Dread the Dead, Sell It First

With Expiration Date Based Pricing (EDBP), the retailer lowers the price of items as the expiration date approaches. The thought is that it’s better to sell the item at a reduced profit than not to be able to sell it at all.
     Researchers at University of Miami, University of Leeds, Athens University of Economics and Business, and ALBA Graduate Business School analyzed EDBP among grocery retailers. However, the practice is not limited to that sector. At the time of Sy Syms's death, his company was operating thirty stores in which, stamped on the back of each price ticket, was the date the item was placed on the sales floor, and stamped on the front was a series of dollar amounts in descending order. Every ten selling days, the price moved to the next lower amount on the ticket. Fashion, too, is perishable.
     Research findings from that tri-national group plus other research on the practice suggests the following about EDBP:

• If your customers are accustomed to your using EDBP throughout your store and you stop using it, this won’t markedly change customers’ perceptions of the quality of merchandise you carry. 
• If your store starts using EDBP throughout, shoppers loyal to the store will begin to consider the store to now have somewhat lower-quality merchandise. 
• This problem can be eased by building trust, such as by having a liberal return policy. Encourage purchasers to return for exchange any unused product that goes beyond its expiration date, even if purchased with the EDBP discount. Researchers at Baruch College find that after someone acquires a product and works through any initial regrets, they hesitate discarding the product past the expiration date. As a result, they’ll use an inferior product, becoming less likely to purchase the item and brand from you in the future. 
• If EDBP is featured as a socially responsible practice to reduce waste, its use can even generate positive consumer evaluations. However, your customers who take home a product with a date on it can easily be confused as to what the date indicates. “Expiration date” means the last date a food should be eaten or used. But your customers might also encounter “sell by,” “best if used by,” “guaranteed fresh until,” the often cryptically-formatted “pack date,” and the “born on” seen on beer bottles. Confusion can irritate customers. Prepare your staff to answer questions about what these expiration and freshness dates mean. 

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

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Purge Expired Products 
Make Your Shoppers Feel Smart

Listen to the Voices of the Customers

The small to midsize retail business can’t stock every possible product or provide every possible service. There’s not enough room on the shelves or enough opportunity to keep all those skills sharp. The advice to carve out a niche is not just so you can distinguish your store. It’s also so your operations can be cost-effective.
     Deciding what to carry means prioritizing the needs of your customers and potential customers. In the early 1940’s, while on the faculty at Brooklyn College, psychologist Abraham Maslow described a hierarchy of human needs.
     Four characteristics of Prof. Maslow’s needs hierarchy are important to retailers:

• It’s based on his conversations with people and observations of their behavior. He steered away from elaborate theories. 
• Prof. Maslow assumed that people are driven to improve themselves in positive ways. Many of the other needs hierarchies assumed people are motivated chiefly by their desires to escape unpleasantness. Retailers do best to accentuate the positive, even when appealing to shoppers in negative situations. 
• People are most comfortable making purchases to satisfy higher level needs when they feel their lower level needs are being satisfied. But needs at the lower levels, such as the need for safety, will never be satisfied permanently. Consumers will always be looking for ways to replenish satisfaction of those needs. 
• The same purchase of a product or service might satisfy more than one need category, and each need can be met in a broad range of ways. 

     Over the years, other psychologists refined Prof. Maslow’s hierarchy. Here’s roughly where the hierarchy stands these days, starting with the most basic needs and moving to the ones it could take a lifetime to even partially satisfy:

• Breathing freely, avoiding hunger, sleeping comfortably 
• Staying safe from injury 
• Having friendships 
• Being respected 
• Understanding how the world operates 
• Appreciating beauty
• Achieving one’s full potential 
• Helping others to achieve their full potential

     “Voice of the Customer” has become a term used to remind those who sell that they should attend to the needs of those targeted for a sale. Here are some questions to ask:

• What is the essence of the consumer need? 
• Why does the need exist? 
• Which benefits and attributes are mandatory? 
• Which benefits are consumers willing to trade off? 
• What benefits are available to the consumer? 
• What benefits does the consumer most desire? 
• What factors might drive purchase decisions in this category? 

