Sunday, July 31, 2011

Control Out-of-Stock Irritation

Studies suggest that when you’re out of stock (OOS) on an item a shopper has carefully chosen, you should have prepared for the shopper to veer off to a wholly different choice.
     Researchers at American University in Washington, D.C. and University of Arizona explain their results using an example, which I’ll adapt here: A shopper comes into your store looking for an expensive pen to give as a gift to a friend. After evaluating the available alternatives, the shopper narrows the choices to two, both of which have an extra-fine felt tip. The only difference between the two is the ink color, which the shopper decides is not that important.
     Then when the shopper asks for the pen with the blue ink, he’s told it is temporarily out of stock. He’s asked if he’d like to place an order, and he’ll be notified when the pen arrives. He replies that he can’t wait that long. The salesperson—knowing the value of selling substitutability—offers the shopper the extra-fine felt tip pen with the black ink.
     But, like a majority of the participants in the American University/Arizona study, the shopper goes off in a different direction, such as purchasing a fancy ballpoint pen with blue ink. Because of the out-of-stock, the blue ink color becomes more important than the felt tip.
     Consumer psychologists attribute the abrupt change in priorities to a combination of shopper irritation (“You should have told me you didn’t have that pen in stock before I decided I wanted it!”) and a vying for control in what has become unpredictable circumstances (“When I come to your store because you carry a certain sort of merchandise, I do it because I expect you to reliably be in stock in that sort of merchandise!”).
     Stanford researchers found that being jilted by OOS’s can affect broad brand reputations. Study participants were told they could win Guess sunglasses by completing a word puzzle. Then upon trying to claim their prize, the winner was informed that the supply of Guess sunglasses was gone. And in a third step of the study, the winners were asked to rate Guess wristwatches and Calvin Klein wristwatches.
     The experience of being told Guess sunglasses were OOS led to lower ratings of Guess watches and higher ratings of Calvin Klein watches.
     You’re bound to be OOS sometimes. Ease the cross words and thoughts by allowing shoppers to maintain a sense of control.

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

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Monitor the Sales Floor to Avoid Out-of-Stocks
Replace Exclusivity with Substitutability

Saturday, July 30, 2011

Fork Over Those Smaller Plates

A rather surprising set of results from a rather strange field study underlines the importance of fine-tuning our assumptions about consumers. There is always more to learn.
     Researchers at University of Utah-Salt Lake City watched what people ate in a popular Italian restaurant. They were keeping their eyes on how much the diner consumed and also, of all things, the size of the fork the diner had been given with which to eat it. Some diners had been provided large forks and others, small forks.
     What’s your guess as to which group ate more? Before making your final guess, consider that a spaghetti-bundle worth of research has shown how when people are given a larger quantity of food, they tend to eat more. For instance, researchers at Cornell University and University of Central Florida found that study participants given a 8.4 oz. tub of fresh popcorn ate about 45% more than those given a 4.2 oz. tub. The effect is quite compelling: When the popcorn given to another set of study participants was stale, not fresh, those eating from the larger buckets still ate 34% more than the small-bucket brigade.
     The Cornell/Central Florida researchers attribute this phenomenon not to echoes from childhood of “You should always clean your plate,” but rather to the tendency of larger servings to subconsciously suggest to the brain that it is expected we’ll eat more.
     The lesson for fixed-price buffet restaurants is to monitor the size of the plates. But what about the fork? Does a larger fork, which results in getting more food into the mouth with each trip, cause people to eat less or to eat more?
     The answer is that the larger fork caused the diners to eat less. The Utah researchers explain the finding this way: Using a larger fork, you take more with each bite, so you perceive that you’re making more progress toward satisfying your hunger. Therefore, you stop sooner. In another Cornell project called the “Bottomless Bowl” study, people who ate from soup bowls that—unbeknownst to the diners—automatically refilled themselves ate 73% more soup than those eating from standard bowls.
     The more general lesson, then, is to give customers signs that they’re making progress in satisfying their needs. If you’re serving on smaller plates, provide bigger forks. If you’re providing a service which takes a long time to complete, point out benchmarks along the way.

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Give Customers a Clear Sense of Progress

Friday, July 29, 2011

Differentiate Yourself in Charity Sponsorship

Business analyses find that, on average, if your store promises to make a charitable contribution of $1 for each item purchased at the regular price, this results in a higher percentage gain in sales than if you offer a discount of $1 off the regular item price.
     Plus you’re helping the charity!
     Greg Buzek, president of consulting firm IHL Group and a trustee of the Retail Orphan Initiative (RetailROI), suggests that you choose a theme charity with which your store becomes associated. Choose your partner carefully based not only on the high quality of the charity, but also on how well your sponsorship differentiates your store. Mr. Buzek advises against picking a cause that is identical to a cause selected by another store serving the same target population as yours.
     Research findings from University of Minnesota, University of South Carolina, and University of Georgia support the importance of pairing the charity partner with the personality of the business. Those researchers used one of the most basic dimensions in consumer psychology: promotion-focused versus prevention-focused.
     Prevention-focused shoppers put top priority on products and services which help them avoid losing what they have now. Promotion-focused shoppers put top priority on products and services which help them gain more than they have now.
     Shoppers in luxury stores are more likely to be promotion- than prevention-focused, while it’s the other way around for shoppers for necessities. That influences the merchandise they’ll buy in the ways you’d expect. However, when it comes to the charitable activities, they support, it’s more complicated: Shoppers interested in self-enhancement in their purchases are more comfortable when the store includes among their main partners charities supporting traditional causes, such as basics and conservation.
     If these luxury store brands do include a symphony orchestra or art exhibit among their partners, they might do well to also highlight their continuing association with a charity providing food, shelter, and education to disadvantaged populations.
     Stores selling commodities need be less sensitive to having charity partners which promote self-enhancement. An important consideration with these stores is that the money be for causes in the local communities so the results can be easily seen.
     As it happens, the local angle is helpful also because it allows the retailer to stay in touch with past customers to provide updates, strengthening both a continuing relationship with the consumer and a continuing association between the store and the charity.

