Minimize Minimum Purchase Discount Fallout

Discounts with a minimum purchase requirement (MinPR) have the format “Buy at least five items today & get a 20% discount on your entire purchase.” This resembles the format of a multiple quantity discount (MQD) (“Buy at least five balls today & get 20% off”). However, there is an important difference. The shopper interested in the MQD is sure to want balls. The issue is whether they really want to buy five. With the MinPR discount, the issue is whether the shopper can find five desired items from the store’s entire merchandise selection.
     What if they can’t? asked researchers at Soochow University in Taiwan, and so the shopper puts into the basket one or more items they really do not long for in order to get the discount on items they do.
     As you might expect, the answer obtained by the researchers is that the shopper’s satisfaction drops and the shopper loses appreciation for the discount. Even though a MinPR discount is much less restrictive than a MQD and the shoppers are saving money on the items they want, many MinPR shoppers feel cheated. This leads to another question: Considering that MinPR discounts increase total purchase revenues, are there steps a retailer can take to avoid the negative fallout from this type of promotion?
     Yes, the researchers documented. An obvious one is to keep in stock the sorts of items shoppers want. A somewhat less obvious one is to stay alert for signs that a shopper is having trouble filling the quota and then help by making suggestions which are based on what you know about the customer, including what items they’ve already placed into the basket. Reduce the decision difficulty. Moreover, encouraging a shopper to explore your aisles is a fine way to acquaint them with all your store carries.
     Another approach to MinPR discounts and MQD has been validated by researchers at National Chung Hsing University, also in Taiwan. Multiple price breaks are in the format “Buy three and get 10% off. Buy five and get 20% off.” In addition to tempting larger quantity purchases, it also results in more single-item transactions than does “Buy five and get 20% off” alone. Perhaps it’s because single-item purchasers feel more comfortable knowing that others—those who purchase three items, but not five—are also missing out on the best per-unit price.

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

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Increase Purchase Quantities with Discounts
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Escort Shoppers on In-Store Travel
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Operate Purchase Liking via Opportunity Cost

When a prospective customer is debating whether to buy a particular shirt, let’s say, a salesperson who is anxious to make a sale might very well show the person some alternative shirts. “If you’re having doubts about this one being just right for you, here are a few other choices I recommend you consider.”
     Researchers at Yale University and University of Arizona explore a quite different response the salesperson might make, probably while walking the shopper from one section of the store to another: “I realize you’re having doubts about purchasing that $29 shirt. I know you enjoy cooking, so I’d like you to consider spending the $29 instead on this food blender.”
     This second gambit touches on “opportunity cost,” a term consumer researchers use to refer to the circumstance where a shopper forgoes the chance to purchase an item because of a decision to purchase another item. The second gambit is most appropriate for the shopper on a controlled budget. In other circumstances, you’d prefer the person to buy both the shirt and the blender.
     The researchers found that when a salesperson introduces options from a wholly different category, a shopper’s interest in purchasing the target item decreases. The reason is that the goal of spending the money changes when the appeal is in terms of opportunity cost. The result is that if the shopper does purchase the blender, they are unlikely to feel sorry they didn’t purchase the shirt. Discussing the decision in terms of opportunity cost helps the shopper come away feeling pleased they made use of an opportunity.
     This general finding holds true for both hedonic items, purchased for the pleasure usage brings, and for utilitarian items, purchased for the outcomes they produce. It holds true whether the marketer presents the alternatives which are dissimilar to the target item or whether the shopper is encouraged to generate the dissimilar alternatives. “You’ve doubts about the shirt. Please think about ways you could spend that $29 on a completely different sort of item we carry in the store here.”
    Spendthrifts—consumers who are uncomfortable with how much money they spend—respond best to opportunity cost appeals. Counter to what you might expect, tightwads—consumers uncomfortable with how restrained they are in spending—are much less responsive. They’ve already figured out the opportunity cost angles.

