Price Product-Service Bundles for Scalability

Retailers that sell primarily products should also sell services, such as training. Retailers that sell primarily services should also sell products, such as having spa staff recommend items customers can purchase for home use.
     To up the dollar value of the transaction, you might offer product-service bundles. Comprehensive solutions are a selling point. “We install the carpeting you purchase here.” “Your massage package includes a selection of body oils to take with you.”
     How should you price the components in the bundle? Findings from Bowling Green State University and Texas A&M University indicate that the small to midsize retail business might choose to discount the product component of the bundle, but should not discount the service portion. The researchers’ explanation is based on scalability—the diminishing unit cost to the retailer associated with additional volume. When you sell more products, you’re better able to negotiate volume discounts, so the cost to you for each item decreases. With services, though, there is a fixed cost. If a day goes by that a service staff member’s help isn’t purchased, you can’t store those hours to use another day.
     The researchers also verified that consumers will pay to reduce uncertainty. This argues for charging full price with services, since there is more uncertainty than with products. Even after completion of the sale, a customer may be relatively unsure about how well the service addressed the real problem and how reliable the result will turn out to be. If the car starts making that strange noise again, the purchaser might figure the auto repair service outcome wasn’t good. Or they could figure that the service provider delivered what was least expensive for the customer given what was known at the time and it’s now time to return to see what else should be done.
     Services customers respond differently to what can be called outcome and process factors. Outcome factors include the ease of scheduling the service, the degree to which the service addresses the problem the customer defined, and the reliability of the result. Process factors include the attentiveness and friendliness of the staff. Studies at Chinese University of Hong Kong and Nankai University found that when at least adequate service is provided, consumers pay more attention to process quality than outcome quality. Attentiveness and friendliness take staff time, a retailing reality that reminds us again services are not as scalable as products.

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

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Rebrand for Renewal

Among the reasons a retail business might pick a different name are a change in franchise arrangement (a Hilton becomes a Marriott), a change in ownership (the current proprietors want to double down on saying “Our shop is under new management”), or a desire to separate from unpleasant associations (a restaurant got lots of press coverage for repeated cases of food poisoning). Sometimes a change in name is required for legal reasons, as was the case with Yosemite National Park’s concessions.
     Researchers at University of Delaware, Cornell University, and University of Chicago studied the financial effects of a name change among 260 hotels compared to a comparable set of 3,010 hotels that did not change names. The researchers concluded that a name change produced, on average, a 6% increase in occupancy, 4% increase in revenue per room, and 3% increase in gross operating profits. They attributed 60% of these benefits to the choice of the name. But this didn’t operate in a way we might expect: The greatest improvements in the financial figures were with the properties that rebranded to a lower price tier.
     The researchers attributed the other 40% of benefits to the quality of fit between the brand and the characteristics of the business. A business is rated more highly when its name is descriptive of the characteristics sought by customers. If you treasure alpine hiking, you’re more likely to stay at the Grand Pines Lodge than at the Soft Soap Spa.
     When a name change involves franchise or buying group arrangements (Pacific Hardware to Pacific Ace Hardware), there are other financial considerations, such as franchise fees, group purchase savings, house brand effects, and the costs of new signage. And a change in name risks wasting all the good will your brand has previously earned.
     If you choose to keep your same business name, there are still research-based tactics to rebrand for renewal:

• Repeatedly advertise and publicize the characteristics you want people to associate with your operations. 
• Point out the similarities of your business to a business that has the features shoppers are looking for. 
• Use customer testimonials to document your benefits that match shopper preferences. 
• Stimulate positive associations with the past glory of your business name. Remind consumers of your history (“Serving our community since 1948”). Dress up the shelves and walls with nostalgic items. 