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

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Pair Contributions with Purchases
Sell Either Protection or Promotion
Donate In Ways that Encourage Others to Donate

Thursday, July 28, 2011

Complete the Collection for Shoppers

Retailers have always succeeded on the basis of filling in the gaps for shoppers. Author Robert Spector talks about how, in medieval London, the shopkeeper would stand in front calling out, “What lack ye?” Decades ago, Kaiser Cement mixer trucks patrolled the San Francisco Bay Area with their slogan on the rotating drum reading “Find a Need, Then Fill It.”
     The release this month by market researchers The NPD Group, Inc. of their 2011 “Brand Landscape Report” reminds us that the desire for completeness still motivates shoppers. Respondents in the NPD project were asked to rank the importance of a set of factors when making shopping decisions. More than 70,000 consumers were surveyed.
     One way in which the need for completeness showed itself was the interest in building on brands. For instance, when it came to consumer electronics purchases, the top consideration was favoring a brand that was already owned. For apparel, the top consideration was that the item carried a brand name with which the shopper had previously enjoyed success.
     Is what we’re seeing no more than an expression of brand loyalty? I suspect not. For both consumer electronics and apparel, the reason “Is a brand I can trust” was in no higher than ninth place for all respondents. But if we switch to looking at toys, the reason “I collect this brand” was in first place for male consumers and in third place for women. It is the urge to collect more than brand loyalty in operation here.
     If you own an antique shop or sell mounted sets of rare butterflies, chances are you've personally benefited from the relatively good profitability in high-quality collectibles. And for any merchandise lines that are not necessities for the customer, consider giving them the appeal of collectibles:
  • Feature items in groups, each one a distinctive member of the family. If parallel products are available for different age groups, have those items in the same ad and on the same sign. Stock them on the same end cap.
  • Introduce new items in the set regularly, at which point you rotate out older versions. This encourages shoppers to buy now.
  • Take special orders and publicize resale markets. When your customer is having trouble getting that special item to fill in the missing spot in the collection, help them buy it from you or from a collectors' group. Keep your customers as dedicated collectors.
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Recognize a Need, Then Fill It
Boost Profits by Making Items Collectibles

Wednesday, July 27, 2011

Analyze Patterns of Complaints

Arriving back from lunch, the acupuncturist was handed an urgent message to telephone a new patient. When the acupuncturist called, the patient said, “After I saw you this morning, I was amazed at the relief in my sciatica symptoms. I’d thought that stuff you said about freeing up the channels was nonsense.
     "But whatever you did caused another problem. My eyesight is shot. Everything I’m looking at is fuzzy. I made it safely driving home. I thought it was only the aftereffects that would go away. Now I’m getting irritated. You must have stuck needles in the wrong place!”
     The acupuncturist arranged for the man’s wife to drive him back to the office promptly. He then had the opportunity to analyze the complaint.
  • Is this a complaint received from a number of patients/customers/clients? If so, there would appear to be a systemic problem for which it is important to take corrective action. Place more emphasis on fixing the problem than on fixing the blame. Whenever serious problems arise in your retail business, hammer out the difficulties in supportive ways. Use your management hammer to repair the shortfalls, not to pound yourself or your staff into the ground. With our example, loss of visual acuity was not a complaint the acupuncturist recalled ever having heard before from his patients.
  • Is the complaint coming from someone who complains about almost everything? If so, it might be time to break up the relationship. Sometimes you’re no longer able to adequately satisfy a customer who’s been frequenting your business. Do it gracefully. Otherwise, the former customer’s belief that you have betrayed their trust can lead to them telling many others to avoid shopping with you. Make the last memory that person has of your business one of you respecting them. After they get away long enough to relax, they might come back. In our example, the acupuncturist had no reason to think this patient was a habitual complainer.
     As it happens, though, the acupuncturist received additional information which cut through any need for a prolonged analysis. You see, while he prepared for the disgruntled patient to arrive, his receptionist came in about another patient. “You know Mr. Brown who’s been receiving treatment here each week for a while? He called just now to say that at the end of his appointment this morning, he must have picked up somebody else's eyeglasses by mistake.”

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Resolve Customer Complaints Carefully
Fix the Problem, Not the Blame
Analyze Errors Accurately
Break Up with Customers Graciously

Tuesday, July 26, 2011

Tell & Ask Shoppers What Sets You Apart

During a “Profitability Tactics for Small Retailers” seminar I conducted last week, innkeeper Naresh Patel added to my repertoire of script snippets: “This is what sets us apart.”
     Mr. Patel owns Americas Best Value Inn located in Turlock, California. His script snippet is used when a shopper asks why they should stay at his lodging rather than at an alternative. Mr. Patel replies, “This is what sets us apart” and then presents a few of the many advantages he knows his lodging facility offers.
     I like the script because it’s positive. When asked to compare our retail business to others, we might feel a tug to criticize the others. This negative approach might alienate the shopper. Consumers from Latin American and Asian culture backgrounds are especially likely to feel uncomfortable with the negative approach.
     At the other end of the transaction, ask the guests of your inn, store, or other retail business for items you can add to your list: “What did you find sets us apart as a place to serve your needs?”
  • According to research at Hong Kong University of Science and Technology, asking questions like these is useful for changing brand, item, and store preferences the consumer has been following without any real thought. Reason-to-buy questions make the shopper stop to consider, therefore increasing your opportunities to influence them. Most people rise to the challenge when asked a question. They might not answer aloud, but they’ll probably start thinking.
  • Asking these questions personalizes the selling arguments. People make each purchase decision for all sorts of reasons, and each of us has a distinctive consumer personality. For instance, some shoppers primarily want to play it safe while others primarily want to acquire new advantages. The shopper can take your reason-to-buy questions in whatever direction fits them best.
  • When a group of family or friends comes together to your business, being asked this question can kick off a brainstorming session in which answers given by each person become a selling point for the others who are listening in.
     It is not a matter of the more reasons, the better, though. Research findings from Universität Heidelberg and Universität Mannheim indicate that if you ask the consumer to generate loads of reasons to buy the particular product or to shop at your place, the task becomes more difficult for the customer, and this actually makes your preferred alternative less attractive.

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Ask Shoppers for Reasons to Buy
Keep an Eye on Yelp

Monday, July 25, 2011

Push Shopping Baskets’ Pull for Sweet Items

How a shopper moves not only projects their buying intentions, but also influences their buying intentions. Consumer psychologists and smart retailers have known for a while that when a prospective customer nods their head up and down—even if the nod comes from reading a marketing brochure which uses narrow columns—the person becomes more likely to complete the purchase.
     Now researchers at Erasmus University-Rotterdam, Aston University, and Katholieke Universiteit Leuven report that when a consumer pulls their arm toward themselves, the consumer becomes more likely to purchase short-term pleasure over longer-term benefits. Have the restaurant patron lift the water glass to mouth to quaff the contents instead of drinking through a straw, and the potential for ordering dessert climbs. What’s even stranger is that when a shopper uses a basket instead of a cart in a grocery store, the shopper is almost seven times as likely to purchase candy bars rather than fruit as a snack.
     A Time Magazine blog posting points out that the shopper who chooses to use the basket on a particular shopping trip might have a different agenda than the shopper who chooses the larger cart, and this could account for the findings. However, the Erasmus/Loughborough/Norwegian School researchers conducted a set of studies which provide strong evidence the differences are due to more than conscious shopping agendas.
     Instead, the reason for the influence of arm flexion on purchase preferences appears to be that over our lifetimes, our brains subconsciously associate pulling our arms toward ourselves with acquiring pleasurable objects. It’s the sort of learning—called classical conditioning—that got Pavlov’s dog to salivate at the sound of a bell. For the adult consumer, pulling the arm toward the body activates subconscious expectations of short-term pleasure, and the arm pullers look to fulfill those expectations.
     It also works the other way around: Pushing an object away from ourselves, such as when navigating a large shopping cart through an aisle, subconsciously potentiates the brain traces of rejecting items which are not immediately pleasurable. This pushing effect is nowhere near as strong as the pulling effect. Still, the researchers do hypothesize that requiring a customer to push a door to enter a store lowers the likelihood of selling pleasure oriented items.
     These effects are subtle, but exploiting them can give you a retailer’s edge.