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Define Your Niches by Your Shoppers’ Desires 
Recognize a Need, Then Fill It 
Broaden Target Markets Beyond Yourself

Influence Who Uses Gift Cards

Many people buy gift cards to use themselves. Or they like a deal where a bonus card comes with the gift card purchase. One for you, one for me. Outback Steakhouse restaurants have been regularly giving a $20 reward card, with a time limit on its redemption, along with each $100 gift card.
     Research at Stanford University and Yale University suggests this type of bundling of reward card and gift card will be most attractive to consumers when one of the pair is seen as serving a utilitarian purpose—satisfying the obligation of purchasing a gift for somebody else—and the other is seen as hedonic—giving oneself the pleasure of a no-additional-cost acquisition. It’s like buying a dozen roses in a gift bouquet and also receiving an arrangement of six lilies.
     But who ends up getting the roses and who gets the lilies? Does the purchaser keep the $20 reward card or the $100 gift card? Researchers at University of North Carolina-Charlotte, University of Electronic Science and Technology of China, and University of Texas-Dallas say the answer to those questions will impact your profitability from the use of the reward and gift cards.
     See how much you can influence the decision, keeping in mind these questions I’ve used the North Carolina/China/Texas findings to generate:

• Who will be more attracted to your high-margin items? Ask the gift card purchaser what sorts of items she likes and what the gift recipient might like in your store. A profitable move for you is to have the larger denomination card go to the one who prefers the high-margin items. This might not be the same one who will spend the value of the gift card quickly. 
• Who is more likely to buy large quantities of items in advance and stockpile them? That one is the candidate for the smaller denomination card if you’re aiming for greater profitability. With the same reasoning, the researchers would recommend that if you offer a gift card as a reward for a large purchase amount, you consider the type of shopper you have: If your shoppers are usually constrained in their spending, offer a gift card at equally spaced purchase amounts—a $20 card for each $100 spent. But if your shoppers are usually ready to spend freely, the profitable route for you is to offer only one card—a $20 card for the first $100 spent. 

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

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Redeem Gift Card Profitability 
Bundle Utility, Discount Hedonism

Credit Those Money-Back Guarantees

A common practice in retailing is to accept products back for a full refund, even if the product has been partially used. The retailer might insist on issuing a store credit for a future purchase rather than making a cash refund. But retailers know a customer is more likely to make purchases at a store offering money-back guarantees (MBGs).
     Researchers at University of Muenster, Catholic University of Eichstaett-Ingolstadt, and University of Texas-Austin have documented how influential the MBG can be. The MBG affects both the shoppers’ logic and their emotions. At the logical level, it is insurance, letting the shopper know that if anything goes wrong, the cost to make things right will be limited to getting the remnants of the merchandise back to you. “Just bring the item in for a full refund.”
     At the emotional level, the influence of the MPG is assurance. When you, the retailer, offer your customer a MBG, you’re encouraging the customer to have high trust the product will deliver on what’s been promised. The researchers find that this second prong—the emotional—is more influential than the logical.
     Because of the power of the MBG, feature this policy in your marketing. Emphasize the assurance you’re offering, with the insurance angle as a subtheme.
     A MBG is a multi-part promise to your customers:

• What you are promising you will do 
• The rules for deciding if you’ve kept that promise 
• The remedies available to the customer if you fail to keep your promise 

     There’s a fourth part as well:

• How you will answer the customer’s questions about each of the first three parts of the promise. The MBG is one tool for projecting your marketing identity to your target customers. Use your explanation of the guarantee to project clearly. 

     Stay aware of the emotional prong as you analyze what you’re promising and make updates in both the promises and the explanations whenever necessary. There are “serial returners” who use items and then come back to the store asking for a full refund. Survey research finds that many of these consumers do not see what they’re doing as cheating. They’re not consciously attempting to defraud the retailer.
     When you set the rules for MBG returns and give explanations to the serial returners, you’d like to keep them as customers. Show respect, concern, and empathy as you are protecting your business from exploitation, even unintentional exploitation.

