Wednesday, March 31, 2010

Advertise Tensile Pricing Selectively

Consumers are, by and large, an optimistic lot. If you advertise “Up to 45% off regular prices,” they’ll think the item they’re seeking will be one of those tagged for the full discount. The vagueness reflected in “Up to 45% off regular prices” is called “tensile pricing.”
     The power of tensile pricing to pull in customers depends on what’s being discounted and how you promote the price discounts.
  • Tensile pricing could present a range (“Save 20% to 45%”), a minimum (“Save at least 20% on every item in stock”), or a maximum (“Save up to 45%”). Research finds that the maximum format usually draws the most shoppers. If you do use the range or minimum formats, make the minimum at least 15%.
  • If you’ve a limited number of products for which you’re offering promotional discounts, tensile pricing will draw more customers than would ads showing the specific discounts on the limited items, according to research at Yale University, Ohio University, and University of Toronto. But if a comprehensive range of products are on sale, you’re better off stating the actual discounts for a sampling of those products than in using tensile pricing claims.
  • Researchers at University of North Texas and Texas Women’s University found that tensile pricing claims are substantially less useful when marketing services than when marketing products. This is probably because with services—compared to the case with products—consumers are more likely to believe that you get what you pay for.
  • Researchers at Wayne State University and University of Memphis have raised questions about whether tensile pricing misleads elderly consumers into believing they are receiving a higher discount than is true. It might be in your interest as a retailer not to use tensile pricing claims with products targeted to your elderly customers.
For your profitability: Sell Well: What Really Moves Your Shoppers

Tuesday, March 30, 2010

Combine Positive with Negative Comparatives

When presenting your shopper with comparisons among alternative products or services, you can do it with a negative frame, a positive frame, or a combination of negative and positive. The negative frame is of the form “The other alternative is bad, and the one I’m recommending is good.” The positive frame is of the form “The other alternative is good, but the one I’m recommending is even better.”

     I recommend always accentuating the positive in comparatives.

  • Negatively framed comparatives draw out more counterarguments from the consumer than do positive comparatives. Maybe it’s because we all sympathize with the underdog. Maybe it’s because the consumer was seriously considering that alternative, and now the ad or the salesperson is saying, “Boy, were you foolish for even thinking of getting such a bad choice.” The shopper argues back, even if only in their mind.
  • Negatively framed comparatives tend to make the shopper more skeptical of the retailer. The shopper starts thinking that the retailer is biased and is trying to manipulate them. These effects then spread in the shopper’s mind so that they might end up doubting and resisting what the retailer says regarding other claims made by the retailer.

     But that’s not all to the story. Although negatively framed comparatives do have disadvantages, they also have an important advantage: The counterarguments and skeptical thinking result in the consumer thinking more about the ad or the sales conversation. And everything else being equal, when a person thinks more about the product choice recommended by the retailer, they’re more likely to buy what’s recommended.

      So here’s the advice for you: Accentuate the positives in all comparatives, but use a combination of positive and negative framings.

Monday, March 29, 2010

Profit from Resurgent Teen Market

A feature article in yesterday’s LA Times analyzes how retail sales to U.S. teenagers are blossoming. Estimates say these teens are spending 5% to 8% more this year than last, and the growth is evidenced in product categories ranging from clothing to footwear to video games to sports equipment.
     Compared to adults, teens have a number of advantages as a target market:
  • Typically, their housing, food, and medical expenses are covered, so they’ve more discretion in spending what money they have.
  • Historically, parents will trim their own expenditures before cutting back on what’s spent on their children. So as the economy recovers, growth in teen spending should be faster than growth in parent spending.
  • Teens have somewhat greater tribe mentalities and greater use of social media. They’re highly concerned with what their peers think of them, but at the same time, want to have a distinctive group of peers with whom they’re in constant contact. Buying merchandise and then spreading the word on the Internet come naturally.

     Anything happening in American retailing influences what happens elsewhere. There are many similarities among teens worldwide, but in selling to a resurgent teen market, also be aware of the differences. Danish researchers at Syddansk Universitet and University of Southern Denmark, after studying teen consumers in 44 countries, described six market segments:

  • Thrills and chills. Having fun and spending freely.
  • Quiet achievers. Courting approval from adults.
  • Bootstrappers. Rehearsing for their future as adults.
  • Upholders. Supporting traditional cultural values.
  • World savers. Wanting to share what they have with others.
  • Resigned. Limiting their expectations from products they buy.

     Wherever you do business, your teenage retail customers are likely to be a mix of the six segments, but also to have prime desires you can profit from satisfying.

Sunday, March 28, 2010

Get Second Chance for Good Impression

“You have only one chance to make a good first impression.” When it comes to handling customer complaints, consumer behavior findings support the saying. If you respond quickly to address an initial complaint, your customer stays as likely as before to make future purchases from you. In fact, a prompt, thorough resolution of the problem often leads to the customer becoming even more likely to come back to buy more.
     But researchers at University of Virginia find that if a customer has the same sort of problem again, repurchase intentions tend to drop sharply. The customer might not even bother to return to the store to complain, instead just shifting their business elsewhere. This means you might not be aware why you’ve lost the business.
     Here are two tips to avoid this happening:
  • Whenever you think you’ve resolved a complaint, ask the customer, “Are you fully satisfied?” If they reply that they are not, see what you can do to change it to yes. Then when you get the yes, say, “If you ever have a problem like this again, please be sure to let me know. Here is my business card.” Use “I,” “me,” and “my” instead of “our store.” Take personal responsibility. Then be sure all staff know that if a customer calls or comes in asking for you by name, staff either get you or say you’re not available now and add, “May I please see if I can help you?”
  • If you have a frequent buyer program that allows this, look for regular customers who have not come to your store for a while. Contact them to ask, “Are there any problems with your shopping here that I can solve? What might I do to make it more likely you’ll shop here soon again?”

