Monday, October 29, 2018

Curtail Quantity Sensitivity by Here-and-Now

When would people resist paying more to visit an amusement park with twelve attractions than one with six? Or to purchase three video games instead of a single video game? Or donate a greater amount of money to a fund to save four pandas rather than one panda?
     Stated in another way, of direct importance to the retailer, “Under what circumstance should we hesitate offering more products or experiences in a single bundle, realizing that the shopper isn’t interested in paying a higher amount for the larger quantity?”
     One answer has to do with satiation. When a customer has had enough for now, they don’t want a bigger set. But researchers at Columbia University and Singapore Management University have another answer, this one related to what consumer psychologists call “scope insensitivity.” When purchase decisions feel psychologically closer to the shopper, the shoppers are more likely to show scope insensitivity, in which a higher product count won’t strongly command a higher price.
     In the studies, psychological closeness came from saying the trip to the amusement park would occur in just a week, where the comparison group of study participants were told it would occur next year, the video games had been created recently rather than in the early 1980s, and the need for the panda-protection contribution was imminent. Prior studies found that psychological distance—the opposite of psychological closeness—is higher when a shopper:
  • Believes they’ll need to travel a longer way to obtain the item 
  • Is selecting an item to be used in the future rather than now 
  • Is selecting an item for use by someone else rather than for their own use 
  • Considers returning or exchanging an item purchased by someone else rather than by themselves 
     It’s not that people would be unwilling to pay more for a larger quantity in the set. Instead, it’s that people resist paying more than when there is psychological distance and therefore generally require extra persuasion.
     The explanation for the scope insensitivity effect is in the psychological closeness affect. Emotional decisions are, by definition, less logical than well-thought-out decisions, and consumers get more emotional when a decision is closer to the here-and-now. According to studies at University of Colorado-Boulder, University of Oviedo in Spain, and Lieberman Research Worldwide, this is true for positive emotions—such as the thrill in having the item—and negative emotions—such as anger at flawed product performance.

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

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Limit Availability to Overcome Satiation
Drive the Psychological Distance

Monday, October 22, 2018

Externalize Surcharges in Partitioned Pricing

When I stay at the Eldorado Resort Casino, where University of Nevada-Reno houses me for my teaching commitments, the bill includes debits not just for the lodging itself, but also for a resort fee and a tourism surcharge. If when consulting with retailers in Boston, I’d chosen to rent a car from Hertz at the airport, I’d have been subject to an airport concession fee, energy surcharge, and convention center surcharge. Choosing a taxi wouldn’t excuse me from the extras, though. There’s still an airport surcharge and possibly a surcharge for a rush-hour ride.
     What are the best ways to present surcharges to shoppers? asked researchers at Pennsylvania State University, University of Groningen, and Iskander Business Partner. More pointedly, can services retailers employ a surcharge strategy to increase profit margins without incurring the full thrust of shopper fury often resulting from price increases?
     The research-based answer is yes:
  • Minimize the number of separate surcharges. When there are multiple surcharges, the consumer becomes more likely to hold the retailer responsible regardless of the explanation for the surcharges. At the same time, findings from Adelphi University, University of Alabama-Huntsville, and University of Dayton indicate that the amount of any single surcharge should never exceed 20% of the base price. If a surcharge is a high percentage, consumers will consider the entire pricing structure unfair. That affects not only the current purchase, but also the potential for future business from that shopper. 
  • Lead off with surcharges that draw attention to other providers. A “convention center fee” is better received than a “rush hour fee.” When it isn’t possible to present surcharges as the responsibility of others, it is best to present an all-inclusive price. 
  • To the degree possible, state the reason for the surcharge in a way that highlights the benefit to the consumer. “Business center availability” can do this when “business services fee” doesn’t. 
  • Avoid labeling the surcharge as temporary. When faced with a temporary surcharge, a shopper concludes they’re paying more than others will in the near future, this leads to feelings of unfairness, and the general negative tone makes blame of the retailer more likely. 
  • Consider surcharges a form of partitioned pricing. Research finds that compared to bundled pricing, partitioned pricing increases purchase intentions with products and services that carry some financial or psychological risk for the shopper. Partitioned pricing makes less difference in purchase intentions for routine purchases. 
For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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Monday, October 15, 2018

