My evidence today comes from six Seattle University, Utah State University, and Northwestern University studies involving more than 1,600 consumers. The finding was that shoppers are no more likely to buy from a store or buy a product in that store which is rated as “In the Top 9!” than “In the Top 10!” But wait, it gets even worse: People told a store or item brand was in the top ten were actually more likely to become customers than an equivalent group of people told the brand was in the top nine. Therefore, the extra effort to move up in the ranking was worse than wasted.
     The reason for this counterintuitive behavior has to do with the desire of consumers to simplify decision making. Round numbers are more comfortable than precise numbers, so create a more positive approach toward buying. This also is part of the explanation of another puzzling finding in those studies: People had more favorable impressions of brands described as “In the Top 9” than “Ranked as 9th.” Another part of the explanation for that one is the optimism of shoppers when it comes to what are called “tensile claims.” If you advertise “Up to 45% off regular prices,” people tend to think the item they’re seeking will be one of those tagged for the full discount. If you say, “It’s ranked in the top nine,” they’ll tend to think it’s even higher than rank 9.”
     Still, there are times when the juice is indeed worth the squeeze. What about fourth place? In Olympic competitions and horse races, we learn who came in first, second, and third, but beyond that, it’s a group of also-rans. The psychological distance between third and fourth is leagues larger than the psychological distance between second and third.
     In other types of ranking lists, there are also cut points. Researchers at Seattle University and Rutgers University-Camden found that on a “Top 50 Retailers” list, consumers are likely to see a bigger difference between ranks 10 and 11 than between ranks 9 and 10 and a bigger difference between ranks 25 and 26 than between ranks 24 and 25. So it might be worthwhile for a retailer to expend resources to jump a cut-point hurdle, but not cost-effective to move up without jumping a hurdle.

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

Click below for more: 
Jump the Cut Point Hurdle
Advertise Tensile Pricing Selectively

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