Monday, February 28, 2022

Hide the Discount for Cognitive Purchases

Knowing an item is at a sale price can be enough motivation for the shopper to place it into their ecommerce shopping cart even when the shopper doesn’t know what that price is. A team at Stephen F. Austin State University and The Pennsylvania State University studied the tradeoffs in a retailer using these hidden price promotions. Mystery, along with perhaps the surprise of being asked to move toward purchase blindly, could be exciting for the consumer, adding to the fun of the transaction. On the other hand, excitement could generate expectations of a large discount, which if unfulfilled, would disappoint the shopper in the retailer’s pricing practices.
     The core question: Are people more likely to purchase the item than if the sale price had been stated at the start? The researchers’ answer is that yes, they are, for cognitive purchases. These are purchases made for mostly utilitarian reasons, with a greater interest in the result of using the item than in the hedonic pleasure derived during use. As examples, the researchers give office supplies as a cognitive purchase, a vacation as a hedonic purchase, and a laptop as either cognitive or hedonic, depending on how the purchaser intends to use it.
     Hidden price promotions in ecommerce have similarity to a physical store’s tensile pricing promotions—ads which attract shoppers using an “Up to xx% off” format. In both, the person doesn’t know the actual price until making that first move—putting it into the ecommerce shopping cart or visiting the physical store.
     Consumers are, by and large, optimistic. If you advertise “Up to 40% off regular prices,” they’ll think the item they’re seeking will be one of those tagged for close to the full discount. With this tensile pricing promotion, you’ll attract almost as many shoppers as you would have if offering the 40% cut on all items.
     Similarly, shoppers exposed to a hidden price promotion have optimistic expectations. The researchers say that discount overestimation will be reduced, however, with utilitarian purchases because the shopper is depending on cognition. We all realize that retailers limit discount depths in order to stay in business.
     If you’re convinced the discount amount will please the shopper, the excitement benefits of a hidden price promotion argue for using it with all items. But if the discount amount might fall short of expectations, be cautious using a hidden price promotion with hedonic items.

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Magnetize the Consumer with Mystery 

Friday, February 25, 2022

Excite Positive Emotions in Expert Sellers

Being recognized as an expert brings pleasure. However, the process of becoming an expert often deadens some of the enjoyment from consuming hedonic items—such as wine—or engaging in hedonic experiences—such as watching cinema. This finding by researchers at University of Massachusetts-Boston and Northwestern University has implications for recognized experts when they’re attempting to make sales. A widespread finding in consumer psychology is that people buy more on the basis of emotion than logical reasoning.
     The numbing of emotion is because advanced expertise leads to overanalyzing, which moves the consumption away from raw feelings. The effects hold for both positive and negative emotions. Based on her University of Alberta studies, Prof. Sarah Moore wrote, “Explaining why a chocolate cupcake tasted so divine makes us love the cupcake a little less, while explaining why a movie was so horrible makes us hate the movie a little less.” With utilitarian items, it can work in the opposite direction. “Explaining why a USB stick is so great makes us like the USB stick more, while explaining why a cleaning product is so horrible makes us dislike the cleaning product more.”
     Since it’s positive emotions that make the sale, the Massachusetts/Northwestern researchers recommend that, with hedonic items, salespeople strive to focus on their feelings. You can then portray the pleasant feelings to the shopper. Use your expertise to decide what purchase decisions would best benefit the shopper and your organization. Then shift away from analyzing with your domain knowledge. Instead, capture the joy the shopper would experience in consuming the item you’re recommending.
     In the studies, this method worked. When assessing professional photographs, people with higher self-rated expertise were less emotional. But this difference was significantly reduced when the participants had been asked to focus on their feelings.
     Related to the problem of experts becoming emotionally numb is that of them becoming explanation dumb. Researchers at University of Illinois-Urbana/Champaign, New York University, and University of British Columbia found that product and service experts don’t stay sufficiently familiar with details of their logic. They’re accustomed to giving advice from habit rather than tracing out the details each time. If pinned down by requests for those details, experts often make up reasons for their conclusions. The experts tend to consider the reasons as genuine. They’ll create false memories on the spot and then accept those memories as real. They don’t realize they’re lying.