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

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Tempt Shoppers with a Template

People like personalized items better than the same sorts of items lacking customization. However, when an item has more than a small number of attributes and each attribute offers more than a few alternatives, the complexity often overwhelms the shopper.
     Researchers at University of Alberta and University of St. Gallen created and then evaluated a technique for avoiding the problems: Develop a limited number of combinations of the major item attributes, then encourage the shopper to choose one of these and personalize using the other attributes.
     In a set of nine studies covering the item categories of shirts, automobiles, vacation packages, jewelry, and financial products, the researchers identified clear benefits of this customization via starting solutions (CvSS). The purchasers were more satisfied with what they ended up buying and found more mental stimulation in using the items. And the store or retail firm owners were pleased how the purchasers selected a greater number of item features, resulting in a higher-dollar transaction.
     Results from Northwestern University and Compass Lexecon studies indicate that CvSS makes the most difference when the shopper:

• Lacks clear decision criteria beyond wanting to personalize
• Feels under high time pressure
• Believes that comparing the alternatives requires mental effort

     After the consumer has selected one of the starting solutions, should you subsequently work from the easy to the complex personalization choices? No. Research at Stanford University and Columbia University suggests you should start with the complex.
     The researchers asked study participants to customize a trip by choosing one each from five flight options, fifteen car rental arrangements, and ten hotels. The order of the three choices was varied for different study participant groups.
     It turned out that the choice of the hotel was quicker when it followed the choice among the fifteen rental cars than when it followed the choice among the five flights. The Stanford/Columbia researchers’ explanation is that the consumers faced with selecting one from among fifteen options adopted a “good enough” mindset. With this mindset, the consumers make the choice of the hotel relatively quickly.
     Those consumers who started with the filtering of five options could hold out for “find the best.” When they moved on to the hotel choice, that mindset caused them to spend more time on the task. Those consumers who feel under high time pressure would find this makes the customization, and so perhaps the travel package itself, to be less enjoyable.

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

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Pull My Leg Vaguely

When we say that a retail sales promotion “has legs,” we mean it has lasting benefits. That’s worth bragging about. But according to researchers, there are circumstances where both the retailer and the shopper are better off if we don’t admit, let alone brag, that the item for sale has legs. Such as if we’re selling bugs for our customers to consume.
     Those researchers, from the Korean Edible Insect Laboratory and the University of Massachusetts, found that successful marketing depended on being somewhat vague in our description of the contents. The researchers go on to say that these lessons apply to other retail products which have negative or unfamiliar reputations. It’s what in other contexts is called TMI. We’ll accept that bugs can be safe to eat. We’ll digest the United Nations report saying crickets need only one-sixth the amount of feed as do cattle to produce an equivalent amount of protein and the crickets emit fewer greenhouse gases. But please don’t show us the legs. Save us from Too Much Information.
     More generally, do people prefer to see what they’re about to eat? Researchers at Ohio State University and University of Texas-Austin aimed to answer that question by assessing the effects of transparent versus opaque packaging on attitudes toward foods in retail stores. They found two opposing effects:

• Salience. Being able to see a food item facilitates imagination of consumption, usually making attitudes more positive. 
• Monitoring. Seeing the actual food item activates scanning for flaws, usually making attitudes more negative. 

     Here’s how that tug-of-war played out in the studies:

• For foods in large packages, monitoring won when transparent packaging was used. Opaque packaging with an illustration of the item resulted in higher sales. 
• For foods with interesting colors and/or shapes sold in small transparent packages, salience won. The likelihood of purchase and amount consumed increased because of the transparent packaging. 
• For other situations selling food, the Ohio/Texas researchers said the effects of transparent packaging on consumer attitudes were not—well—so clear-cut. The outcome does still seem to be influenced by the package size and the characteristics of the items. 
• With non-food merchandise, consumer psychology research finds overall advantages in letting shoppers see the item rather than hiding it inside opaque packaging. Do allow enough package surface to list usage benefits, though. People buy things for the benefits offered more than for the physical characteristics of the items.

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

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Label Why They Don’t Read the Labels