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Guarantee with Care 
Present Warranties as Insurance, not Assurance

Tier Your Loyalty Programs Apart

Set different levels in your loyalty programs so that your especially profitable customers gain recognition and additional rewards, providing motivation.
     You might be concerned that if you add levels above what you now have, this will irritate your current frequent shoppers. Researchers at University of Pennsylvania and University of Southern California explored what happens when a retailer introduces new award levels in a loyalty program. Suppose that up to now, you’ve had a gold level at the top. Now we’ll add a platinum level above for which only some gold members will qualify because the purchase thresholds are higher. The researchers found that consumers actually prefer retailers who offer elite loyalty program tiers, even when those consumers know they’re unlikely to themselves qualify.
     Here are some tips for maintaining multitier loyalty programs, based on experimental research findings and retailer experiences:

• For movement to the next level, set thresholds which are out of grasp, but within reach. Consumers dislike a feeling that you’re forcing them to buy what you’re selling. In general, they don’t object at all to being tempted, coaxed, or even challenged by thresholds they feel they can achieve and that they’ve earned. 
• Provide lots of ways to earn credits for movement to the next level. Referring a friend earns points. “Get extra credit for coming to special event sales, even if you end up purchasing nothing.” The objective is to maintain momentum and a sense of achievability. Do assess the profitability that comes from these non-purchase sources of credit, though. Discontinue those which aren’t working. 
• Set thresholds on the basis of continuing activity, not lifetime activity with you. You wouldn’t ever want to completely drop a customer from loyalty program participation unless the person asks to be dropped. The loyalty program serves as a way of tracking the shopper, not only for rewarding good customers. However, you maintain purchasing motivation by requiring ongoing actions in order to receive the elite benefits. 
• Include among the reward choices for elite levels a few options which allow your customer to show off and you to show them off. A five-minute shopping spree in front of other customers or an extravagant event at the customer’s home with media coverage would bring attention to your program. Some of your clientele would absolutely hate this attention. But other would love it, and the publicity can motivate consumers to aspire to those high levels. 

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Help Loyalty Program Members Progress 
Set Moderately High Purchase Thresholds

Catalog the Advantages of Catalogs

A recent CNBC.com posting documents how catalogs remain an important retailing tool:

• During 2011, almost 90 million Americans bought an item directly from a paper catalog. 
• J.Crew has over 300 stores, but still mails out 40 million catalogs annually. 
• Another apparel retailer, Express, began mailing out catalogs a year and a half ago. They now say that both a paper catalog and an online catalog work for them, but the paper catalog works better in driving sales. 

     Clearly, paper catalogs are less important than they were decades ago. One of the first items to be jettisoned when Sears and Montgomery Ward hit the financial rough seas was their Big Books.
     In my opinion, the percentage of retail sales made from paper catalogs will decrease over time, accompanying decreases in bricks-and-mortar store sales. Consumers will continue moving toward purchasing online. However, just as there will always be a place for the B&M store in the consumer’s purchasing plans, there will always be a role for the paper catalog.
     Research suggests that paper catalogs are at their best with items where sales benefit from large picture spreads and an abundance of textual description. The pictures can be gaudy, and the textual description fanciful. In fact, that could be for the better.
     A Bloomberg.com posting about Stauer, the print catalog and ecommerce retailer of luxury items, described how to do it. Owner Mike Bisceglia was quoted as saying, “We buy large stones with less clarity but at a better price. Guys like being able to afford a big, beautiful 50-carat ruby necklace.”
     Claiming you paid a good price is itself part of the showing off—even if not to the recipient of the gift. Mr. Bisceglia is also quoted as saying, “There are all different levels of pearls, but 99.9 percent of people can’t tell the difference between a string of pearls that goes for a couple hundred dollars and the thousand-dollar pearls.”
     Give the customer tales to tell about the items. The first words in the story count for a lot. In the Stauer catalog, the description for a jewelry item began, “This story breaks my heart every time….” and the one for a watch kicked off with, “When it comes to symbols that stir the heart, you can't beat the American flag.”
     With compelling illustrations and phrases, a paper catalog could be an essential component in your multichannel marketing strategy.

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Distinguish Show-Offs from Connoisseurs