Click below for more:
Condition Your Customers
Give Shoppers Variety for Control
Start Your Shoppers Feeling Yes

(My thanks to Peter Laudin, owner of The Pattycake Doll Company, for bringing these recently published research findings to my attention.)

Sunday, July 24, 2011

Enrich Shoppers’ Sense of Community

Attend to the sense of community provided by the combination of your store and neighboring stores. When a shopping center gives a sense of community, consumers will spend more time there. Skilled retailers turn that extra time into increased sales through proper merchandising, promotion, and salesmanship.
     For a megamall like Westfield Stratford City, currently taking form in East London, there are special challenges and opportunities to learn from. With over 300 retail merchants, Westfield Stratford City will be Europe’s largest urban shopping center. The comprehensiveness of Westfield Stratford City in itself provides a sense of community. The range of retailers includes restaurants, groceries, and entertainment. Office space and housing are part of the planned development. If the final physical design facilitates flow from one part of the consumer’s life to others, this will enrich the sense of community.
     In a megamall, an important function of the individual retail units is as short-term respites within the bustling community. When operating in this sort of setting, your store entrance should use calming colors, sounds, and aromas. This allows shoppers to regroup and prepare themselves to launch into the exciting store interior and back into a purchasing momentum.
     Inside your store, design for interaction, though. Westfield Stratford City will have interactive store directories throughout. Shoppers welcome familiar design elements to help them orient themselves to the mall as a community. This will be especially important at Westfield Stratford City, both because of the potentially overwhelming size of the centre and because the centre is anticipating substantial patronage by people visiting from outside the area to see the 2012 London Olympics events.
     At the same time, consumers are attracted to surprises—such as distinctive design elements—once they become oriented to the shopping site. Concierge staff at the centre will be wearing specially designed outfits. Easily identifiable staff help shoppers orient themselves.
     Gender influences expectations of shopping communities. Women shoppers tend to like communities with curves and alcoves. They enjoy moving through shops with friends alongside and, at least in most cases, with family groups. As a result, women generally avoid tight shopping spaces. They are more tolerant of constricted spaces when paying for their purchases. Men tend to be less interested in socializing while shopping than in completing the task. Clear signage and obvious shopping paths are especially important. That way, the men don’t have to ever stop to ask for directions.

Click below for more:
Design Stores with Visual Aesthetics
Soothe the Savage Shopper with Silence

Saturday, July 23, 2011

Embrace Your Key Performance Indicators

What key performance indicators do you want to check on every day you do business? Store sales? Overall store margins? Average transaction and voids by each cashier? Maybe you’ll want to check the weather, since when you put it together with sales figures, you can get a better idea how to order inventory in the future. For the same sort of reason, knowing what advertising you had out on the street can be helpful.
     What do you want to check on every single week? How about payroll, sales by department, margins by department? How about your monthly KPIs? Maybe inventory turnover, markdowns, and open to buy versus budget.
     Many retailers who have decided what they should be checking end up not doing it. Your nonstop schedule can serve as a reason for you to neglect the KPIs. Another reason can be the mistaken belief that you should be measuring only what has numbers associated with it.
     Count what counts. Sure, if you can quantify it, that’s good. Conversion rate—the percentage of customers you talk to who end up making a buy—is a good KPI. In other cases, what counts can’t legitimately be quantified, but it’s measurable. Customer satisfaction might best be viewed as high, medium, or low. And sometimes, it’s not quantifiable or measurable, but only verifiable. Are you having fun as a retailer? Yes or no could be the most exact answer.
     Create openings in your schedule to check the KPIs. Then be sure you’re not avoiding assessment because you’re afraid of what you’ll discover.
     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.
     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 retailing terms, the law becomes “As fear builds in a retailer, the quality of their thinking and the effectiveness of their actions improve. 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.

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Check Your Dashboard Indicators
Use Your Fear to Your Advantage

Friday, July 22, 2011

Learn from Setbacks by Using Educated Trials

You’ll have setbacks. You’d like to identify the reasons so you can benefit. How can you do that well when there are so many moving parts? In addition, because human personalities, including your own, are involved in any setback, all our psychological defenses often fog over the matrix of true causes. In his book A Thousand Days, historian Arthur M. Schlesinger Jr. quotes President John F. Kennedy as saying, after the Bay of Pigs fiasco, “Victory has a thousand fathers; defeat is an orphan.”
     One answer to how to identify the reasons for setbacks is to be found by transitioning from that failure involving the word “pigs” to a retailing setback around teddy bears. Build-A-Bear Workshop stores epitomize the interest today’s consumers have in personalizing their shopping experience. Each child customer selects from a range of items in the store to design their own stuffed animal, and upon completion of the toy, the child signs the animal's birth certificate.
     However, Build-A-Bear lost $2.3 million in the first quarter of 2011. This compares with a profit of $1.7 million for the first quarter of 2010.
     The response of the retailer was to engage in educated trials to discover how best to move forward. The nature of those trials hints at a few things you might do when experiencing setbacks.
  • Tinker with your merchandise mix to see what sells: Build-A-Bear opened their first store in a hospital—Cook Children’s Medical Center in Fort Worth, Texas. Added to the usual merchandise mix were a patient gown, crutch, sling, bandages, cast, wheelchair, and hospital staff outfits.
  • Expand the shopping time commitment alternatives to learn what shoppers want: Build-A-Bear opened a store in Orlando International Airport. Limited edition souvenir items can be purchased by the shopper lacking time to construct a toy before a flight.
  • Appeal to local loyalties, then judge the advantages: Build-A-Bear is based in St. Louis. Although almost all of the 400 or so Build-A-Bear stores across five continents are in shopping malls, they’ve also stores at the St. Louis Zoo, St. Louis Science Center, and St. Louis Cardinal’s ballpark.
     It’s possible these initiatives actually contributed to the first quarter loss. But even if the educated trials did not pay off in short-term profitability, they provided more opportunities for the retailer to learn.