Saturday, March 27, 2010

Show Impulse Purchase Items for Groups

Hold special events in your store to encourage people to shop with you by bringing along friends or family. But recognize that whether they come as friends or as family can affect the types of items you’ll want to feature for them.
     When people shop in groups, each shopper’s cart tends to ring up a higher total than if those same people had shopped alone. They are more likely to make what we think of as impulse purchases. A major reason this happens is that consumers in groups become more willing to take on risks, and it is the fear of risks behind much of any resistances to buying.
     There are different types of risk avoidance. When shoppers come as a group of friends, they can test out what friends would think, since a collection of their friends is right there. As soon as one shopper in the group makes a purchase decision, there can be a bandwagon effect, with the rest joining in by buying the same sort of item.
     It might not be the same precise item, though. Research from Sorbonne-Assas in France and University of Adelaide in Australia suggests that when about 80% of the group select the same item, those remaining will aim for something else. So merchandise in preparation for both conformists and variety seekers.
     When shoppers come as a family group, they stay concerned with what the rest will think of them, according to research at University of Texas-Arlington. But at the same time, when all the family members are adults, fears of both financial risk and physical risk fade. There certainly are exceptions to this rule, but the rule seems to be that family groups of adults get more impulsive when considering purchase of expensive items and items requiring physical skills to use.

Friday, March 26, 2010

Discover How the Customer Compares Items

For many purchases, the shopper weighs the characteristics of the different products against each other before deciding. Listen to how the customer compares product characteristics, capabilities, or benefits. Then you can decide how to most effectively and efficiently steer the prospect toward the alternative that carries best value for both the purchaser and the store.
     If you’re not sure, you could say, “What questions do you have for me to help you compare the choices here?” The wording of the customer’s questions lets you assign the shopper to one or more of the decision styles described by researchers at Virginia Tech and Pennsylvania State University. Here are the three main ones:
  • Is the shopper using deal-breakers? “If it can’t do crosscutting, it is out of the running for me.”
  • Pro-and-con weighting? “Well, this one doesn’t have the feature I came in here looking for, but it has some other features you have made me realize I could use.”
  • Rating by the numbers? “This second model gets 28 mpg and the other one gets only 24, so in the final analysis I’ll go with the second one.”

     The product comparison style used by a shopper is related to the person’s education level. Those with less education tend to be deal-breaker deciders. Those with more education tend toward rating by the numbers. The style also has to do with cultural background.
     Whatever the education or culture, you might have come to realize that after doing the comparison, a shopper will often end up buying the choice that isn’t the top rater. Many purchases are made more by emotion than by reason. Still, those emotions are more likely to be positive when the customer is convinced you’ve given them the information to compare items in ways that fit their style.

Thursday, March 25, 2010

Suggest Nostalgic Items to Lonely Shoppers

In my new book, Retailer’s Edge, I recommend appealing to nostalgia. I’ve seen a draw toward memories of the past growing since mid-2009. I’ve attributed the growth to the economic downturn in large part. People start thinking of past times as being softer.
      In the book, I also warn retailers that the buyer psychology pendulum will swing back again. Now research due for publication in next October’s Journal of Consumer Research gives retailers deeper insight into what drives the pendulum. Consumer behavior experts from Arizona State University and Erasmus University in the Netherlands conclude that when people are feeling lonely, they become interested in nostalgia.
      In one study, the researchers had participants play a ball-tossing game on a computer. But the game was rigged so that some participants were told they’d been dropped from the game. Compared to the people who were not dropped, those participants were more likely to say that belonging is important to them. And they also made more consumer choices which reminded them of their personal history. This included preferences regarding automobiles, food brands, TV shows, movies, and even shower soap.
      At another point in the research, the people who had been dropped from the game were offered a cookie carrying a brand name popular in the person’s past. Those who ate the treat ended up complaining less of loneliness than they did before.
      We can’t exclude the possibility here that simply eating the cookie—any brand of cookie as long as it has chocolate in it, of course—would ease the pangs of loneliness. Still, the researchers say their methodology leads them to conclude that the taste of nostalgia was what did the trick.
     Have a customer who’s looking lonely? They’re likely to be most interested in brands and items associated with years gone by.

Wednesday, March 24, 2010

Respect the Internet’s Speedy Reach

We’ve another reminder about the potential dangers for retailers because of the very fast, very widespread reach of the Internet:
     Kmart recently offered selected customers a coupon for $10 off a $20 purchase. Each customer receiving the coupon offer had given their e-mail address to Kmart and shopped in a community in which Kmart had recently updated the store.
     Missing from the coupon, though, was a notice that it could be used only in certain locations. No surprise that the distribution quickly turned from a targeted e-mailing into a massive number of Internet hits. Also no surprise that when customers brought their coupon into the nonparticipating stores, store staff told them the coupon would not be honored. Actually, it appears that it got much worse than this. A bunch of people posted on Kmart’s Facebook page that they’d been accused by store staff of trying to defraud the store.
     Here are a few of the reminders inspired by this Kmart episode in the Internet age:
  • Proofread, even when there is time pressure to start a promotional campaign. Make that especially when there is time pressure. Mistakes like the promise of a 50% discount will spread so rapidly you won’t be able to catch them.
  • Coach staff to fix the problem, not fix the blame. My impression after reading and hearing reports of what happened is that many store staff sincerely believed the coupons were fraudulent. It looked like an Internet hoax. I believe store staff, including managers, said to customers, “This coupon is fraudulent,” and the customer heard, “You’re a dishonest cheat.”
  • Acknowledge the seriousness of a problem. KOMO TV reported that in a telephone interview, the Kmart spokesperson said what happened was, “simply an error.” That quote got very fast, very widespread circulation on the Internet.