Shoppers make better decisions when they read item labels. Plus it saves you time answering questions which the label text could do. If the label contains usage information or other cautions, reading the label is a safety matter. Considering all this, it’s in your interest to figure out why customers so often fail to do the recommended reading.
     Studies at University of Budapest find that issues of trust explain much. Label reading is less likely when the shopper has high trust in the quality of products in the item category, high trust in you as a source of recommendations and instructions, or low trust in their own ability to make sense of what the text on the label says. For instance, when they expect the label to be written in a language largely foreign to them or to use many unfamiliar terms, the shopper is much less likely to read it, the research finds.
     If the lack of label perusal is due to the shopper’s lack of trust in their ability to understand, help out the shopper. One alternative is for you to post translations and simplified versions of the label text for your items likely to be most popular with these shoppers. A less cumbersome solution is to coach yourself and your staff to stay alert to shoppers who struggle to read a label before turning away. The Budapest studies indicate you’re most likely to see this happening with items having consequences for health or items purchased for use by others than the purchaser. People are more likely to seek item labels when there are children or illness in their household.
     This does assume that your salesperson can make sense of the labels. In my tale to illustrate this point, a manager was pleased at his decision to hire Marie as a salesclerk in the pharmacy. Older customers seemed much more comfortable asking Marie questions than asking the teenage salesclerks in the store. However, the manager noted that Marie might be having some difficulties from being an older person herself: When a shopper would ask Marie for help in reading a package label, Marie often squinted and appeared to lack confidence.
     “Marie,” he asked her one day, “sometimes I’ll assign an employee to pick up pharmaceuticals. Do you need to wear glasses to drive your car?”
     “Boss,” replied Marie, “I need to wear glasses to find my car.”

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

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Keep Fluffy Happy at Retail

“If Mama ain’t happy, ain’t nobody happy.” So goes the saying from America’s South, consistent with the much older guidance in Latin, “Pax matrum, ergo pax familiarum.”
     So what about, “If Fluffy ain’t happy, ain’t nobody happy”? Researchers at University of Helsinki, University of Gothenburg, University of Vaasa, and Aalto University found that seeking bliss for our household pets powerfully influences consumer behavior. Participants in their studies reported how choices of housing, vehicle, travel, and budget allocations were all shaped with Fluffy or Fido’s proclivities in mind.
     Retailers offering items for pets often verify an Eastern Washington University research finding: People are more willing to buy premium items for their pets than for themselves. About 80% of dog owners said they were serious about selecting healthy food for their dogs, but only 65% of the same people said they were serious about their own food selection. Many owners of dogs are as determined to maintain insurance on their pets as on themselves. Some time ago, sales of designer-label pet clothing and accessories began a growth spurt. More recently, dog massage services gained retail traction.
     We consider our pets to depend on us to defend them. It’s the same dynamic which helps explain why, during economic downturns, consumers cut back more on expenses for themselves than on expenses for their children. The research at University of Helsinki, et al adds to this the motivations arising from us wanting to pay back our pets for faithfully serving us. These animals provide companionship when we’re lonely, tactile comfort when nobody else wants a hug, an avenue for meeting others who have the same sort of pet we do or who agree the mutt is actually cute, a feeling of status if the breed is special, and a feeling of safety if the breed is big. Use these motivations as levers for retail sales to pet owners.
 
For your profitability: Sell Well: What Really Moves Your Shoppers

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Judge Coupon Campaigns by Objectives

A retailer might intend a discount coupon campaign to introduce shoppers to products, services, or categories. Or a retailer might issue coupons to draw in shoppers from other retailers on items the target audiences have commonly purchased in the past. Those are only two of the numerous possible objectives for a coupon campaign, but they are the ones looked at in a set of studies based at Universidad de La Sabana in Bogotá, Colombia and IESE Business School in Barcelona, Spain.
     The upshot of the studies was that the ways in coupons can build profitability depend on the type of campaign objective and on the nature of the item you’re discounting. Therefore, clarify your objective before you design the campaign, and then evaluate the success of the campaign in terms of that objective.
     The nature of the couponed item also makes a difference. In the Bogotá/Barcelona research, what made a difference in effectiveness included:

• How often consumers purchase such items 
• The number of alternatives 
• The price range among the alternatives 
• The frequency and regularity of discounts on the item 
• The size of the discount 

     Other factors to consider:

• The degree to which the consumer believes the coupon is customized for them. 
• How far in advance of the purchase decision the coupons are distributed. Coupons presented at the store entrance drive up sales more than do coupons available in the aisles of stores. Distribute coupons as early in the shopping process as possible. 
• Conditions for coupon use. When coupon redemption requires the customer to spend more on an item than they’d planned to, the coupon redeemer increases the amount they are willing to spend on other items as well. 

