Credit the Appeal of Cash

This week, Walmart.com launched their “Pay with Cash” program. “Pay with Cash” is designed for customers who lack a checking account and credit card, but want to take advantage of the broad item selection and ease of shopping online. The customer places an order via Walmart.com and pays with cash at a Walmart store within 48 hours, at which point the order is shipped.
     An opinion piece on the Forbes website ridicules the concept: If a shopper can’t get a credit card or a checking account, how would they ever have a computer? In my opinion, this opinion piece is what’s been called “marketing to the mirror.” For retailing success, we must broaden target markets beyond ourselves. The seed of “Pay with Cash” was Walmart’s epiphany that only 15% of transactions at the stores use some form of credit. The Walmart shoppers are needing to, or at least preferring to, pay with cash.
     And there’s PayNearMe. According to the Dow Jones & Company Inc. blog AllThingsD.com, Danny Shader, CEO of PayNearMe, introduces his company to potential investors by joking that they will probably never in their lives use the service. Those who do use the service place orders online and then can pay in cash at a 7-Eleven store.
     Mr. Shader goes on to say that estimates of the percentage of American households not having a bank account run as high as 24%. A target market for PayNearMe is teenagers too young to have their own credit. One of the first PayNearMe partnerships was with SteelSeries, a retailer of video gaming equipment.
     Last August, Walmart announced they’re expanding the list of checks they’ll cash. In addition to payroll and government-issued checks which have been accepted for some time, Walmart stores will now accept insurance, pension, and student loan checks. The goal is to encourage shoppers to feel more wealthy while in the store so they’ll spend more. Having cash in your pocket does that.
     Then for the holiday season, Walmart brought back layaway. Shoppers could put aside store merchandise and make cash payments on it until the full price has been met. Here, too, Walmart wasn’t alone. Other large retailers like Sears and Toys R Us and small retailers like the three Ritzy Ragz & Thingz stores in Northern California were among those laying away reservations about the technique.
     And giving full credit to the consumer appeal of cash.

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Raise Your Community’s Aspirations

Since forever, shopping has motivated people to reach for more in their lives, to set their aspirations a few notches higher. Consumers see merchandise and learn about services potentially available to them, then get energized to turn the potential into reality.
     It doesn’t always happen that way. Shopping also can frustrate and anger people when what they’re shown and told about seems unattainably beyond their realities. Researchers at University of Texas-Austin and Switzerland’s University of Bern found that consumers are more likely to form an emotional attachment to an item at retail if the consumers see the item as fitting their image of their current self rather than of the person they aspire to be. Shoppers hesitate stretching their aspirations out too far.
     This fact leads to two tips:

• Feature items which, for your target customers, are out of grasp, but within reach.
• Raise the self-esteem of your shoppers so that they feel ready to reach for the stars. 

     Doing that second one will increase your sales in the short-term. It also will help ensure longer-term sales by keeping your customers healthy. Studies from University of Chicago, Emory University, Johns Hopkins University, and University of Vermont support a classic finding in psychology: Consumers with higher self-esteem fight off disease better than do others.
     Raise your community’s aspirations and your store sales by helping people feel great about themselves:

• Flatter expertise. Researchers at Duke University saw that a motivator for many experts is showing off their knowledge. For the best long-term results, give genuine praise. But researchers at Hong Kong University of Science and Technology find that even insincere flattery can be effective.
• Each time you personalize the selling message by referring to a characteristic of the shopper, you’re delivering a compliment. Even the smallest things can give you a retailer’s edge. For example, researchers at Universiteit Leuven in Belgium find that across languages and cultures, people’s self-esteem is heightened if their name is used.
• When customers are completing their purchases, they are more interested in reassurance than in benefits statements. This is a prime opportunity for praise. Compliment them on the good decisions they made. Invite them to return to tell you how their purchases worked out for them.
• Researchers at Virginia Tech, Babson College, and Florida Atlantic University found that improving the atmospherics in neighborhood retail stores tends to improve the self-esteem of the residents.