Tuesday, March 23, 2010

Weigh Flat-Fee Pricing

Many types of retailers charge customers a flat fee per month for unlimited use of services. Here are some consumer psychology factors to consider in deciding if and how flat-fee pricing for services can work well for your business:
  • A variety of surveys find that people hesitate committing to a flat-fee plan unless they believe they can quit at any time, even if there’s a penalty for midterm cancellation. The reality to keep in mind, though, is that because of mental inertia and the comfort of not having to worry about piecemeal purchases, people are unlikely to cancel a flat-fee arrangement until the next renewal date.
  • Research at University of Pennsylvania and University of Southern California suggests that people agreeing to a flat-fee arrangement are more likely to build commitment to the retailer and recommend the retailer to others if the customers are referred to as “members of the plan” rather than as “subscribers to the plan.”
  • Do you have the capacity to provide for the maximum quantities and the ranges in demands that customers will request? According to researchers at University of Southern California, most consumers overestimate how much of the service they will use in the future when first purchasing a flat-fee agreement. Take this into account when doing your planning for how many customers you can accept and how many service providers you’ll require.
  • Research at Harvard University and University of Toronto finds that, as a general rule, usage is highest in the initial weeks after agreement to the plan, and usage fades over the following periods of time. Because the customer’s rate of use tends to be lowest right before renewal time, it is especially important that you—the retailer—present advantages of renewal and encourage use as the renewal date approaches.
For your profitability: Sell Well: What Really Moves Your Shoppers

Monday, March 22, 2010

Remember to Use Shopper Marketing

“Shopper marketing” is a relatively new retailing term, but the concept is as old as retailing itself. Shopper marketing means increasing sales by understanding how the shopper behaves right when considering what to buy. The term slices off for attention the part of consumer behavior that has to do with making the purchase.
     I’ve noticed industry experts using two “elephant” phrases when discussing the importance of shopper marketing. Some talk about “the elephant in the room.” That idiom describes a reality everyone knows is important, but nobody brings up because doing so could cause difficulties.
     Shopper marketing is the elephant in the room because retailers often sidestep the fact that the users of our products and services may not be the same as the ones who make the purchase or the ones who handle final disposition of the product. The guy or gal who buys the elephant food aims to know how elephants think, even though he or she isn’t thinking like an elephant. That approach requires a twist of merchandising.
     People also talk about shopper marketing as being like the blind men and the elephant. This idiom—based on a story found in various forms in various cultures—refers to how different people will come to widely different conclusions because each individual senses only part of the whole reality.
     Applied to shopper marketing, the story of the blind men and the elephant can remind us that although we are aiming to increase sales by understanding how the shopper behaves at the time of considering what to buy, much more than point of purchase is involved. Using shopper marketing helps time-starved and over-informed retailers keep the focus on building sales.
     So here’s another tie-in to pachyderms: Focus is a great tool for improving memory, and elephants never forget, you know.

Sunday, March 21, 2010

Show Respect in Front of Customers

What went wrong in this situation?
     A customer bursts into the store, rushes toward a salesperson, and starts complaining loudly about defects in a product she’d purchased. The salesperson calmly replies, “What would you like me to do to make things right for you?”
     In response, the customer roars, “Look, I’m upset. You don’t sound like you’re taking me seriously. I want to talk to a manager.” The salesperson says, “I’ll get you a manager. Please wait just a minute.” The salesperson radios for a manager, saying, “I’ve a customer who is very dissatisfied and would like to talk to a manager.”
     As soon as the manager arrives, he immediately says to the customer, “What would you like me to do to make things right for you?” For a moment, there is silence. Then both the salesperson and the manager notice the customer’s nostrils flaring as she says, “You people keep repeating yourselves. Your salesperson here didn’t even ask me what my problem is.”
     At that, the manager turns, with a combination of irritation and frustration, away from the customer and toward the salesperson to say, “Our customers are our most important asset. How could you not ask the customer what the problem was? This customer deserves better than that. This is not the first time you’ve done something like this.”
     According to findings by researchers at University of Southern California, about 40% of retail consumers report that at least once each month, they see a store employee treat another store employee so rudely that the customer gets less interested in shopping at that store.
     Here, the manager wanted to show the customer she was being respected. But this message was severely undercut by the failure of the manager to show respect to the salesperson in front of the customer.

