Compromise Effects with Shopper Segments

Anticipating trends is a valuable skill for retailers. Also valuable is an awareness that a trend can wiggle around, level out, and move into reverse. Moreover, a trend that holds true for one consumer segment might not hold at all for other consumer segments.
     An exemplar of all this is the changing strength of what consumer psychologists call the compromise effect: When a shopper is faced with a good-better-best choice, the typical shopper tends toward the middle alternative.
     Traditional research found the compromise effect to be robust, allowing retailers to shape shopper behavior by the choices presented to the consumer. You’d put in the middle the choice you thought would be best for satisfying the shopper’s needs and your profitability objectives.
     Then began a trend toward what I’ve called barbell retailing: Consumer choices moved away from middle markets. Movement to the extremes becomes more likely at times of uncertainty, and consumers worldwide were experiencing economic uncertainty.
     The implications for you, the retailer:

• In your merchandising, feature both premium and bargain choices for product lines. If you need to save on inventory expenses, deemphasize the midrange choices.
• For any midrange lines you do carry, project a strong lifestyle personality of staying the course and showing perseverance in the face of uncertainty.
• Avoid the extreme extremes. When the weightlifter loads up the barbell for a total 130 lb lift, they’ll put the 50 lb weights on first, then the 10 lb weights outside the 50 lb ones, and then the 5 lb weights outside the 10 lb ones. Keep the shape of that barbell in mind. Your shoppers are moving out from the center, but only a minority are moving all the way out to the highest luxury or the deepest discount preferences.

     But, wait. The compromise effect trend wiggled with mood: When shoppers are worried, but determined to make the purchase rather than defer the decision, they seek the compromise alternative and will look for it as the middle alternative. Not the highest-priced or lowest priced, but the middle-priced. Not the highest quality or lowest quality, but the medium quality.
     Now, a more recent study at Otto-von-Guericke-University and Karlsruhe Institute of Technology in Germany indicates that it makes a difference whether your shopper is more interested in quality or price. The compromise effect is currently strong among the segment of quality-seeking consumers, but weak and insignificant among the price-conscious segment.

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