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

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Analyze Errors Accurately
Personalize the Shopping Experience

Thursday, July 21, 2011

Inculcate Your Staff with Store Values

When all your staff project the values of your business, the consistent message instills in shoppers a strong memory of your store. When those values fit what the shopper seeks, the potential for selling increases dramatically.
     The reality is many candidates for employment with you may not share all your values. In fact, the prospective hire, and even some employees who may have been with you for a while, might not know what your values are.
     Researchers at University of Wyoming-Laramie discovered how as employees identify with a business, their values are open to profound change. There are three levers for this change:
  • The employee’s economic well-being depends in part on you. Therefore, you have the attention of the employee when you take opportunities to discuss your values.
  • For employees who work in your store more than a few hours each week, their job becomes an avenue for socializing with you, other employees, and shoppers. Social learning researchers like Albert Bandura at Stanford University pointed out the strength of personal interactions and behavioral modeling in forming what we call values.
  • The third lever is the personal. When you and your staff encourage the employee to discuss how they handled difficult situations on the job, the employee comes to articulate to themselves a system of values. The result is the consistency across situations you’re aiming for. In their depth-oriented interviews, the Wyoming researchers uncovered examples of ways the values formed at the retail site changed an employee’s life decisions at home and with family.
     Here are two of the many tools available to you to inculcate your staff with store values:
  • Screen prospective employees by presenting a few situations and asking the employee how they might handle each. These should be real situations that require the candidate to prioritize among alternatives which reflect values. Be clear with the candidate and in your own mind that there is probably no single best alternative action in each situation. Remember that the person does not yet know your values and that you’ll have opportunities to significantly shape those values.
  • Mythologize your store. A myth is a special kind of story. Researchers at Boston College and University of Technology-Sydney say that the themes of a myth appeal to psychological needs across cultures. The best retail store myths help explain the origin of the business and give the store a memorable personality based on values.
For your profitability: Sell Well: What Really Moves Your Shoppers

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Incorporate Family Values into Your Retailing
Mythologize Your Store

Wednesday, July 20, 2011

Report Your Demise with Open Ears & Mouth

It’s been said that when Mark Twain was told his obituary had been published in the New York Journal, he issued a statement reading, “The reports of my death are greatly exaggerated.”
     Experts say that didn’t happen. Mark Twain has gained bonus fame from what he never originally said. I won’t be plowing new ground in the graveyard then when I apply the words to a recent report by Windows IT Pro: Microsoft plans to significantly expand the number of retail bricks-and-mortar outlets they operate. About 75 store openings over the next few years. The ultimate online company has decided that reports of the death of B&M are beyond the zombie pale. Unacceptably inaccurate.
     According to the report, Microsoft has decided that retail stores are an excellent way both to listen to the customer and to speak to the customer. One objective is stated as help in moving away from learning about their customers and toward learning from their customers. Another objective is stated as getting the sales message directly to the customer’s ears.
     These are indeed excellent ways to use the advantages B&M offers compared to ecommerce and social media interactions. There are opportunities here to shape your message and gain bonus credit. That point brings me back to the Mark Twain quote and what is said to have really happened:
     According to rumor eradication site, reports of the illness of Mr. Twain’s cousin in 1897 were misinterpreted to indicate Mr. Twain’s imminent death. Mr. Twain issued a statement: “The report of my death was an exaggeration.” He added the word “greatly” years later in a retelling.
     Mr. Twain wasn’t the type of person to claim credit for quotes he never actually uttered. One of my favorite Twain quotes is, “Wagner’s music is better than it sounds,” but says Mr. Twain was careful to credit it to fellow humorist Edgar Wilson Nye.
     Why are so many of these misattributed? In this case it’s probably because we know the name Twain better than the name Nye. When I start out saying I’ve a quote from Mark Twain, I’ve primed you to be ready to chuckle.
     Bringing it back to you, the retailer, when you and your store staff take the opportunity to interact face-to-face with shoppers, you can create your own legendary impressions which will come to mind even when those shoppers go to other shopping sites.

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Attend to Face-to-Face Word-of-Mouth
Gather Comments from Your Customers

Tuesday, July 19, 2011

Form Retailer Groups for Practices Recognition

“My observations of many merchants in my neighborhood are that they treat their businesses more like a hobby than a business. They often aren’t open at the times the sign on their door says they will be. They refuse to stay open even one day per week in the evening. They close up during special events we other merchants arrange.”
     That’s an edited version of a comment I received on a retailer survey.
     It’s harder for you to be convenient when the stores around yours are not open at times convenient to shoppers. It’s harder to claim customers should trust what you say when the merchants on either side of you don’t keep the operating hours they’ve promised in writing.
     Researchers at University of Georgia and University of Southern California looked at situations where shoppers ended up feeling either better or worse about their experience than they'd expected. When shoppers' expectations were exceeded, the shoppers often took it for granted and didn't give lots of credit to the product or service. It was when expectations were not met—when the store's promises were not kept—that there was more likely to be an impact on the evaluation of the product or service.
     One possible solution is to move your operations to a managed shopping center, such as a mall, where operating hours and keeping to commitments are generally enforced. Another alternative is to join up with other retailers who want to adhere to your high standards and professional practices.
     Some years ago, Ace Hardware Corporation developed a detailed code of procedures to which the independently-owned stores could adhere. Each store that did was awarded the designation “Vision 21.” The notion was to give the Ace Hardware brand a quality image across the range of owners and operators of the stores. You might do something of this sort to grant prestige to the brand that is your retailing corridor.
  • Give shoppers a way to recognize the distinction. Vision 21 retailers got a plaque to display, and a press release was sent out when a store qualified.
  • Measure key performance indicators, such as profitability, to show that adherence to the standards is worthwhile. You want to recruit as many neighborhood retailers as possible.
  • When you’ve good participation, consider raising the bar to provide your brand even more prestige. This year, Ace Hardware Corporation morphed the Vision 21 program into Ace Platinum.
Click below for more:
Keep Your Promises
Hobnob with Your Neighborhood Retailers

Monday, July 18, 2011

Transform Shoppers with Magical Thinking

By and large, we’re an optimistic lot. If asked to compare ourselves to others, about 80% of us will say we perform better than the average person. That is, of course, a mathematical impossibility. You can’t have 80% better than the 50% benchmark.
     My very favorite of those research studies found that 80% of us even believe we are more likely than are our neighbors to go to Heaven.
     Hmm, I can’t locate the study right now. I’m sure I remember correctly that it said 80%. I’m also sure that since I mentioned the study to you, it will show up soon. Sort of like how when you buy a purple car, you start seeing loads of purple cars.
     It's magic.
     Combine unrealistic optimism with an irrational belief in magic, and it becomes a force of consumer motivation. Researchers at HEC-Montreal and at Queen’s University-Kingston analyzed how magical thinking helps people stay on a diet. The researchers recommend against confronting dieters with the objective odds of success, since those odds would discourage them from persevering.
     Don’t lie to consumers. However, stoking the magical optimism can facilitate success. Keep things in the spirit of the children’s book The Little Engine That Could, with its mantra of “I think I can, I think I can.”
     Acknowledge the power of shopper superstitions, even if you don’t accommodate every one of them. Superstitions are most likely to influence consumers at times of uncertainty and when there is information overload. Because we’re living in times of worldwide economic uncertainty and because today’s shoppers are exposed to monumental amounts of advertising and advice, we’d expect to see more of what resembles shopper superstitions.
     Use this fact to improve your profitability. Distinguish two flavors of being superstitious. Researchers at University of Texas-Pan American, Ohio University, and China’s Chongqing Technology and Business University differentiate between consumers who do things like carry good luck charms and those who believe in the power of fate or karma regardless of what lucky charms they're packing.
     Researchers at Dartmouth College and Columbia University suggest that for those who respect karma, you show extra perseverance in resolving any customer service complaints. Research at St. Louis University and Oklahoma University suggests that the other type of superstitious consumer will become a fan of your store if you pair positive shopping experiences with a memory aid, such as small items carrying your store logo.