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

Saturday, March 20, 2010

Show Commitment to the Underserved

A promising path to retailing success is to select an underserved target market and then show commitment to meeting their distinctive needs. In my opinion, there is no better example of that than La Curacao, the California-based chain with a target market of consumers of Latin American heritage. Based on what La Curacao has done, here are some tips for all retailers—regardless of where in the world you are located and what distinguishes your underserved target markets:
  • Give help in gaining financial strength. La Curacao offers three credit plans, two of them specifically designed for customers without a strong credit history. It’s reported that 95% of purchases are made with a store credit card, and for 80% of the store credit card holders, the La Curacao card was the first one they ever had.
  • Honor the family. Cultures place different amounts of importance on family, but every culture honors family to some degree. La Curacao gives college scholarships to children with Latin American roots, sponsors talent shows featuring young Latin American musicians and dancers, and provides ongoing Latin American-themed live-performance family entertainment in each store. The company spokescharacters are a gregarious family of penguins.
  • Partner with others who have ties to the distinctive community. For their college scholarship program, La Curacao partnered with the University of Southern California Mexican-American Alumni Association. For an initiative that brings Latin American bands to the annual Tournament of Roses Parade in Southern California, La Curacao partnered with a local affiliate of the Spanish-language Univision TV network. Although the stores are probably best known for selling home appliances, computers, and furniture, La Curacao also partnered with suppliers of ethnic handcrafts. The company motto is “Un Poco De Su PaĆ­s,” which translates from the Spanish into “A Little Bit of Your Country.”

Friday, March 19, 2010

Check Instructions with Elderly Customers

Don’t forget that the elderly are an increasingly important target market. And don’t forget that the elderly forget. More than younger people do. Researchers at University of Michigan and University of Iowa point out that for the most part, your elderly customers come with a risk of not following instructions for correctly using products they purchase. Here are tips to reduce the risk:
  • For products popular with seniors, have large typeface instruction sheets available and offer one to the customer. Or at least, if you see the customer straining to make sense of what it says on the package, show them a larger size package version which they can read. Here’s why: The elderly generally prefer smaller package sizes. That’s true with perishable products when the customer is no longer living with a full family. It’s true when money is tight, since the smaller size is affordable. It’s also true because the elderly often have limited storage areas at home. What does this have to do with understanding instructions? Well, smaller package sizes usually show product usage instructions in smaller letters so everything that’s legally required can fit. And elderly people often experience difficulty reading small print.
  • Tell the elderly consumer what to do, not what not to do. Researchers find that the elderly have a dangerous tendency to misremember. They forget the not part.
  • To the degree that you have time, deliver the message in different ways. Tell the elderly customer the product usage instructions. Demonstrate your points with gestures or even a sample of usage. Then check for understanding by encouraging the customer to ask you questions. In doing this, be sure to respect the dignity of the customer. If they seem confused, let them know you and others in the store are available later.

Thursday, March 18, 2010

Monitor Your Progress Toward Objectives

“What gets measured gets done.” Good advice for retailing management. Still, one big difficulty is that monitoring requires focusing on the here-and-now, and the here-and-now includes all the incoming demands on our resources. Getting the shelves stocked now, paying the pressing bills before the mail pickup, resolving the argument before things get really ugly. This pulls our thinking away from the longer-term perspective.
     There’s also something else: When a retailer carefully monitors results toward achieving long-term goals they’ve set, one consequence is that time seems to pass more slowly for the retailer. And that, in turn, makes the goal seem more distant. Ironically, then, monitoring our achievements so far can actually interfere with what gets measured ending up getting done.
     A hint about how to unscramble this riddle comes from a classic study which itself produced another puzzling riddle: In an article titled “Obesity, food deprivation, and supermarket shopping behavior,” which appeared in the Journal of Personality and Social Psychology more than forty years ago, R.E. Nisbett and D.E. Kanouse reported something quite surprising: People on a diet buy less when they are hungry than when they have eaten recently.
     It certainly would seem that hungry dieters would buy more, not less. What’s going on here? The answer is that the hunger became a reminder to the dieters that they were in the process of making real progress. They could sense how far they’d come toward the payoff of taking it off.
     The hint for you: Avoid continuous monitoring of how far you need to go to achieve long-term, somewhat fuzzy goals. Instead, regularly monitor how far you’ve already progressed toward each clearly defined business objective.

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

Wednesday, March 17, 2010

Dislodge Indecision with New Choice

Sometimes a shopper is frozen into indecision because of tradeoffs among the prices and the quality of the features. One way to dislodge ties is to introduce a new alternative which is clearly inferior to one of the items in the tie.
     Here’s my adaptation of the technique: A customer comes into an electronics store to buy a printer. The customer narrows the choices to two and then pulls out an article she brought to the store with her because the article includes a bunch of ratings of printers. Printer Model A, at a price of $180, has a rating of 50. Model B, for $260, received a rating of 70.
     The customer can’t decide between the two and finally says she wants to look at other stores. The salesperson replies, “May I show you one more model that I think would help you decide? We carry a complete selection of printers, so I hate for you to need to go shopping somewhere else.” The customer agrees to look at one more printer.
     The salesperson presents a model from a manufacturer that does a lot of advertising, but has recently not received high ratings for their printers. If asked, store staff don’t give the model high recommendations. Still, they carry the model because people ask for it based on familiarity with the advertising. The salesperson says, “The price for this model is $180.00, like Model A, but if you check your article, you’ll see that it received a rating of 30, not the 50 which Model A received.”
     The introduction of the inferior alternative often dislodges the tie and results in a purchase decision. With this set of facts, the choice is more likely to be Model A.

