Beware If These Zip Codes Are Buying

A while back, marketing researchers at MIT warned retailers not to be misled by successes selling to what they called “harbingers of failure.” Ironically, booming sales of a newly introduced item to these customers constituted a strong sign the item would broadly flop.
     The existence of this strange but important category of consumers was subsequently verified in studies of over 100,000 shoppers and 400 retailers. Now, joined by a University of Washington colleague, the MIT researchers find that there are not only individual harbingers of failure scattered in among other customers. There are entire zip codes populated by these reverse indicators.
     If you’ve highly profitable sales to such a zip code, proceed cautiously in expanding to other markets or assuming longer-term profitability. Residents of harbinger-of-failure zip codes are comparably less likely to build store loyalty.
     How to identify the neighborhoods? Monitor for generally unconventional or unpromising preferences. The residents maintain a track record of frequently purchasing niche existing items of all sorts which are markedly less popular elsewhere. These people donate to different political causes than do people in neighboring zip codes. The congressional election candidates they vote for usually lose. During periods of a sellers’ market in real estate, prices of their homes increase at slower rates than in otherwise comparable areas.
     There’s reason to think harbingers of failure have an exaggerated need for variety. At the same time that you won’t depend on them to accurately predict long-term sales, you’d like to meet their need. The fact that they cluster in neighborhoods is good news for brick-and-mortar retailers.
     If you want to introduce these customers to a new item, their interest in switching is fine. However, if the equivalent item the customer has been buying delivers good value for them and high profits for you, I’d think you’d prefer to at least delay the switching.
     Slow it down by encouraging customers to consider alternatives they’ve already tried. If the shopper talks about “breaking out of my brand routine,” ask, “What are some other brands you’ve used in the past, and what convinced you to start using the current brand?” If the customer talks about delaying a purchase so they can try out a store which opened recently in the area, ask, “What are some of the stores you’ve shopped at before or in addition to shopping here, and what about our store keeps you coming back?”

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