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Cast Magic Spells for Escape Benefits
Offer Superstitious Shoppers Good Luck Charms
Join Customers in Role-Playing

Sunday, July 17, 2011

Insulate Bargain Alternatives’ Image Damage

Soon after retailer Williams-Sonoma added a $425 bread-making machine to their merchandise line, sales of the $275 unit doubled. The $275 unit seemed like more of a bargain compared to the substantially more expensive alternative.
     But did the introduction of the $425 model lower consumers’ perceptions of quality of the $275 model? Research at Miami University and France’s ESSEC Business School suggests that if, in these circumstances, the $275 and the $425 models carry the same brand name, the introduction of the more expensive model might actually enhance perceived quality judgments of the less expensive model. The researchers assessed the degree to which study participants liked the product and accorded it prestige.
     And how about allowing bargain versions on your shelves? The researchers used as an example the introduction by Charmin of a lower-quality Charmin Basic product and Foster’s Beer producing a lower-quality Foster’s Grog. Would adding these bargain versions to your store’s merchandise mix lead to lower quality ratings of the flagship versions?
     In the current price-sensitive retail marketplace, it is good for you to make bargain alternatives available. At the same time, you want to preserve the quality image of items that yield higher per-unit profitability. The Miami/ESSEC findings and other research suggest ways to reduce the damage to the image of the higher-priced alternative:
  • Check that the bargain brand does still competently fulfill functions the shopper is seeking. The price is lower, so the purchaser expects compromises. But if there is not sufficient value, do not carry the item.
  • Begin introduction of the bargain versions with product categories where you already have a better-best set. When there is a premium version in addition to the flagship version, introducing a lower-quality alternative has less negative impact on the brand image.
  • In ads and in-store selling, give shoppers examples of the breadth of product line you offer. This message encourages consumers to think of the bargain alternative as an opportunity to choose rather than as a reflection of the brand quality.
  • Put more gusto behind the marketing of the better and best versions than behind marketing of the good, but bargain, version. Consumers have a natural tendency to credit the brand with characteristics of its best example. Support this tendency.
  • Physically segregate the bargain version from the flagship version and any premium version. A stigma can rub off from cut-rate merchandise to other merchandise that is adjacent.
Click below for more:
Anchor Browsers onto Higher Prices
Resell Consumers on Buying Used Items

Saturday, July 16, 2011

Acknowledge People Waiting in Line

Sometimes you don’t mind waiting.
  • Dining at a fine restaurant is best experienced as leisurely. This applies even to the delivery of the entrée. You don’t want to wait hours. But if you order the forbidden black rice risotto and the server dumps it in front of you thirty-five seconds later, alarm bells sound from your brain’s gourmet lobe. Hey, it takes thirty-five minutes to prepare a palatable forbidden black rice risotto.
  • Researchers at University of Michigan find that when it comes to products with a custom or artistic component, purchasers tend to consider a longer delivery time—within reasonable limits—as a signal of higher quality.
  • Researchers at University of California-San Diego and Duke University discovered that although people say they would never pay more money if it meant waiting longer for delivery, some of those same people report experiencing substantial pleasure from anticipation during the wait.
  • Researchers from Boston College, University of Miami, and Duke University point out how a fairly high percentage of people don’t mind at all sitting in a waiting room for a while before a necessary, but unpleasant, experience, such as a dental appointment. The researchers found that many of them use the waiting time to prepare themselves.
     Still, standing around a store waiting is pretty much a slam-dunk bother. Giving customers something interesting to look at can help. Airport waiting areas use television sets with the sound volume kept low. You could do that, too. In hotel elevator lobbies, a large mirror causes time to go faster for waiting guests. Some retailers report good results from relaxing those waiting by pumping in a lavender or vanilla scent.
     But especially among American consumers, a foundation of the hating in waiting is the shopper worrying they’re being treated inequitably. “A shopper who arrived after I did might get served before me.”
     There’s a research-based technique for easing that source of anxiety: Acknowledge each consumer as they arrive in line. Make eye contact, smile, and nod.
     There’s an art in doing it well. You don’t want the person you’re now serving to think you’re ignoring them by looking away. Do it between sentences, when the person in front of you takes a breath. And do it with everyone who comes. That way, the person you’re now serving recognizes they got the benefit of your instant acknowledgement earlier.

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

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Slow Down the Sales Process Sometimes
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Friday, July 15, 2011

Compose Integrated Musical Atmospheres

The sound of music can influence shoppers. But don’t depend on a radio for your background music. For one thing, I’m told that there is exposure to being sued for playing copyrighted material in a commercial setting without permission. Playing the radio in the back office is different from playing the radio throughout the shopping floor.
     And from a shopper psychology perspective, depending on the radio doesn’t allow for fine-tuning.
  • Consumers are drawn to stores that entertain them. Think about the flavor of entertainment which fits your store’s retailing personality. Music does not stand alone. It’s part of the total in-store experience.
  • Use music to pace customers. When you play faster music in a store or restaurant, people tend to make their selections and complete their purchases more quickly.
  • Allow for the sounds of silence. Excessive noise leads us to tighten our muscles, and as research from National University of Singapore and University of Chicago confirms, tense muscles keep people from being sold what they’re not fully convinced they want. To facilitate the sale and soothe the savage shopper, introduce some periods free of the music. A little peace and quiet also puts the harried salesperson back in tune.
  • Play music with lyrics if you want shoppers to select items from habit without much thought. Researchers at Columbia University and Northwestern University find that noticeable music helps head off arguments shoppers might make to themselves about the purchase. On the other hand, if you want a shopper to carefully analyze the purchase decision, either do not have music or use music that is barely noticeable. If you’re wanting customers to try new brands or new products, cut off any intrusive music.
For your profitability: Sell Well: What Really Moves Your Shoppers

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Thursday, July 14, 2011

Pair Preferences with the Shopper’s Entourage

Are your customers crazy? You might get that impression sometimes. However, through the lens of shopper psychology, it almost always makes good sense.
     What I’m thinking of now is that to say a shopper can have a multiple personality is not to say the shopper suffers from the sort of pathology portrayed in the Showtime series “United States of Tara” about a woman with what’s formally called Dissociative Identity Disorder.
     And now my multiple mental set is suddenly shifting to where I’m thinking about how a shopper whose preferences you think you know very well can have quite different preferences when coming in with a different group of people. For instance, when shopping with family members along, a consumer is more likely to take financial risks in purchases than when shopping with a group of friends. But the shopper with family is less likely to select highly unusual products or services.
     It can be frustrating for the conscientious salesperson. Here you and your staff are priding yourselves on knowing what each customer likes as soon as they walk through the door, and here you find that your assumption was all wrong this time. The way to get back on track with your mindreading is to start pairing the shopper’s preferences with the group they’re associating with at that time.
     As it happens, the group is not only what you see right there in the store. It also can be the group in the shopper’s mind. Researchers at UCLA and University of Washington-Seattle find that if you can get a shopper to think about their association with a group, it slants their preferences toward what they will like as a member of the group.
     These researchers saw the effect with advertising. In many ads, the imagery and text portray a particular group to which the target consumer belongs. It might be a group of people who enjoy clubbing or vacationing. It might be a group that’s in college or using a walker.
     Past research had shown that shoppers associate certain merchandise and services preferences with each such group. What the newer research indicates is that a salesperson’s reminders of group membership also can shape the shopper’s relative rankings of purchase alternatives. You can change item and brand preferences by guiding the personality toward the one of the multiple possibilities that shopper is carrying in their mind.