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

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Explore What’s Behind the Numbers

Deutsche Lufthansa has reported that their AG’s Frankfurt airline facility transported 110,000,000 animals during 2011. That’s actually more than the 106,000,000 people carried by all Lufthansa units.
     Does this mean the airline is primarily an animal freight company? Well, not really. You see, of the 110,000,000 animals, 80,000,000 were tropical fish. That still leaves dogs, cats, and race horses. Still, less than about 2% of Lufthansa’s total cargo revenue comes from transporting the creatures, and cargo revenue is but a part of the total. Lufthansa can safely say they are primarily a passenger airline.
      But can you safely say you understand what’s truly behind all the numbers you look at as key performance indicators (KPIs) for your business? Consider profit margin, for instance. An analysis by global management consulting firm Bain & Company notes how although Amazon’s five-year operating margin is only 4%, compared to an average of 6% for discount and department stores, the Amazon return on invested capital is more than double the average for bricks-and-mortar (B&M) retailers.
     To know what’s behind the numbers and set the right benchmarks, you’ll want to separate online from B&M figures.
     When analyzing financial indicators, slice and dice the numbers in different ways depending on your objective. For example, consider the size of your typical retail sale.
     Suppose it’s been a slow morning with only ten transactions. Two of those were for $100 and eight of them were for $5. The easiest way to calculate the average is to add up the total value and divide by the number of transactions. The total is $240, so the mean average for the ten transactions is $240 divided by ten, or $24. But $24 certainly isn’t the typical transaction. It’s $5, with two exceptions of $100 transactions.
     Instead of using only the mean, also look at the mode, the median, and the range. For the mode, group transaction amounts, such as everything from $10 to $19.99 into one bucket, everything from $20 to $29.99 into another bucket, and so on. Then see which bucket has the most entries. In my example, the mode is $0-$5.
     To get the median, line up the amounts from highest to lowest and then find the point where half the amounts are above it and half the amounts are below it.
     To get the range, look at the lowest and highest values.

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Lick ’Er Country-of-Origin Stereotypes

When your customer enters your store, she carries with her certain stereotypes about country-of-origin: Scotch whiskey is better than whiskey from India. Chocolates from Switzerland are superior to chocolates from China. Those are the sorts of findings from researchers at Babson College.
     How about putting the two of those together? What’s the perceived quality of chocolates from the country famed for Scotch malt whiskey? A recent article in The Economist says the perceived quality will be positive, and that it’s because of the luxury reputation of the liquor. Highland Chocolatier, a family-run artisan business in the village of Grandtully, Scotland, is experiencing massive production growth with retail sales of the products at upmarket department stores, restaurants, and hotels.
     This notion of quality by association also comes into play when we want to lick a consumer’s less positive country-of-origin stereotypes. Harvard University researchers give a couple of alcohol and sweets examples:

• Don Melchor cabernet from winemaker Concha y Toro in Chile has received ratings equal to French Bordeaux wines from Wine Spectator, but is broadly perceived as not being world class. 
• Chocolates El Rey in Venezuela sells cacao to candy makers in Switzerland and Belgium, but has difficulty selling its own chocolates to connoisseurs internationally. 

     Here are a few research-based tips on selling such products at retail:

• Keep prices high enough. Research at Israel's INSEAD and at Stanford University confirms that when people buy products or services at what they consider to be deeply discounted prices, they tend to end up feeling that the benefits are less than if they'd paid full price. They love having gotten a discount, but they don't have as much love for the product or service. Consumer psychologists call this the price-quality link.
• Flaunt the country of origin. Alongside the underappreciated product, have items carrying a sterling reputation which come from the same country. We can introduce the impression of quality to the shopper's brain indirectly or subconsciously. Ideas introduced this way have a special power. Because the perceptions arrive subconsciously, the person is less likely to mobilize reasons not to buy.
• Downplay the country of origin. Harvard University researchers analyzed how Corona beer successfully accomplished this. Early on, Corona was nicknamed “Mexican lemonade,” and rumors circulated that workers urinated into the beer during the manufacturing process. Corona chose to position itself not so much as a Mexican beer as a beer of the beach. 