Tuesday, March 16, 2010

Position Prized Items to Grab Attention

You probably have certain items you’re especially interested in having customers consider. It might be because these items carry high profit margins or come with promotional allowances from the supplier. Increase sales on those prized items by displaying them in ways that grab attention.
  • Stock identical packages of the item on an end cap with no competing items on adjacent shelves. Do this on the end cap for the aisle the shopper is most likely to approach when looking for the product category. That way, the shopper sees the prized product first, boosting the probability it will be chosen to fill the need. If you want to boost sales of cordless drills from Milwaukee Tool, put a bunch of packages of those on the end cap at the aisle shoppers come to when seeking electric drills, for example. I give that as an example to expand your thinking about the value of end caps. Retailers are accustomed to using end caps for low-priced commodity items. Remember that end caps also can be good positions for higher-priced items that appeal to your distinctive target markets.
  • Keep the prized items away from competing items that have very colorful packages and/or unusual shapes. Researchers at University of Southern California found that when packages stand out from others, they not only draw the eyes and hands toward them, but also tend to be judged by shoppers as a better value. In one study, people were shown two grocery packages holding identical quantities. The people were told that the prices of the two were the same and the quality was similar. Most of the study participants thought the attention-attracting package was bigger and therefore was the better buy. If alternative items have attention-attracting packages, leave some distance between those and the prized items.

Monday, March 15, 2010

Lay Out Ads to Trigger Positive Associations

A challenge for retail advertising is to create positive feelings for the full range of products carried in the store. Manufacturers can advertise a limited line because they usually produce a limited line. But as the final link to the consumer in the supply chain, the retailer has the role of providing product assortment.      Research findings from Northwestern University and University of Chicago suggest a way for you to meet the challenge: For instance, if you want consumers to have positive feelings toward both the mayonnaise and the ketchup you carry in your store, you need include only the mayonnaise in the ad. A good feeling about ketchup builds when looking at an ad for mayonnaise because we associate the two.      As a consumer gets more familiar with a product, they come to like it just because it’s easier to recognize. This is true even if the consumer has never tried the product. The “mere exposure effect” is a major reason that advertising works. But the Northwestern University/University of Chicago findings go beyond the mere exposure effect. You don’t even need to show the product to make it familiar to the consumer.      Most retailers know about the “peanut butter and jelly” principle of merchandise adjacencies: Shelve the jellies and jams in the same area as you shelve the peanut butter, since as soon as the shopper picks up a jar of peanut butter, they’re likely to start thinking about jelly. And now in planning your ads, think out the mental adjacencies: What product categories trigger positive associations to other product categories? Then consider featuring just one of the product categories from each set in the ad. But stay aware of unintended associations. The researchers found that an ad for a kill-lice shampoo caused a hair conditioner to be liked less.

Sunday, March 14, 2010

Use Low-Price Guarantees Strategically

Many retailers promise a payment if the customer finds a lower price on an item purchased from the retailer. These low-price guarantees are most popular at retailers that hold out their prices as a major reason for shopping with them. However, a low-price guarantee can be valuable for all retailers, as long as the guarantee is used strategically.
  • Offer the guarantee on distinctive items. If your major marketing point is cut-rate prices, you might offer a low-price guarantee on every purchase. If your major marketing point is value, benefit from the draw of the low-price guarantee by offering it on selected items. Researchers at Wayne State University, Baylor University, University of Mersin (Turkey), and University of New Mexico found that with distinctive items, the low-price guarantee results in more customer satisfaction after a purchase, whereas with commodity items, the guarantee could encourage your regular customers to try out your competition.
  • Keep it simple. Avoid promises like, “If you find a better price on the same item within 30 days at another store, bring us their receipt as evidence, and we’ll give you twice the amount of the difference.” To have this guarantee honored, the person would need to buy a second copy of the product and then bring the original one back to you for the money and then bring the second copy back to the other store to make a return. It’s more credible to say, “If within 30 days of your purchase, you find a lower price advertised on this item, bring us the ad and we’ll give you a credit for the difference.” Yes, this means that if you put an item on sale, customers who recently purchased it can request a credit. This is another reason for offering the guarantee just on selected items.
For your profitability: Sell Well: What Really Moves Your Shoppers

Saturday, March 13, 2010

Compare Unknown Brand Extensions

Do you introduce into your merchandise mix brand extensions which are at first unknown to your customers? If you carried Clorox bleach, you might have decided to come on board when Clorox pioneered the market for disinfectant wipes. Customers recognize the brand name. With new products, the supplier is more likely to agree to favorable purchasing terms. And the supplier is likely to devote extra amounts of advertising support to help you sell the product.
     In deciding whether to carry a particular unknown brand extension in your limited shelf space, though, evaluate not only the amount, but also the nature of the advertising support.
     Researchers at Purdue University, Indiana University, and University of Connecticut find that comparative advertising is particularly powerful. But what comparison is used makes a difference: With the disinfectant wipe product category as an example, for follow-on entrants, such as those from Lysol and Mr. Clean, the comparison should be made to the pioneer product—in this case, Clorox disinfectant wipes—rather than to the parent brand—Lysol cleanser, for instance.
     For a pioneer entrant, comparison advertising is still great, but at introduction, the comparison should be made not to other ways of accomplishing the same function—in this case, disinfecting surfaces—but rather to the existing products that carry that brand name—Clorox bleach, for instance. The objective with the pioneer entrant is to show a favorable comparison to parent brand items.
     If the comparison for the pioneer product to the parent brand items doesn’t look favorable to you, there is reason for concern. Other research suggests that if the new product seems to consumers a moderately logical extension of the parent brand, a customer’s negative experience with the unknown brand extension will corrupt the reputation of all products in your store carrying that brand name.