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Impress Customers with Your Staff’s Expertise Focus Experts onto Their Feelings

Monday, February 21, 2022

Grace with Loyalty Point Expiration Extensions

How would it feel to give up your gold and accept the silver or—oh no!—the bronze? I’m not talking about your repositioning on the awards stand at the Olympics. No, I’m asking about the likely reactions of your customer to a drop in loyalty program status if they fail to give you sufficient continuing business.
     Studies at Georgia Southern University and Macquarie University conclude that the customer would probably feel embarrassed and irritated. Worse yet are the reactions if the points earned so far are declared as immediately expired. Points can be used for free items or discounts with clearly measurable monetary value, which can also be managed by the customers themselves like currencies. Earning a higher status in the program, on the other hand, is predefined by the firm policies and does not come with a direct monetary value that customers can control. To encourage continuing active participation in the loyalty program, allow customers to keep their points for a grace period and keep building further on them, and punish with status demotion rather than point expiration.
     Some loyalty programs award gold status to customers as an exclusive gift without requiring them to meet purchase criteria. Because their loyalty program status was endowed, not earned through buying, we might expect they would consider it fair if the business subsequently takes back the gold medal. Yet, the researchers found these people were more likely to feel embarrassed and that they’d been treated unfairly when losing status and points than were those who legitimately earned status through purchases. More important to a retailer, they also reduced their store patronage to a greater extent.
     To avoid risks in hierarchical loyalty programs, you could eliminate tier structures. Not a good idea. Research indicates that people are attracted to the status available with tiered programs. So go in the opposite direction from eliminating tiers. Make a big deal of the tiers. Refer to the customer as a “member.” Give extra acknowledgement, such as by looking at the customer, smiling, and saying, “Thanks for being a Gold Level member.” Little need to worry that the Bronze Level shoppers overhearing this will feel they’ve been slighted. Research finds it motivates rather than irritates or discourages.
     Do be sure participants understand the rules for and consequences of being dropped to a lower level. Then give advance warnings to those at risk of being dropped.

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Help Loyalty Program Members Progress 

Friday, February 18, 2022

Lend a Hand to Brand Selfies

Proud purchasers of branded items might want to show them off with selfies distributed widely via social media. If you’re the marketer of that brand, you’d benefit from knowing which selfie characteristics pique purchase interest in viewers of those images.
     Researchers at University of Hamburg, Vienna University of Economics and Business, and Columbia University compared three formats: 
  • Pack shot. A standalone picture of the item with the brand logo clearly displayed 
  • Consumer selfie. Like a pack shot, but the face of the selfie poster or item user is also in the frame 
  • Brand selfie. Like a consumer selfie, but rather than a face, only a hand holding the item is shown
     It was the brand selfie format which produced evidence of the highest purchase intention. The explanation is in the ability of the viewer to imagine themselves holding the item. The pack shot doesn’t do as well in getting the viewer in touch with the item. The face in the consumer selfie directs thoughts away from the brand and toward the person shown.
     When we imagine holding an item, we become more likely to purchase it. Also, depending on the angle of the shot, the brand selfie could imply that the model in the photo is handing the item to the viewer, adding to this impact. Studies at Brigham Young University and University of Michigan indicate that if you aim for this, you should have the hand on the left side of the image. Right-handed people—constituting the large majority of most stores’ customers—are more likely to buy items which are displayed in a way the items can be easily picked up with the right hand.
     In all this, we’re assuming the poster is proud of the branded item. If the selfie is intended to warn people away from a purchase, omitting the face has varying results. When a shopper viewing a negative review is unsure of the identity of the reviewer, they often assume the reviewer is like them, adding credibility to the review. When a negative reviewer is clearly identified and the shopper already has developed positive feelings about the brand, the shopper often starts thinking how they are different from the reviewer in order to discount the negative review. They want to like the item.
     All else equal, a review is more influential with a shopper if the shopper feels a similarity to the reviewer.