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

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Suggest Ways Shoppers Can Save Money

I’ve cancelled my service plan maintenance agreement with my HVAC (heating, ventilation, and air conditioning) company.
     I say “my HVAC company” because I, like most consumers, feel an extra commitment to a retailer when subscribing to a company service. Research at University of Pennsylvania and University of Southern California suggests that people agreeing to a flat-fee arrangement are even more likely to build commitment to the retailer and recommend the retailer to others if the customers are referred to as “members of the plan” rather than as “subscribers to the plan.”
     But I probably would have cancelled my enrollment and began to look for another vendor even if I’d been called a member. The problem was that I no longer felt the retailer was trying to save me money, and that was my motivation for enrolling in the first place.
     Some years ago, when I wanted a new HVAC system, this company had been praised to me by a good friend. The sales rep suggested a system adequate for my specifications after describing the alternatives and recommending against a more expensive system which he said was more than my house required.
     I was impressed with the company’s customer focus. When I received an e-mail encouraging me to enroll for the maintenance at a monthly fee, I did so promptly. About every six months, I got a call to schedule a visit, at no extra charge, to tune up the system. I liked the peace of mind. I could now think about things other than whether the system needed maintenance. Psychological inertia set in, as it will for any customers you have on a flat-fee or subscription arrangement.
     Then something changed for me during this last year. Each time, the serviceman finished by giving me a list of jobs that should be done at an additional cost. They seemed hungry for work. My trust faded fast.
     Still, I wanted to restore that trust. It was easier than having to find another HVAC company when I required service. So I telephoned the company and shared my impression that the list of recommendations was never-ending and that I was starting to doubt that they were motivated to save me money.
     Her reply: “Well, you don’t have to take the recommendations.”
     My suspicions were confirmed.
     If you want to keep the business of your consumers, let them know how assiduously you watch out for them.

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

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Examine the Magnitude of Differences

When you’re told that changing your way of doing business can make a difference in your business, ask how big a difference. After all, making changes consumes resources.
     I give you that advice after reading a recent report from social commerce consultants Bazaarvoice. The report supports some of what we expect: Women who buy in-store are happier with their purchases than are men who buy in-store. Men like buying online because they find in-store shopping to be a hassle and the liking of the experience spreads to liking the products more.
     The report also presents provocative tidbits:

• Consumers ages 65+ have a stronger preference for products purchased online over products purchased in-store than do consumers ages 19-24. Retailers should welcome older shoppers to purchase online.
• Asking purchasers to post online reviews of their experiences allows the retailer to continually improve. However, in-store purchasers receive an e-mail asking them to post a review only 45% of the time, while online purchasers receive such an e-mail 80% of the time. Still, in-store purchasers are just as likely to give feedback online as online purchasers. Retailers don’t need to depend on an e-mail if they ask in-store customers face-to-face and via signage to contribute reviews and suggestions.
• About 70% of shoppers say they use smartphones while in the store. This suggests the in-store salespeople aren’t giving the shoppers enough of the right kinds of information.

     In my opinion, a difficulty with the Bazaarvoice report, however, is insufficient attention to the magnitude of differences:

• Ceiling effect. Satisfaction scores can go only so high when you use a five-point scale. Although consumers ages 65+ reported a stronger preference for products purchased online over products purchased in-store, the difference is 4.34 versus 4.06. Both of these are more than 4.0, which indicates very good satisfaction. The corresponding figures for the respondents ages 19-24 were 4.48 versus 4.40.
• Percentages without reason. A classic finding in consumer research is that percentages are easier than raw frequencies for a person to understand and remember. But that ease of comprehension sometimes masks the meaning of the raw numbers. The Bazaarvoice report says that iPad users spend nearly 16% more time on retail websites than do other tablet users and mobile users. But the difference is 5 minutes versus 4 minutes 19 seconds. Forty-one seconds is 16%, all right. Is that significant enough to guide a retailing strategy? Maybe not.

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