Friday, March 12, 2010

Give Loyalty Program Head Starts

Give head starts to participants in your frequent shopper program. This motivates them to participate and to shop with you more often.
     Researchers at University of Southern California and University of Pennsylvania set up an experimental loyalty card program at a car wash: Each customer could receive a free car wash after paying for eight.
     However, this offer was structured in two different ways: One group of customers were told they’d receive a reward after purchasing ten car washes, but they’d start off the program with a free credit for the first two washes. They had to get eight more. The other group were required to get eight washes before receiving the reward, and they didn’t start off with any free washes.
     Of customers in the “get eight, no head start” group, about 20% ended up participating in the program to the point where they received a free wash. But of customers given the head start, almost 35% purchased the eight additional washes to get their free one. In addition, the head start group completed their quota more quickly and kept coming to the car wash more often than did the group who didn’t get the head start.
     Help customers focus on how far they’ve come and less on how far they have to go. This applies not just to loyalty programs, but also to layaway plans, for example. Design the payment record card to resemble a pyramid so that early payments show up as a large base and later payments as topping it off.
     The general point here is to maintain motivation by maintaining momentum. Retailers also find success in giving frequent shopper program credits for coming into their store periodically, even if the person doesn’t make a purchase on the visit to the store that day.

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

Thursday, March 11, 2010

Keep Logic Brief with a Reluctant Customer

We’ve identified the product or service alternative that we’re convinced will best meet the needs of both the customer and your store’s bottom line. The customer is ready to be convinced, so we say, “What do you see as the two features you like best about the alternative I’m recommending?” The customer gives us two reasons, but still seems reluctant to make the purchase. So we say, “Okay, what are six more of the features you like?”
     Whoops. We meant well, but according to research findings from New York University, we probably made the product or service less appealing to the customer. Why? Because generating two reasons to buy is almost always an easy task. Generating six more reasons takes a substantial effort. When the customer has a tough time completing the list of eight, they tend to say to themselves, “I guess this item isn’t so great after all.” Next, the customer starts generating counterarguments to the reasons they already had come up with for buying.
  • If the customer seems motivated to continue a list of reasons to buy, say something like, “I can understand that it can be difficult to come up with reasons when there are so many distractions right here on the sales floor.” The New York University researchers found that pointing to the situation as the cause of the customer’s difficulty in thinking of reasons helps keep a positive impression of the product in the customer’s mind.
  • If the customer seems comfortable with purchasing the item, say, “May I give you this item to buy?” Ask for the sale. Other research says customers are likely to end up being pleased with a purchase if—after doing enough thinking to make themselves comfortable—they decide to take the plunge based on intuition or emotion.

Wednesday, March 10, 2010

Earn Goodwill in Giving Discounts

Your pricing policy should result in high profitability. To accomplish this, you want customers to return to your store, and they are more likely to return when they feel good will toward you and toward the pricing policy. Researchers at University of St. Thomas and University of California-Berkeley advise that when discounts are used properly, it earns good will.
  • Be kind. In most cultures, we expect to see discounts offered to senior citizens. A store giving that sort of discount receives appreciation from the seniors. It also generates good will among many of those not receiving the discount, since they see the retailer as kind-spirited.
  • Avoid appearances of discrimination. The University of St. Thomas/UCB researchers presented 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. The researchers hypothesize that was because the participants considered the policy to be discriminatory. 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.
  • Make all the rules clear. The researchers 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 chat rooms what was going on, there was not much evidence of good will toward Amazon. Amazon’s error here was in offering two different prices at the same time. I believe that if a 30% discount had been offered one month and a 40% discount the next, good will would have been generated, not destroyed.

Tuesday, March 9, 2010

Explain Delivery Time As Quality/Talent

University of Michigan researchers showed people artistic creations and asked each to judge the quality of each work. Before being asked for the quality rating, though, the participant was told the amount of time the artist had taken to complete the work: “The artist took one year to do this.” “This piece was completed by the artist within one week.” The times given were not the actual times, of course. You know how psychologists love to lie to people.
     The purpose of lying like this was to see if a potential purchaser of artwork would infer quality from the length of production time. And indeed, there was a relationship. Even though the “completion times” had been randomly assigned to the works, the longer the completion time, the higher the average rating of the work. If it took longer to do, it must be higher quality.
     But wait, there’s more. Next, the study design was turned sideways. Participants were asked to judge the talent of the artist based on how long a creation had taken to complete. So, retailer, what’s your guess about how this will turn out? If an artist takes longer, is the artist judged to be more or less talented, or does it not matter?
     The answer is that participants judged the quicker artists to be more talented.
     Put these two findings together and we have the strange conclusion that the most talented artists—the quick ones—produced the lowest quality pieces—the quickly completed ones.
     This is another example of the importance of presenting information to the consumer properly. To highlight the quality of the product or service, talk about thorough attention to detail. To highlight the skills of the manufacturer, talk about how each person and each process was so refined that no time was wasted.

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

Monday, March 8, 2010

Enhance Convenience via Teammates

Some Winn-Dixie supermarkets now sell bus passes and debit cards. Plans are to let customers pay their utility bills while shopping.
     If you follow the trend to offer added services like Winn-Dixie is doing, you can enhance convenience for customers. But here are tips from a consumer psychology perspective for succeeding in this type of strategic partnering:
  • Choose categories of products and services that your shoppers are likely to expect to see and for which it works best to have another business be the provider. Researchers at George Mason University and Ohio Northern University pointed out how shoppers have clear rituals. So when they go to a grocery store, they’ve come to expect to see movie rentals and, increasingly, to get gasoline. Winn-Dixie delegated the movie rentals to Redbox kiosks and handled the gas sales by giving loyalty card holders a discount on purchases at Shell stations.
  • With the product/service categories, team up with brands that are compatible with your target markets and store personality. The Florida Times-Union reports that Blue Cross and Blue Shield of Florida arranged to sell their health insurance cards and medical care discount cards through Winn-Dixie because of a commonality in target markets.
  • Keep a local angle, especially if you are teaming up with a large business known to be headquartered in another area. This is even more important if you are yourself a large retailer also known to be headquartered in another area. Last fall, Stop & Shop and Giant Food, both of them parts of Dutch conglomerate Royal Ahold, announced that Starbucks kiosks in a number of stores would be replaced with another coffee supplier, Dunkin' Donuts, whose home is Canton, Massachusetts. That's much closer to the Stop & Shop/Giant stores than Starbucks, which is most strongly associated with Seattle.