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

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Know How Shopper Fungibility Functions
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Control Out-of-Stock Irritation
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Show Class for Price Image

Your store’s price image (SPI) is the general belief your target markets hold about whether your store charges high, medium, or low prices. SPI is an overall impression rather than a detailed memory by the shopper of the precise price your store charges for each item. There are items which always have a highly disproportionate influence on SPI because shoppers do track and compare. Still, research finds that SPI is influenced to a greater extent in the long term by factors such as the range of prices in your store, the frequency with which you offer promotional discounts, and the size of those discounts.
     Researchers at Eastern Michigan University and Seattle University find that another significant determinant of SPI is the retail format classification your target audiences perceive you to have. Six store classes explored in the studies were specialty, drug, convenience, grocery, mass merchant, and club.
     The study results indicated that consumers associated the first three of those with a high price image and the last two with a low price image. The grocery store format was not associated clearly with either a high or low price image. This suggests, in a way consistent with other research, that shoppers carry a set of varying price images for grocery stores. “They’re high if you’re looking for meat or fish, but I find great bargains in the bakery in the early afternoon.”
     Because the perceived format class influences your SPI and SPI in turn influences people’s interest in shopping with you, consider into what class you want your target audience to place you. The determinants of class used in the research included:

• Convenience. Higher price image for convenient location and many hours of operation 
• Customer service. Higher for courteous staff and liberal return policies 
• Selection. Higher for many different product categories and many options within product categories 
• Ambiance. Higher for cleanliness and pleasant lighting 

     Project your format class by how you provide these attributes to shoppers, how you publicize these attributes, and the classifications of stores you use in comparative advertising.
     A class associated with a higher price image allows you to more comfortably set higher profit margins for items available through other outlets. A benefit you might not anticipate is gift card sales. Researchers at Washington State University and Saint Joseph’s University found that, although recipients tend to prefer cards from non-luxury stores, givers prefer purchasing cards from luxury stores.

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

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Toast Straightforward Label Designs

For marketers, what is the best balance between simplicity and complexity in graphic designs on an item’s label? The answer from researchers at Université d’Angers and Montpellier Business School is that a label’s design should deliver the intended sales message with no more than necessary complexity.
     Considering that both research institutions are in France, it’s less than surprising that the studies were centered on brand perceptions of Champagne bottles. But the conclusions can provide guidance for a panoply of consumer products and persuasion agents: For the most part, keep label designs simple.
     On the shelves of a liquor store at the time of the study, the complexity of Champagne labels ranged from the simple rectangle and uncluttered graphics of Moët & Chandon to the scalloped label shape and graphics-filled border of Dom Pérignon. For the research studies, fake label designs were created, but in keeping with the spirit and spirits of the project, those fake labels were commissioned from a wine label printing company doing business in the Champagne region since 1910.
     The objective of using the fake labels was to avoid judgments of brand image being associated with brand names familiar to the study participants. However, I’ll note that there still is potential contamination, since the whole impression of label simplicity might be associated with memory traces of Moët & Chandon and complexity with Dom Pérignon. All participants in the study had been screened to be Champagne consumers.
     In the studies, participants overall expressed more positive brand impressions for the bottle carrying the simple than for the one carrying the complex label. As part of this, simplicity produced consumer perceptions of success, modernity, authenticity, and reliability.
     Still, there are circumstances in which at least some complexity in design is advisable. In the Champagne bottle study, complexity of the label on the bottle produced perceptions of maturity, imagination, joy, and sophistication. Although consumers had preferred simple to elaborate, all four of those results of complexity could be considered as desirable when choosing among brands of the bubbly.
     Complexity can engage shoppers in ways which hold them long enough to become purchasers. Researchers at University of London, University of Groningen, and Università della Calabria found that when a store or brand logo was easier to perceive, people liked it better initially. However, after prolonged consideration of the item, the attraction turned to aversion.

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

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