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Reach Out for What Will Touch Your Shoppers 

Monday, February 14, 2022

Risk Underdog Appeal When Risk is Low

While consumers root for the underdog, those same consumers like to associate with winners. Therefore, to get the best from portraying yourself as an underdog marketer, project your commitment to winning. Show perseverance in meeting the shopper’s needs.
     Studies at HEC Montréal and Concordia University indicate it’s wise for you to also assess the degree of risk your target audience perceives in the purchase decision. The researchers saw how underdog positioning works best overall with shopper perceptions of low-risk transactions. With higher-risk categories—such as pharmaceuticals, financial investing, and life insurance—shoppers prefer top-dog brands. Top dogs are assumed to have greater competence and stability than underdogs.
     In the studies, positioning as a top dog or underdog was accomplished with a brand biography the study participants read. Top-dog biographies included phrases like “market leading,” “well-equipped,” and “significant budget.” Underdog biographies used phrases like “relatively small and new,” “determination,” and “persevered.”
     There was an important exception to the overall conclusion that perceptions of high risk draw consumers away from underdog brands and toward top dogs: When a shopper is able to cognitively and emotionally transport themselves into the brand biography—a process called “narrative transportation” by consumer psychologists—before thinking about high riskiness of a purchase decision, underdogs can maintain their attractiveness. This argues for underdogs presenting their case as early as possible with target audiences.
     All this also argues for the underdog marketer reducing the perceptions of high risk for the shopper. One way to reduce perceptions of risk is to present more alternatives. Shoppers are more willing to take a risk in making a purchase when having a few options to select from Strangely, another way to reduce perceived risk is to add risk notices. Tell more risks than you need to. When you notify the shopper of more risks, this can reduce the shopper’s opinion of the total possibility of harm.
     University of Miami and Boston University researchers saw this using as an example the dangers of a new drug to treat hypertension. A group of study participants was told the drug could increase the likelihood of seizures. Another group was told the drug might increase the likelihood of seizures, congestion, and fatigue. Then, when participants were asked to state how threatening they judged the drug to be, those told there were three side effects gave lower threat ratings. Adding minor risks diluted the total estimate.

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Overachieve as the Underdog 

Friday, February 11, 2022

Encourage Diners to Reject What You Offer

Most fast-casual restaurant diners say that in choosing a restaurant, the ability to customize ingredients in their order is very important. People feel that the ability to customize means freshness, and almost 80% say the ability to customize is the top reason for satisfaction with their order.
     Past survey findings which suggest these conclusions are reported by a team of researchers at University of Denver, Colorado State University, and Vanderbilt University, who then go on to explore variations on customization. A consumer could add ingredients, such as saying what they want on their pizza. Or the consumer could subtract ingredients, such as saying what they want omitted from the standard entrée.
     The researchers found that a consumer using the omit procedure will estimate lower calories in the item even when the item ends up with identical ingredients and portions as that for the consumer who’d used the addition procedure. The researchers say that because of the attractiveness of customization and high interest in calorie management, restaurants could draw business by highlighting the diner’s ability to trim down ingredients from fully-loaded offerings. The consumer might very well choose not to trim it down, but because of the way the customization availability was presented, the consumer will perceive a lower calorie count.
     An ancillary profitability benefit for the retailer in promoting rejection over augmentation is that the price of the item could stay the same while the cost of the ingredients is less. The diner can derive value from the ability to customize, enjoying their favorite blend of flavors, and the feeling of healthier eating.
     Other researchers have found differences between omit and addition presentations and with items beyond restaurant offerings. Studies at Bentley University compared two selection frames: In the first, the shopper was invited to add desired options to a base model. In the second, the shopper was invited to delete undesired options from a fully-loaded model. In the set of experiments, consumers selected a larger number of options with the delete frame. This happened most often when enjoyment would come from item use and less often with products like house paint.
     Shoppers who appreciate the appeal of the fully-loaded model become more likely to consider the price of the model with fewer options to be a good deal. Therefore, the introduction of the fully-loaded model facilitates the sale if the shopper has concerns about the prices of alternatives.