Sunday, March 7, 2010

Be Aware How Shoppers Compare Products

Is a granola bar more like a candy bar or more like a cup of fruit yogurt? Is an apple more like a donut or more like an orange?
     According to researchers at University of Missouri, Mississippi State University, Emory University, and University of California-Irvine, the answers your shoppers give depend on the shoppers’ goals and values. Most of the consumers in the research study said that a granola bar was more like a candy bar than like a cup of fruit yogurt. But for the people who placed top priority on health goals, the granola bar was more like a cup of fruit yogurt. Those same health-oriented consumers said an apple was more like an orange than like a donut. But for the people who placed a higher priority on eating convenience than on eating healthy, the apple-donut similarity came up stronger.
     What difference does this make for you, the retailer? Well, the category in which a shopper places a product determines the comparisons they’ll make in deciding what to buy from you. If you’re selling apples, donuts, and oranges, the health-oriented customers will be comparing the prices, the freshness, and other attributes of the apples with the oranges. The convenience-first customers will be doing an apple-donut comparison. If you’re selling flowerpots, statuary, and seed flats, the dedicated gardener looks for the flowerpots and seed flats to be in the same shopping area. The dedicated outdoor decorator wants to compare the aesthetic attributes of the flowerpots with the statuary.
     We can guide the choices of our shoppers by the ways in which we arrange the merchandise and describe the alternatives we give the shoppers for spending their money. But it often works even better to present the alternatives in terms of what categories we discover our shoppers using already.

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

Saturday, March 6, 2010

Emphasize Possibilities, Not Probabilities

When your customers make purchase decisions, they use shortcuts. Otherwise the amount of information to process would be overwhelming. They are aiming to balance a whole set of risks, ranging from financial—“Is this price too much, too little, or just right?”—to psychological—“How well does the personality of this store and this product fit my values?”
     Psychologists at Carnegie Mellon University, Columbia University, and University of Chicago who study real-world decision making point out that when it comes to weighing the risks, consumers tend to think in terms of possibilities—“How can I make this happen?” “How can I keep this from happening?”—more often than in terms of probabilities—“How likely is it that this will happen?” “How much would it cost me to make what I want twice as likely to happen?” “How much to make what I don’t want half as likely?”
     People pay much more than justified by the odds in order to gamble on a lotto ticket. “You can’t win if you don’t play!” and “Somebody has to win!” become the rationales for spending money to turn a zero possibility of gain into a very small, but better-than-zero, chance. People pay for an extended service contract on an appliance even when the probability is that the cost of repair or replacement would be less than the cost of the ESC.
     There are experts who look at this happening and conclude that shoppers are stupid. That’s wrong. Sure, our customers sometimes make foolish choices. And we never want to exploit or mislead. But let’s remember how the excitement from holding the lotto ticket and the peace of mind in having the ESC carry value.
     Keep it simple for your shoppers. Emphasize possibilities, not probabilities. Research says this is what your customers want to hear.

Friday, March 5, 2010

Be Creative in Prospecting

Here’s another reminder for Making Money Is Not Illegal, Immoral or Fattening readers. This one is from a section starting on page 94 of the book in which Art Freedman is using his family’s store as an example:
     “Be creative in building that Top-of-Mind Awareness. Do you go over to your competition, not just to walk through the stores regularly, but also to drive through the parking lot? Write down the names and phone numbers of the businesses that are in your competition’s parking lots. Then come back to your store and have your outside sales person, you yourself, or somebody else contact those people to say, ‘Hey, you know what? You’ve got to come down here to our store. We have an excellent trade program. We’re a smaller store. We carry only 28,000 items in the store, but we can get you 100,000 items. Would you be offended if I send you some information in the mail?’
     “Do you know what people say when you ask, ‘Would you be offended if I send you information in the mail?’ They say no, I would not be offended. So you say, ‘Okay, cool, I’ll call you back in a week, after you get it.’ And go beyond doing it in the parking lots of your competitors. Do it in your own parking lot, too, because a lot of those people who are shopping are business-to-business shoppers, but you don’t know that because they don’t yet have an account with you. They have an account or accounts somewhere else. They’re coming into your store to pick up one or two items, and then they’re leaving. Get their business names from their trucks or cars in your parking lot. Look up the phone numbers, get in contact with them, and build those relationships.”