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Wednesday, July 13, 2011

Disclose Selectively to Facebook Referrals

As Facebook becomes a progressively more dominant marketing platform available for retailers, it’s valuable to understand the psychology of the Facebook user.
     A snippet of information recently came from The Pew Research Center's Internet & American Life Project about a core element of the retailer-shopper relationship: Trust.
     People who access Facebook multiple times each day were found to be more than three times as likely as non-internet users to say that most people can be trusted. Compared to other internet users, the multi-Facebook group were about 43% more likely to trust others.
     The relationship between social network services and being trusting was not so strong for MySpace, LinkedIn, Twitter, or other SNS users. But that absence of evidence might very well be a statistical artifact, and therefore not mean much: In the Pew survey of 2,255 adults, more than 90% of SNS users said they employ Facebook. In addition, many Facebook users also use another SNS.
     It’s far from clear what’s the cause and what’s the effect in this relationship between Facebook and being trusting. But it’s an indication that when a shopper tells you they came to your store because of something they saw on Facebook, they’re open to trusting you.
     Keep the interactions professional. Be ready for a mix of what University of Geneva researchers call “secure business attachment” and “close business attachment.” In the first, the customer wants to rely on you for quick answers to questions about purchases made and for quick solutions to problems with purchases. In the second, the customer wants to exchange information about family and friends.
     The trust that has been granted might mean you can selectively withhold information from these customers. Don’t flood customers with what they’d prefer not to know. Your customers at times find it challenging to consider the whole truth.
     If you sense something is important for the customer to know, tell it to them. And if your intent is to mislead or betray, that’s sinful. But in fact, presenting information selectively usually assists the consumer. Researchers at University of Twente in the Netherlands, University of Indiana, and University of Cincinnati set out to confuse study participants by adding to the sales pitch technical jargon, unfamiliar words, illogical product groupings, and dollar prices restated as cents. The result was that the participants chose items more quickly and with more certainty than would be in their best interests.

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Tuesday, July 12, 2011

Hesitate Giving Away the Store

Free works in funny ways. This means retailers are at risk of misunderstanding how to best use an offer of a free product.
     A case in point was yesterday’s 7/11 offer by 7-Eleven to give away Slurpees. According to a USA Today article, when 7-Eleven did the freebies last year, paid sales of Slurpees climbed an average of 38% for the day across locations.
     Is the lesson that your best alternative for building sales in your store is to give away the store? Well, as you’d expect, it’s more complicated than that.
  • The free Slurpee the consumer got was just over seven ounces. It’s designed to arouse a shopper’s appetite without satisfying the craving. The senior brand director for Slurpee has said, “You get a taste of it, and you choose to have more.” If the product and amount are at that sweet spot, you giving it for free can increase profitability from the add-on paid sales.
  • Like the recent Chick-fil-A food giveaway, the 7-Eleven promotion was framed as a celebration. 7/11 is declared as the retailer’s eponymous birthday. Consumers were encouraged to go to to download party hats and confetti. If your giveaway is part of a celebration and you merchandise properly, the additional items people buy will more than make up for your costs of the freebies. Free can activate a desire in the shopper to pay you back.
  • Looking at a climb of 38% for the one day isn’t sufficient. If you experience that sort of boost when giving away a product, assess if it was a move of sales from surrounding days, such that the net gain is not substantial.
  • Before offering an item for free, do the rest of the math. I’ll call it the Groupon calculation. Offers of free products, like the deep discounts of Groupon and its sister programs, can draw in crowds for a day. However, don’t find yourself wanting to believe, “We lost money on every sale, but we made it up in volume.”
     The idea of free can produce craziness in people aside from retailers. In discussing the seemingly irrational drive to get something for nothing, the USA Today article includes this quote: “Economists are wrong about almost everything.”
     I regret to say this silliness apparently came out of the mouth of a fellow psychologist. Maybe it was caused by brain freeze from drinking his Slurpee too fast.

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Monday, July 11, 2011

Sign On for Effective Signage

An article by business consultant Rhonda Abrams nicely pointed out the importance of signage and how easy it is to overlook opportunities. She wrote about a carpet cleaning retailer who parked his truck in her driveway, a driveway which is on a busy street. What a waste it was that the truck had no signage.
     With an inexpensive magnetic sign, the carpet cleaning retailer could proclaim, “Here I am doing work for someone who selected me from the available alternatives, and here’s how to contact me to do quality work for you.”
     Yes, this would be too many words to have on signage you expect people to read as they drive or walk by your van or truck. You’ll probably want to limit the text on a vehicle to a name, tag line, website address, and phone number. Just enough to make them want to learn the rest. You’ll also want excellent contrast between background and foreground.
     That’s on the street. Inside your store, keep the signs simple enough to be read quickly, but also design the sign to make things simpler for the shopper. Researchers at Columbia University found that an important element in signage is placing product choices into categories for the shopper. Categories help us break down the decision into more manageable steps. That soothes shoppers most dramatically when they're unfamiliar with the products they're selecting from. It speeds up decision making, and time is money for both you and your customers.
     The style of signage helps define the personality of the retailer. I’m thinking about Lululemon Athletica, which describes itself as selling sell “technical yoga clothes.” Signage in their stores is in the style of neat handwriting to project creativity.
     Research at University of Colorado suggests that a handmade look might not appeal to all types of consumers, but would be attractive to shoppers who see themselves as creative or who aspire to be more creative. Findings from surveys conducted by the Boston Consulting Group indicate that women shoppers—the major target audience for Lululemon—like their creativity combined with practicality.
     Part of the personality you want to project is helpfulness. Good signage answers questions customers commonly have. This saves irritation for staff who quickly tire of being asked where the rest rooms are. It also allows shoppers to avoid needing to ask questions of sales staff. This is important to newbies to your store who fear a question will launch an aggressive sales pitch.