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Describe Fully-Loaded Items to the Focused 

Monday, February 7, 2022

Entangle Tactical Termination Customers

Pay $19.99 or pay $109.99. Guess which one I settled on.
     The initial purchase price for my antivirus software was $29.99, with a requirement that I enroll in automatic renewal for after the first year. The renewal price was $109.99. Still, nothing prevented me from cancelling at the end of the first year and purchasing a new package, which I was able to easily find for $19.99. That’s what I’ve just done. It’s a maneuver Technische Universität Braunschweig researchers refer to as a “tactical termination,” defined by my cessation of the contract while intending to continue using the service, with the objective of avoiding price discrimination.
     In analyzing reasons for tactical termination and ways a marketer can reduce the frequency, the researchers point to norms. Customers are more likely to stay entangled with higher renewal fees if social norms reinforce moral obligations and less likely to stay entangled if their social interchanges suggest they’d be foolish to do so. Once a consumer engages in tactical termination, the behavior becomes closer to being a norm, so they’re more likely to continue doing it. Toward reducing tactical termination, remind customers as their renewal date approaches of the special ways in which you’ve been treating them and will continue to do so. Findings from University of Arizona and Yale University indicate it also is helpful to show how the service reinforces the user’s self-identity.
     Because a major motivator of tactical termination is the customer’s perception they’re not being appreciated for loyalty, offer special rewards to those who renew. Northwestern University studies indicate it’s best if you avoid stating a monetary value for this reward. That makes it less likely the consumer will compare its value to the value of the forgone price break, which allows you to keep the cost of the reward low.
     Research findings from London Business School and Massachusetts Institute of Technology suggest another tactic: Tell new customers the reason they’re getting a discount is to compensate for the hassle of changing habits and integrating the service into their lives.
     This has two helpful effects: 
  • It justifies the new user discount in a way which makes the more experienced user not begrudge the benefit given to succeeding generations of new users. This is rationalization. 
  • It encourages the new user to pay back the discount by changing habits and/or integrating the subscription into their lives. This is reciprocity.

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Beware Dynamic Pricing 

Friday, February 4, 2022

Mandate Masks with Appreciation

Mandates provoke resistance. Mandates produce compliance. The proportions with which each of those two occurs depends on the general acceptance of what’s mandated. This issue’s importance exploded in tandem with the COVID-19 pandemic and the compelling evidence that wearing a facemask substantially reduces transmission rates. A  Pennsylvania State University study compared mandatory versus recommended facemask policies along with whether to express appreciation for wearing a mask or to apologize to the person for the bother of wearing a mask.
     In the study, the mandatory policy was stated as, “All customers are required to wear a mask before entering the store.” The recommendation policy read, “All customers are strongly encouraged to wear a mask before entering the store.” The appreciation message was, “Thank you for your cooperation. We appreciate it.” The apology message read, “Sorry for any inconvenience. Our apologies.”
     It turned out that the highest degree of reported willingness to don a facemask when shopping at a grocery store was among those participants given a mandate and an appreciation message. Offering an apology rather than expressing appreciation resulted in lower reported willingness. For those study participants presented with the recommendation rather than the mandate, there was no evidence that expressing appreciation or an apology made a difference.
     Self-reported interest in revisiting the store followed a similar pattern. Study participants were also asked how much the mask policy would bother them and how restricted they would feel in their freedom. The evidence from all study results together is that resistances will be lowest and compliance highest when mandating mask-wearing and thanking the customers for adherence.
     In general, it’s best to nudge people toward acceptance of an action, not mandate the action. Long-term compliance with limitations is enhanced when people feel in control. Mask-wearing mandates are more likely to succeed when the requirement is time-limited. With long-term restrictions, we might want to provide choices for the consumer. My grandson Eli, whose current early-career job is as a cashier at Rite Aid, and I are considering a possibility for use at his store: Post signs at entrances reading, “If you choose not to wear a mask in the store, we will take your temperature and forbid entry to those shoppers whose temperature is too high. We alert you to the fact that because of supply chain shortages, we currently have in stock only rectal thermometers.” How well do you think that’ll work?

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Unbox the Resistant Customer