Thursday, March 4, 2010

Protect Against Contamination Feelings

“Don’t hang out your dirty laundry” is classic advice for life. “Never hang out your dirty panties on your store racks” is wisdom for retailing. Well, it looks like some Gap, Victoria’s Secret, and Bloomingdale stores failed to be wise, according to an investigative report.
     NBC staff purchased intimate items at eight major retailers in a New Jersey shopping mall, soiled the items with baby oil, and then went back to each store to ask to return the items. The returns were accepted. That’s fine with me, since a liberal return and/or exchange policy creates customer good will. I am disappointed that it looks like the store employees failed to ask the reasons for the returns. Asking customers the reason for a merchandise return helps curb fraud. But then the worst of all: The investigative reporters later found the returned items back for sale on the store floor.
     The NBC report also included an interview with a woman who said she’d worked at three Victoria’s Secret stores, and it was normal procedure to resell returned underwear. When told all that had happened, the stores involved said it was not, in fact, their policy and they’d reeducate their workers about this.
     So wash your new undies before wearing them. And protect against customers experiencing any feeling of contamination while they’re shopping in your store. This holds for all sorts of merchandise. Shoppers love to touch. But researchers at University of Alberta, University of British Columbia, and Arizona State University report that customers have less interest in an item on a rack or shelf when they’re thinking about who else has touched it. They feel disgusted at the idea the product could be contaminated by other shoppers. Have staff frequently refold, repackage, and reshelve in order to remove cues of product contamination.

Wednesday, March 3, 2010

Introduce Unknown Products with Charity

Unknown brands can provide you higher profit margins. But the profit margins become profit dollars only if your customers turn those unknown brands into brands they get in the habit of buying. Among the more effective techniques for convincing customers to start using an unknown brand is to tie their trial to you contributing to a charity. Findings from University of South Florida indicate that pairing charitable contributions with the sale of brands unfamiliar to the customer will boost sales of those unfamiliar brands. The research finds that the boost is not nearly as great when it comes to brands already familiar to the shopper.      When a vendor asks your business to purchase a selection of the unknown brand, negotiate with the vendor to share with you in sponsoring the charitable contributions. After all, building sales is in the interest of both the supplier and you. But you’ll get better results if you publicize the sponsor as being your store. Research at Michigan State University, Illinois Wesleyan University, and University of Texas-Austin suggests that when a store rather than a brand is publicized as the sponsor, consumers are more likely to see the sponsorship as a charitable act rather than only a selling technique.      There’s nothing wrong with doing well by doing good, though. So also consider the charity sponsorship as an opportunity to prospect for new customers. Invite opinion leaders from the charity to visit your store to learn about all that you offer. Get senior citizens involved as volunteers. Researchers find that altruism is especially important to elderly consumers. Seniors like to give their business to retailers who are compassionate, and they like to view themselves as generous. Whenever you organize a charitable activity, offer a variety of ways for your older customers to pitch in to help.

Tuesday, March 2, 2010

Use Your Fear to Your Advantage

Are you afraid, retailer? The Conference Board says that confidence among your U.S. consumers dropped about 19% from January to February. German business confidence fell, with Investors Business Daily attributing the drop to weak retail sales and adding that other European countries are reporting low consumer confidence and/or weak consumer spending.
     Even if your retail business is doing nicely, an aura of fear can disrupt optimism. Although retail sales in Australia rose 1.1% from the third calendar quarter to the last calendar quarter of 2009, Business Week headlined an article “Australian Retail Sales Unexpectedly Decline 0.7%,” talking about only December.
     Fear can immobilize a retailer, preventing them from taking actions necessary to stay on top of events. Fear can shut down the creative thinking needed to navigate through setbacks.
     But realize, retailer, that fear also can help you move fast and think sharply. The trick is to keep the fear manageable. A century ago, psychologists Robert M. Yerkes and John Dillingham Dodson sketched out what became known as the Yerkes-Dodson law. In terms of retailing management and fear, the law becomes "As fear builds in a retailer, the quality of their thinking and the effectiveness of their actions improves. To a point. Past that point, as fear builds further, the quality of the retailer’s thinking and actions drops fast."
     If your fear seems to be getting too high, switch to a less demanding retailing task briefly. Research indicates that success there causes the fear to decrease.
     In the diagram, the green curve shows what happens to the quality of retailer performance for difficult tasks as fear increases. The gold curve shows the same, but for less demanding tasks. Notice that at the point where the green curve starts to go down sharply, the gold curve stays up a while longer.

Monday, March 1, 2010

Sell to Values, Not Just Value

Retailers in the early 1950s wondered why sales were so poor for the new vacuum-processed freeze-dried instant coffee products. Was it because the flavor failed to be as rich as the fresh-brewed? Yes, that was a factor. However, the biggest reason had to do with the values of the shoppers. The purchaser of coffee at retail was usually a housewife. Market research in the 1950s found that housewives subconsciously thought purchasing instant coffee threatened their valued view of themselves as being capable homemakers.
     Things did change over the decades. But coffee still intersected with values at retail. In the late 1980s, researchers at California State University-San Bernardino and Virginia Tech found that an advertising appeal to flavor fared better than an appeal to status. Coffee shoppers really liked “The delicious, hearty flavor and aroma of Sterling Blend coffee comes from a blend of the freshest coffee beans.” They weren’t as excited about, “The coffee you drink says something about the type of person you are. It can reveal your rare, discriminating taste.”
     But as I say, things change. One value among coffee drinkers at retail now is keeping it natural. So in 2010, Peet’s Coffee and Tea profits with the slogan “Handcrafted Since 1966,” and Seattle’s Best—a subsidiary of Starbucks since 2003—enthuses “Choose Organic!”
     Another value of consumers these days has to do with value in another sense: Getting value for the money. That value has been around for a long time, but it became especially important with the economic downturn, and most consumer psychology experts predict consumers will continue to attend to value for the money even as their personal economy improves.
     The meaning for you? Whatever products and services you carry, sell to a sense of value, but also be selling to the other values.