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

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Sunday, July 10, 2011

Watch for Fads

I wear a wristwatch. Been doing it each day since well before 2006, when The Sacramento Bee predicted the wristwatch was going the way of the abacus. I don’t do it to meet more people, even though in 2005, the Boston Globe said, “Anyone who needs to know the time these days would be wise to ask someone over the age of 30.” Yep, I’m over 30.
     I wear a timepiece because I keep to a tight schedule—appointments, submission deadlines, travel commitments, interval training at the gym—and it’s easier for me to frequently look at my wrist than to repeatedly pull a mobile device out of my pocket.
     A recent New York Times feature which yielded those really nifty quotes from The Bee and Globe also described other functions of wristwatches, aside from telling time. “Really nifty”? Yep, I’m clearly over 30.
     The NYT says wristwatches are enjoying a renaissance by serving as unusual jewelry and as mechanical chic. Sales of moderately-priced watches have risen about 15% over the past three months. Luxury watch sales have climbed more than twice that much. Swatch Group Ltd. saw net profits rise 42% in 2010. That’s especially astounding when you realize the 42% growth was for a company which is already the world’s largest watchmaker.
     Should you carry wristwatches, retailer? If so, select your mix based on what functions the watches would serve for the customers you serve. Diesel manufactures a model for the show-off. The face is twice the size of the classic standard watch’s. Casio’s aiming for the surfer and skateboard demographic with rainbow-colored models. J. Crew is selling straightforward Timex models to match the spirit of classic simplicity in their other merchandise offerings.
     Also ask yourself if the wristwatch renaissance is a fad. Consumer psychologists define a fad item as one where popularity explodes and then dies suddenly. With fads, just like with wristwatches themselves, success can be in the timing. Stock up too late and you’ll not only miss out on the profitability from the period of explosive sales, but you’ll get stuck with unsold products.
     Timepieces being sold as jewelry or curios remind me of another item for the wrist—Silly Bandz, those colored silicone bracelets, each of which would take on the shape of an interesting object, character, or word, when not being worn. Sales of Silly Bandz peaked and promptly evaporated.

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Saturday, July 9, 2011

Convince Kids that Healthy Has Authority

Children are vulnerable. To maintain your right to ask for support from your consumer communities, you’ve an ethical obligation to guide younger consumers in those communities toward healthier choices.
     As a set of articles in the current Journal of Consumer Behaviour reports, the relationships between children and healthy choices is a conflicted one throughout the world and across children’s age ranges. When it comes to food, for example, researchers at NOVA School of Business and Economics in Portugal find that, in general, children 7 to 8 years of age know what is healthy and what’s not and think it is good to eat healthy foods, but also think it’s great fun to rebel against being healthy.
     Researchers at Boston College found that asking children 8 to 12 years old to read nutritional information on food packages made them less likely to choose the healthier alternatives. It seemed to be a matter of the children vying for control.
     Consumer behavior experts from University of Calgary conducted focus groups with 225 children from various parts of Canada. The children were asked to discuss the differences between “kids food” and “adult food.” These young consumers said kids food was more likely to be sugary and come in unusual shapes and colors, while adult food was more likely to be plain, easily recognizable fruits, vegetables, and meats.
     When the focus group moderators probed deeper with the children, the moderators found that, as in the NOVA study, the children in the Calgary study thought it was a prerogative of childhood to rebel against being healthy. But there was also clear evidence that the children recognized adult food as giving opportunities for pushing beyond society’s demands to be healthy. You can rebel as an adult.
     From the perspective of developmental psychology, an important difference in the child’s mind between rebelling as a child and rebelling as an adult is that the adult does it with more authority. The way the retailer can fulfill the ethical obligation to guide younger consumers toward healthy habits is to associate those habits with having more authority.
     When discussing purchase choices with the parents, also look at the child periodically. With some children, it works well to crouch down. If the child asks questions, answer in terms the child can understand and with no hint of ridicule. What seems obvious to an adult might be puzzling to a blooming consumer.

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Educate Children as Consumers

Friday, July 8, 2011

Cultivate Controversy Carefully

Fashion retailers thrive on controversy. Pastry sellers, maybe not so much. Or maybe just as much.
     Baked goods company Entenmann’s tweeted, “Who's #notguilty about eating all the tasty treats they want?!” This on the day that endless tweets of outrage were circulating about the acquittal of Casey Anthony on charges she had killed her 2½-year-old daughter.
     Entenmann’s soon deleted the tweet and then issued a new tweet: “Our #notguilty tweet was insensitive, albeit completely unintentional. We are sincerely sorry.”
     Likeable Media, the social media consultants to Entenmann’s actually did the original post. They were tracking the #notguilty tag as a trending topic, so hopped on board with its use, but say they failed to first investigate why the tag was suddenly so popular.
     The “insensitive” apology tweet was retweeted nearly 100 times and the Entenmann tweet roster ended up including countless thank you responses to those who said they understood.
     Although it turned out quite nicely for Entenmann’s, I suspect that the controversy here was not intentional. But I much more than suspect that there are retailers and other marketers who carefully cultivate controversy.
     Back to the fashion retailers: American Apparel’s sexually-charged advertising that has sometimes used pornographic film stars generated not only outrage, but also rapt attention. Even some praise. In a week when the American Medical Association urged advertisers not to digitally distort images of female models to make them look unrealistically skinny, American Apparel could point out how their models are shown without imperfections Photoshopped out.
     Even when you as a retailer allow controversy in order to be socially responsible, take care. Analyze the values of the culture in which your business operates. Research indicates people with backgrounds in collectivist cultures, like those in many Asian and Pacific Island areas, Greece and Portugal, are more likely to embrace social responsibility than those who identify with individualist cultures such as Great Britain, Canada and the Netherlands.
     At the start, you might choose to take on social responsibility issues that will bring largely supportive attention. Almost everybody supports reducing the trash we generate. So your first social responsibility initiatives might involve exploring ways to sell products that use refillable containers, favor vendors that minimize packing, and accept old products as recyclables.

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

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Thursday, July 7, 2011

Allow Prestige for Store Brands

The Private Label Manufacturing Association is happy. Retailer revenue from store brands continues to increase. Using data from The Nielsen Company, PLMA estimates that sales increased by about 2% during year 2010. This is good news, since a reversal of previously high growth was expected. In drug stores, sales of store brands have almost doubled over the past decade.
     Stocking private label goods—store brands—gives you advantages over carrying only nationally advertised brands. Retail profit margins are usually higher, even if you’re offering a better price to the customer.
     But you might set a somewhat lower, not significantly lower, price on the store brand than on the nationally advertised brand. According to the principles of the price-quality link, consumers are more likely to accept a store brand as being of high quality when the price is comparable to the nationally-advertised brand.
     To keep that profit margin higher, allow shoppers to give prestige to store brands. Consumers are ready for this. A survey commissioned by PMLA and conducted by GfK/Roper concluded that 80% of U.S. consumers believe the store brands they choose to buy are either equal in quality or better than the corresponding national brands.
     Past research does indicate that some cultural groups avoid private labels in certain product categories. Research based at University of Memphis suggests that African-American consumers tend to steer away from private label brands in clothing, particularly boys’ clothing, because the private label lacks the cachet of widely advertised brands. Other research finds that Asian-Americans expect much more information about product features and consumer ratings when considering house brands than when considering national brands.
     To build the prestige, advertise the store brands and feature them in social media channels likely to be seen by people who are both in your target market and are members of the cultural group.
     When you’ve store brands that cross product categories, using a similar package design to build brand image is a good idea from a shopper psychology perspective. Mere familiarity brings credibility. Research findings from Wake Forest University and University of North Carolina–Greensboro do suggest that you place products with the same package design in different relative shelf positions for different product categories.
     For instance, with the mouthwash, the house brand is to the top left of the other brands, while with the toothpaste, the house brand is to the bottom right of the other brands.

