Absorb for Family Firm Success

Absorptive capacity is essential for your family-run store to thrive. Studies at University of Castilla-La Mancha supported this conclusion by using an instrument to measure the four components of absorptive capacity as generally agreed on by business scientists. Here is my version of those four along with why they are especially important for the family-run enterprise:

• Acquisition. The business regularly exchanges information with others in the industry. This overcomes an inbreeding danger for the family-run store, in which management decisions are always made by the same select group. 
• Assimilation. Ideas for improving the business are continually communicated and critiqued. Otherwise, senior family members can mistakenly believe junior family members understand the reasons for decisions, and junior members can hesitate questioning flawed ideas for fear of disrupting family peace. 
• Transformation. The accumulated and critiqued information fuels innovation. One of the frequent upsides of a family-run business is stability, but without a strong transformation capability, the stability results in the business falling behind the marketplace. 
• Exploitation. The business tests out prototypes before undertaking full implementations. This component of absorptive capacity facilitates both the innovation and the opportunities for critiques. 

     In a sample of 1,045 family firms, those reliably practicing the four above showed greater sales growth, profit growth, and growth in market share. An entrepreneurial spirit also proved important to success, but it operated through absorptive capacity.
     Family-owned stores too often lack longevity. That reality transcends languages and cultures. Consider the English-language versions of these maxims:

• “Father merchant, son gentleman, grandson beggar” (Mexico) 
• “Rich father, noble son, poor grandson” (Brazil) 
• “From the stables to the stars and back to the stables” (Italy) 
• “Wealth never survives three generations” (China) 
• “Shirtsleeves to shirtsleeves in three generations” (U.S.) 

     Those were collected by investigators at Boston Consulting Group and Cambridge Advisors to Family Enterprise to flesh out the fact that only about one out of every ten privately-held businesses makes it through to the third generation.
     Family-run businesses have advantages. The loyalty among management members helps to persevere through the tough times. As long as the senior members cultivate a life outside the business, developing a succession plan is straightforward. The business projects an authentic sense of family to customers and prospective customers. According to research at University of Geneva, giving a sense of family is useful for retailer-to-business relationships, too.
     By incorporating absorptive capacity, your family-run business can realize these advantages for the long-term.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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Exchange Retailing Ideas with Lots of Others
Prolong Opportunities for Family-Owned Stores
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Like Parent, Like Child, Like Buying

When approving purchase of a prom dress, is the mother or the father of the intended wearer likely to set a higher acceptable budget? Most retailers I’ve asked say it’s the father, but the research-based answer is not so straightforward.
     Researchers at State University of New York-Oneonta, Rutgers University, and University of Minnesota asked parents visiting a zoo to take a short survey about the zoo. Parents were selected to participate only if they were visiting the zoo with at least one child of each sex in tow. As compensation for completing the survey, the parent was offered a chance to win a backpack, small suitcase, or similar item. The parent could choose to enter the drawing for either the pink items from the “Girl’s Prize Pack” or the blue items from the “Boy’s Prize Pack.”
     It turned out that 76% of the mothers chose the Girl’s Prize Pack and 87% of the fathers chose the Boy’s Prize Pack. In a few other studies, too, these researchers found that parents favored expenditures on the same gendered child and that the explanation seems to be greater psychological identification with the same-sex child. There was also evidence that the pattern of preferences extends beyond parent-child pairs. Therefore aunts may be more comfortable making purchases for nieces, and uncles for nephews.
     When families shop together with you, it’s useful for you to identify the retail influencers. However, an important limit on the value of this set of studies is that the participants were required to choose between an expenditure either on a boy or on a girl. In many circumstances, a parent can choose to purchase items for each of their children. In these circumstances, adults could endeavor to spread the expenditures equitably. It is when the extent of resources feels limited, such as when the retailer wants to upsell, that it pays off to sell through the same sex parent.
     Also, in tight economic times, both parents become highly receptive to spending more retail dollars on daughters than on sons. In any case, none of this should be used in a way which would alienate the father of the daughter or the mother of the son. To show how you like having the parent buy from you for the child, make clear that you respect the preferences each parent expresses.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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Go Intense with Threatened Shoppers

If your shoppers seem unsure of themselves, up the intensity in what you present them. Bolder claims of purchase benefits, more expressive gestures, larger samples, item alternatives with brighter colors, areas of the store with stronger fragrances.
     Researchers at Indian School of Business exposed participants to messages which produced either high or low self-doubt about the participants’ intellectual abilities. Afterwards, those participants with self-doubt tended to prefer brighter colors and louder music than those without self-doubt.
     So going big helps make the sale. Except when it doesn’t. Researchers at HEC-Paris and Northwestern University concluded that when the large size of a product or package implies power, consumers craving more power go for the large. A set of study participants were offered a choice of different-sized bagel pieces. Those participants who felt powerless in the face of threats chose bigger pieces.
     But when small size implies status, consumers who feel relatively powerless will forgo the large. In another study, participants were offered four sizes of hor d’oeuvres. Some of the people were told that the largest ones had recently been served at a White House event. The rest were told that the White House event featured the small hor d’oeuvres. In this case, the status of being a White House appetizer outflanked the importance of size. The participants preferred the smaller items.
(The research article I cite here was subsequently retracted following the discovery of a set of statistical errors which cannot be explained, since the authors no longer have the data. I’m leaving my reference to this article in place with this notice so that my blog readers coming here via a hyperlink will find what they're looking for and learn of the retraction.)