     Slice-and-dice your campaign results by factors like these to untangle what’s really happening.
     In your analyses, also recognize profitability comes from those who notice, but don’t redeem, their coupons. Researchers at University of Virginia found that such consumers spent more in the stores issuing the coupons than did consumers not receiving the coupons. Because the large majority of people who receive coupons don’t redeem them, the sales lift caused by a coupon campaign comes mostly from the non-redeemers. There are many more of them, even if each spends only a little more.

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

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Close the Sale Close to the Source

Why is that purchasers of a limited edition production—let’s say a production run of 200 copies before the die is broken—will robustly prefer a lower serial number over a higher one—such as 5/200 over 197/200? Researchers at Yale University say an underappreciated reason has to do with what consumer psychologists call “contagious magic.” This discovery by the researchers is a reminder of the appeal of contagious magic for all sorts of retail sales, not only those of limited editions.
     Contagious magic refers to the belief—commonly encountered in consumers and usually subconscious—that two objects which have been in contact with each other will exert an influence on each other. In a study at Max Planck Institute for Biological Cybernetics, golfers who were told they were using a club previously held by a Professional Golfers’ Association Tour winner sunk a third more putts on average than an equivalent group not told this.
     A study at Arizona State University and New Zealand’s University of Auckland used musicians in place of duffers, guitars in place of putters, and supposed replicas in place of supposed actual possessions. Why is it, the researchers asked, that a purchaser of a guitar would find that having a respected rock star sign the guitar caused the guitar to produce better music? This was especially true when the guitar was a replica of the instrument used by the rock star autographing it. The answer: Contagious magic!
     In the Yale studies, lower serial numbers were subconsciously associated with greater closeness to the source, and consequently, catching more of the influence. It worked across item categories ranging from recorded music to fine art to apparel. It had little to do with the consumers’ beliefs about how well the item was made.
     Contagious magic isn’t always to the upside. Researchers at Yale University and Israel’s Bar-Ilan University asked study participants how much they’d like to own clothing and furniture which had previously been used by well-regarded celebrities, like George Clooney, and those with negative reputations, like Saddam Hussein.
     When the association was with a well-regarded name, the consumers felt they could absorb some remnants of the original owner. They said that if the item had been thoroughly cleaned, it was nowhere near as valuable to them. With the negatively regarded celebrities, however, the effect was reversed. Sterilization of the item before purchase was all to the good.

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

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Say, Are You Being Ethical?

Life is easier for small to midsize retail businesses that conduct themselves ethically. You’ve less concern about interference by regulatory agencies or about fighting legal actions a deep-pockets large retailer could afford to take on. You’re also better able to assume the mantle of a community-loyal enterprise, thereby strengthening your marketing position compared to those large retailers with their far-away headquarters.
     Research findings from University of North Carolina-Chapel Hill and Northwestern University suggest one simple way to both stimulate virtuous behavior in your store staff and say to your shoppers that you follow the rules: Include mottos of integrity in text on store documents. In one of the studies, exposure to the quote, “Success without honor is worse than fraud,” produced substantially more ethical behavior than did, “Success and luck go hand-in-hand.”
     Previously, researchers at University of North Carolina along with colleagues at Harvard University had found that adults behaved themselves better when in environments where childhood playthings—such as teddy bears and crayons—were around. In the study, participants carrying out business around the playthings lied less and were nicer to each other than those in surroundings lacking items associated with childhood. For instance, the frequency of cheating dropped almost 20%. Still other research finds that it’s not only reminders of the little kids, but also of oldsters that can encourage us to behave.
     Keep the cues subtle and light, though. You could put the mottos on sales receipts and post on the shop floor and in the break room some photos of kids, senior citizens, and playthings. If the cues are overbearing rather than subtle or come across as “holier than though,” staff and customers can easily come to feel they’re being manipulated and so ignore the message or react with the opposite of what we intend. Researchers at University of Miami, Hong Kong University of Science and Technology, and University of California-Berkeley found that happens with store slogans people are asked to think about closely. In the North Carolina/Northwestern studies, the participants who were affected couldn’t always even remember the motto they’d read.
     The effect of the sayings is not necessarily in changing the morality in people’s personality. It’s in reducing the probability that people will ask each other in the situation to commit improper acts. That’s plenty enough for a retailer to aim for, and it allows for the fuzzy nature of real-world retail ethics.

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

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