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Wednesday, July 6, 2011

Look at the Whole Picture in Profitability

The consumer behavior study was carefully done. But the recommendations to the retailer don’t make sense. Can you figure out why I say that? Here are the details:
     Ryerson University researchers developed a mathematical model to assess the ongoing effectiveness of customer loyalty programs—-sometimes called frequent shopper programs—-which reward customers for their continuing business. Retailers assume that, when well-designed, loyalty programs motivate customers to keep coming back. The Ryerson researchers believed their mathematical model would refine this assumption and suggest how to maximize the monetary return from loyalty programs.
     To generate data for the mathematical model, it was postulated that loyalty program members who purchased an item were given a coupon for a 15% discount on a subsequent purchase to be made within two months. I see this as a good example, since prior research has shown that, overall, the loyalty program reward most popular with customers is a percentage discount on future purchases of items selected by the customer and a 15% discount is usually sufficient to motivate a shopper.
     The resulting mathematical model reflected how loyalty programs do indeed influence consumers to become repeat customers. Then further analysis showed how once the habit is developed, there is no evidence of further gain from continuing the loyalty program. In fact, the model indicated that, in order to compensate for the revenue lost from the 15% discount, it would be necessary to raise the price on that item or on other merchandise.
     Therefore, concluded the Ryerson researchers, you should discontinue the loyalty program once you’ve established the initial habit.
     What’s wrong with this conclusion? Well, here are two flaws:
  • If the program is effective, the retailer should continue using it to build loyalty in more shoppers, including those coming into the store after the program began.
  • A frequent shopper program has objectives other than building a general tendency to return. For instance, it also allows you to track each customer’s purchase history in ways you can use to target sales promotions.
     The mathematical model was overly limited in scope. It didn’t match real retailing life. Maybe I should have spotted that immediately when I saw that the article about the research was published not in a retailing or marketing journal, but in Computers & Industrial Engineering.
     When someone suggests a profitability tactic to you, take care that they’re not basing the suggestion on an unrealistically limited perspective.

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Give Loyalty Program Members Prestige
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Tuesday, July 5, 2011

Convince Shoppers to Reach for the Stars

Help your shoppers reach for the stars. To achieve more than they thought realistic before they saw the products and services your store makes it possible for them to possess. To go beyond what is in their grasp to realize what is within their reach.
     However, before we get too mushy about this, let’s recognize that a primary motivation for you doing this is to increase your sales.
     Researchers at University of Texas-Austin and Switzerland’s University of Bern looked at the emotional attachment of a total of more than 2,300 consumers to a total of 167 brands retailers carry. They found that consumers are more likely to form an emotional attachment to an item at retail if the consumer sees the item as fitting their image of their current self rather than of the person they aspire to be. Shoppers hesitate reaching out too far.
     But maintaining the status quo will result in smaller shopping basket totals. We’d prefer our shoppers to aspire. Consumer psychologists use the term “aspirational group” to refer to a cultural group that a consumer wants to join but believes they do not belong to yet. Newly minted MBAs may aspire to become part of a business professionals’ culture. Hispanic youth attending a U.S. university might aspire to view themselves as mainstream American college kids.
     To trigger aspiration, build self-esteem.
  • Flatter expertise. Researchers at Duke University saw that a motivator for many experts is showing off their knowledge, even when that knowledge is out-of-date.
  • For the best long-term results, give genuine praise. But researchers at Hong Kong University of Science and Technology find that even insincere flattery can be effective.
  • Each time you personalize the selling message by referring to a characteristic of the shopper, you’re delivering a compliment. Even the smallest things can give you a retailer’s edge. For example, researchers at Universiteit Leuven in Belgium find that across languages and cultures, people’s self-esteem is heightened if their name is used.
  • When the customer is completing their purchase, they are more interested in reassurance than in benefits statements. This is a prime opportunity for praise. Compliment them on the good decisions they made. Invite them to return to tell you how their purchases worked out for them.
     In building self-esteem, stop before it’s too late, though. The Austin/Bern researchers found that when self-esteem was extraordinarily high, consumers went back to aiming for the status quo, at least in the short-term.

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

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Monday, July 4, 2011

Monitor Your Thanks to Customers

Is it possible to thank your customers too much? Yes, according to researchers at University of California-Riverside, Boston College, and Southern Methodist University. In the Journal of Marketing, an article titled “Enough is Enough” describes their findings. The research findings also suggest how to avoid the risks of excess.
     Before I reveal those ways to you, let me say that as a consumer, I love being thanked by a retailer. And as a consumer psychologist, I recommend retailers thank their customers profusely and repeatedly. One of the many reasons for repeated thanks is to stay in touch with the customer.
     Jen Kubala, co-owner of Ritzy Ragz & Thingz, sets the benchmark at sending out five handwritten thank you notes each week. Jean Chai, an Ameriprise financial advisor, sends a handwritten thank you to every new customer. A while back, she wrote me, “I am well aware of the trust and confidence you have placed in me. I take this responsibility very seriously…. Thank you for making me your financial advisor.”
     So what might go wrong with these initiatives? The Riverside/Boston/Southern Methodist study assessed the repurchase behavior over a three year period by customers who were thanked repeatedly by the retailer. The researchers found that when there were too many thanks, the recipient began to see it as more of a sales pitch than as genuine appreciation. There were fewer repurchases from customers who indicated to the researchers that this tipping point had been exceeded.
     How to avoid the risks?
  • Find out which channels each consumer prefers for messages. Repurchasing dropped faster when a customer liked a personal telephone call, but was getting thanked via e-mail. For most consumers, a grammatically correct handwritten note is a welcome break from text messages. However, some prefer quick and dirty.
  • Add unpredictability. A surprise thanks comes across as more genuine than an obviously scheduled one. Researchers at Yale University and Carnegie Mellon University found that a surprise gift to commercial bank customers resulted in significantly higher deposit account balances.
  • Thank valued customers in a range of ways. Ms. Chai sends birthday greetings to her clients via e-mail or a phone call. Ms. Kubala sent me a card noting how I’d consulted with her about a “Profitability Tactics for Small Retailers” seminar I’m presenting in Turlock, California July 19.
Oh, one more thing: Have I thanked you lately for your interest in RIMtailing?

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

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Say Thank You, Dear
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