      Other studies have identified ways a retailer can influence a shopper’s sense of power. In a Northwestern University project, it didn’t take much: Some of the study participants were asked to imagine an actual episode in the past when they possessed high power in a situation. You could adapt that to discussions you have with a frequent customer.
     Show advertisements and store signage which emphasize the power possessed by the shopper (“At our store, you’re the boss”) rather than those which deemphasize the power (“At our store, we take care of you”). And treat the shopper with deference more than with authority.
     When the salesperson takes on the role of Coach or Playmate, this builds the sense of power of the shopper.

• The Coach reassures us. The customer expects the Coach to be available until the problem is solved and to encourage the customer to buy whatever is needed to solve it. 
• The Playmate loves fun. The customer expects the Playmate to be more interested in how the shopping experience feels than in how the product or service works. 

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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State That Status Shouldn’t Affect Service

Effective salespeople adjust their approach to each customer’s characteristics, and highly skilled salespeople use observations of each customer’s appearance to assess those characteristics. Still, none of this means your store’s salespeople should treat low-status shoppers shabbily.
     Researchers at Catholic University of Eichstaett–Ingolstadt and National University of Singapore analyzed how frontline employees handled angry complaints from female customers about flawed service. The researchers defined high status customers as those wearing business dress and having professionally styled makeup and hair. Those wearing the equivalent of jeans and a T-shirt and not appearing to have professionally styled makeup or hair were defined as low status. The researchers found that, compared to the treatment of the high status customers, the low-status angry complainers were less likely to be offered restitution to compensate for the dissatisfaction and were more likely to be yelled at by the employee.
     But this difference reliably occurred only in businesses judged to have an overall poor service climate. In the businesses with a high service climate, customers with angry complaints were handled adequately regardless of apparent status.
     You should not tolerate mistreatment of your employees by angry customers, no matter how bad the service transgression. However, yelling at the customer is not a proper response, and the response should be based on respect, concern, and empathy regardless of the social status of the customer.
     It is important for everyone on staff to be clear in words and actions that all shoppers are to be treated fairly. Discrimination in retailing is often subconscious.
     Some frontline retail staff carrying biases against minorities operate on the assumption that it’s only the minorities who are disturbed by discriminatory behavior. Since the prejudiced staff member decides consciously or subconsciously that they’d prefer not to do business with minorities anyway, they resist changing their behavior. But studies out of Clemson University and University of North Carolina-Wilmington saw how discriminatory behavior has more widespread effects on customer goodwill than those prejudiced frontline staff acknowledge. Many white shoppers became as outraged as blacks when the white shoppers observed a black customer being treated in a discriminatory way. All the customers are watching.
     Discrimination on the basis of race is illegal. Subtler forms of discrimination may not be against the law, but they’re still bad business. Michigan State University and University of Notre Dame researchers found that physically unattractive shoppers are frequently targets of rudeness and exploitation.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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Disentangle Religiosity Effects on Shopping

For some time, I've noticed that patrons adhering to an organized religion tend to shop in distinctive ways. Identifying those distinctions could be valuable for retailers because many religious patrons witness their faith when shopping.
     Researchers at University of Wyoming say the effects depend on whether the shopper is affectively or cognitively religious. People whose faith is primarily affective would strongly agree with statements like, “God is an important influence in my life.” The affectively religious take comfort in a personal relationship with a divine being. On the other hand, those whose faith is primarily cognitive would strongly agree with statements like, “The scripture of my religious affiliation is the word of God.” These consumers take comfort in adhering to a firm set of required and forbidden behaviors integral to the religion.
     Religiosity is associated with shopper conservatism and self-control. Research based at University of North Florida found that consumers who are more religious are more likely to be repeat store customers. This was true whether the religious folks were Protestants, Catholics, or Buddhists—the three faiths represented in the study sample. Consumers showing lower levels of religiosity or declaring themselves to be non-religious were more likely to switch stores from one shopping trip to the next.
     In addition, religious shoppers are more likely to be consistent tightwads than are non-religious shoppers. Tightwads believe they should be spending more. Loosening up the self-control a bit could profitably serve both the shopper and your bottom line.
     The inquiry about differences between the affectively and cognitively religious discovered that with the affectively religious, commenting on religious beliefs in the purchase situation led to a strengthening of self-control. With the cognitively religious, it relaxed self-control. Listening to how your shoppers evidence their religious beliefs helps you select a proper sales approach.
     Also disentangle the effects of religiosity, spirituality, and ethicality. Researchers at Appalachian State University and University of Nevada-Reno administered a Human Spirituality Scale asking how strongly one agrees with items reflecting a reverent compassion for the welfare of others, a larger context or structure in which to view one's life, and an awareness of life itself and other living things The participants were also presented with a set of situations measuring business ethics. Overall, those scoring highest on the HSS showed the lowest adherence to business ethics.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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