Elevate Expected Prices with Hot Cues

As a rule, when the weather is warm, people become more comfortable paying higher prices for products and services. Yet what’s true in general is not always true for specific cases. If the product is a snow shovel and the service is repair of the furnace, a willingness to pay more is likely to come into action during the cold months instead of during hot ones. And studies at Clicksuasion Labs in North Carolina, University of Auckland, and Western Sydney University find that the effect of warm temperature reports on price anchors operates most clearly when consumers are making their purchase decisions without complete amounts of information.
     Notice that those studies talked about reports of warm temperatures, not just warm temperatures. Participants in one of the studies who were asked to think about their activities during an 85º day subsequently estimated higher costs for a service than did participants asked to think about their activities during a 35º day. By prompting your shoppers to consider their experiences in warmer weather, you increase their comfort at paying more in circumstances where they’ll be making purchase decisions based on limited amounts of information.
     Enhancing this effect is that higher temperatures stimulate impulsivity. Shoppers during hot summer months prefer mental shortcuts to detailed analysis in making purchase decisions.
  • Pleasant heat after a time of less pleasant cold raises people’s spirits, and happier people get more interested in shopping. 
  • In temperate weather, people prefer to get their necessary shopping done with so they can move on to leisure activities. 
  • Prolonged high heat wearies shoppers, making them less alert to spotting and less resistant to discounting weak reasons for buying or not buying. 
  • Higher temperatures when shopping—as long as they’re not too high to be pleasant—lead to consumers being more likely to purchase what others in the vicinity are buying. 
     Correspondingly, colder weather leads to more deliberative decisions. University of Pennsylvania researchers analyzed the enrollment decisions of 1,284 college prospects at a campus known both for its academic strengths and its limited recreational offerings.
     If the day of the college prospect’s exploratory visit to the campus was especially cloudy, the odds that the prospect would choose to apply to that campus increased markedly.
     What made the most difference was change. Pleasant heat after a time of cold stimulated impulsiveness. Cloudiness higher than average led to more deliberative decision making.

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

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Monday, October 8, 2018

Level with Shoppers about Competitor Upsides

For at least some retailers, the miracle in the 1947 Christmas-themed film classic “Miracle on 34th Street” is that the department store Santa in the story recommends to a shopper she purchase her merchandise at a competing store, yet Santa still keeps his job. However, studies at Georgetown University and City University of New York conclude that such a practice can be good business, and therefore is commonplace, not a miracle at all for astute retailers.
     An example given by the researchers is set at a local art gallery. The shopper is interested in a particular painting, but isn’t sure if the price is right, so decides to delay the purchase. Here’s my version of what the retailer could say to change the shopper’s mind and make the sale: “You’ll notice that this painting is unframed. We sell frames in our store, but I suggest you consider looking for a frame at the frame warehouse two blocks from here. We carry picture frames as a convenience for our customers, but the frame warehouse specializes, so they have a broader selection and better prices.”
     The shopper who is unsure of what the painting should cost is reassured that the asking price is proper as the salesperson gives evidence of wanting to save money for the shopper. Circumstances of this sort occur if the item you’re selling is highly distinctive or the consumer purchases items in that category only infrequently. Recommending a competitor for an adjacent—a companion—product or service builds trust when the competitor offers advantages such as a better price or a more comprehensive selection. The results include increased probabilities of making the sale right then and of the customer returning in the future.
     In the experimental studies and in reports from salespeople, competitor referrals succeeded across a broad range of items, such as selling a sink while referring for the disposer, selling shoes while referring for the socks, and selling a first mortgage loan while referring for a construction loan.
     Another force for profitability in all this is that each time you refer to a competitor, they become more likely to, in turn, refer their shoppers to you. Just be sure to let the others know what you’re doing, such as by asking your customer to say who sent them.
     The mutual exchange is reminiscent of Christmas, so ties us back nicely to “Miracle on 34th Street.”

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

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Monday, October 1, 2018

Right Store Identity with Window Writing

Effective window displays introduce shoppers to what’s inside the store. Featuring merchandise in a store window grants those items an extra appeal similar to that from a celebrity endorsement as the shopper subsequently looks around inside. Displays which portray the product or service being used trigger imagination of usage by those looking at the window, and imagining usage builds purchase likelihood.
     Beyond this, researchers at University of Texas-Arlington find that the glass itself offers a canvas to introduce shoppers to what’s inside the store image. “Place identity” occurs when the words and phrases put on the windows resonate with the values of the shoppers. High place identity enhances ongoing patronage.
     In this research, consumers were asked to evaluate the idea of posters, flyers, stickers, and text on windows and doors at retail stores. The consumers rated the window writing on how interesting, appealing, impressive, eye-catching, and creative they found it to be. The consumers were also asked about likely value offered by the merchandise and about intentions to shop at stores with writing on the windows.
     Facilities with window writing the consumers liked were more likely to receive high ratings for merchandise value and shopping intentions. Moreover, the consumers rated writing on the store windows as a better way to assess for a values match than could be accomplished with advertising or with email contacts.
     What occurs is a positive version of what was found in another set of studies, those about bumper stickers. Researchers at Colorado State University found that drivers of cars with bumper stickers are more likely to honk, tailgate, cut off other vehicles, and express other aggressive behaviors than are drivers of cars without bumper stickers. Unexpectedly, this held true whether the sentiment on the bumper sticker was about aggression or acceptance. “My Kid Is an Honor Student” as well as “My Kid Can Beat Up Your Honor Student.” “Visualize World Peace” as well as “Don’t Mess With Texas.”
     People were using the personalizing of their cars to justify the expression of aggression. The bumper stickers were proclaiming territoriality. “This car is my place with my values.”
     In the case of the writing on the store windows, the territoriality is store-sponsored graffiti, again reflecting values.
     As with graffiti, many cities place limitations on store window writing. Still, working within those limits, you can right any confusion about what your store stands for.

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

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