Understand Updated Product Name Changes

Suppose you run a golf pro shop. Callaway Golf Company notifies you that the Big Bertha driver is being replaced by the Great Big Bertha. Suppose you sell razors and you’re thinking of phasing out the Sensor in favor of the Fusion.
     What difference does the name change make?
     Management scientists at Harvard University and London Business School distinguished between the two situations. Here’s my interpretation of their findings.

• In the Callaway example, the name modification indicates a continuation. When such a product comes into your store, consumers expect to see improvements in the current features and consider switching to be relatively low risk. This eases resistances to making a switch. At the same time, there’s little excitement about upgrading, since it looks like nothing is dramatically improved. Why bother?
• In the Gillette Sensor to Fusion example, the new name suggests fundamentally new product benefits. There are implications of substantial improvements in quality and thereby great satisfaction in usage. The other side of the coin here is that, compared to the name modification situation, consumers consider the product as having a higher likelihood of failure. This razor is closer to the cutting edge upon which purchasers could be sacrificed. Compounding the perception of risk, consumers are more likely to fear that once they start using the new product, it will be difficult to move back to using the older version.

     When the product being newly introduced in your store involves a name modification, not a complete name change, assess the risk tolerance of the shopper. With the shopper who wants to protect against losses, emphasize the comfort of staying with the familiar. This fits well with golfers, who prefer incremental improvements to chancing a noticeable deterioration in performance while on the course.
     If the shopper has a high risk tolerance and the newly introduced product has a name modification, not a name change, emphasize the value of the augmented capabilities of the product. Younger shoppers are, in general, more likely to want this than will older shoppers.
     The suggestions are largely just the reverse for the situation where there is a complete name change with the new product.
     In all the situations, there’s more to understand, aside from the significance of the nature of the name change and the risk tolerance of the shopper: Also understand thoroughly how to use the newly introduced product so you can fluently answer questions.

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Count on Numbers in Product Names
Sell Either Protection or Promotion

Vary Velocity for Loyalty Program Motivation

You’d like customers to remain motivated when accumulating points in your frequent shopper program. The challenge is that what motivates the customer starting the program is different from what works as the customer draws closer to the reward. Researchers at University of Texas-Austin distinguish between what I’ll call a “Will I ever buy enough to earn a reward?” mindset at the start and a “How much more do I have to buy to earn a reward?” mindset once deep into the program.
     What motivates the first mindset to keep coming to your store is a quick accumulation of points. This says that goal attainment is, in fact, possible. But what motivates the “How much more?” mindset is a relatively slower velocity. The reason for this second one is less direct: If it takes more effort to achieve a goal, as long as the goal is attainable, the payoff seems more valuable.
     The researchers tested how this works by comparing the effectiveness of two types of loyalty club cards at a coffee shop. The uniform velocity card gave the customer three points for each purchase, and when the customer got 24 points, there was a reward. The variable velocity card gave five points for each of the first four purchases, and then one point for each of the next four purchases. Again, when the customer got 24 points, there was a reward, so what was required for each card was a total of eight purchases.
     Consumers with the variable velocity card completed the card more quickly, evidencing higher motivation. The variable velocity card gave the consumer a jumpstart.
     Researchers at University of Southern California and University of Pennsylvania achieved the same sort of result in a different way. One group of customers were told they’d receive a reward after purchasing ten car washes, but they’d start off the program with a free credit for the first two washes. They had to get eight more. The other group were required to get eight washes before receiving the reward, and they didn’t start off with any free washes.
     Of customers in the “get eight, no jumpstart” group, about 20% ended up participating in the program to the point where they received a free wash, compared to 35% for the group getting the jumpstart. In addition, the jumpstart group completed their quota more quickly and kept coming to the car wash more often.

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Give Loyalty Program Head Starts

Invite Cash Mobs

The Wall Street Journal recently reported how at approximately 6:30 PM on Tuesday, December 20, 2011, a group of sixteen people descended suddenly onto Oakland, California gift boutique Marion & Rose’s Workshop.
     Never fear. This Gang of 16 was not a criminal flash mob, intent on taking money and merchandise from an unsuspecting retailer. No, this was a cash mob, intent on supporting a locally-admired retailer by having each shopper spend at least $20.

• Shades of the 3/50 Project, in which consumers are asked to each select three independently owned businesses she or he would miss having available if the businesses disappeared, and then spend a total of at least $50 each month at those businesses. Except the cash mob is a one-time commitment with the intent that the shoppers will be motivated to come back soon and often.
• Shades of the tuangou phenomenon in China, in which shoppers organize themselves in advance to enter a retail business all at once to negotiate a group purchase discount on a specific product or service. Except the merchant in tuangou doesn’t know beforehand that the group is coming, and the cash mob doesn’t complain about paying full price.

     WSJ says that cash mob events have occurred in more than twenty U.S. cities so far. And they are events, in that it’s expected the shopping binge will be followed by a round of drinks at a nearby locally-owned bar.
     A few of the other informally suggested rules:

• The retailer is known for having contributed to the community in the past.
• The store carries items for both men and women.
• The cash mob event is scheduled for a time that business in the store would otherwise be slow.
• The retailer joins the participants afterwards at the watering hole.

     You could wait for consumers to discover your retail business is a good candidate for a cash mob. Better yet is to create your future by building an inviting environment for cash mobs in your retailing community. Contribute by organizing an event or two yourself.
     Simultaneously create an environment uninviting for that evil twin of the cash mob—the criminal flash mob. From a psychological standpoint, a most valuable measure is to rehearse yourself and your staff on how to handle all sorts of situations in managing crowds. In particular, unambiguously designate who to contact for assistance if an incident occurs and after the incident.

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Give the 3/50 Project a 360
Create Your Future by Anticipating Resistance
Flash Mob Scenarios Before Staff Eyes
Use Psychology for Shopper Crowd Management

Work Daily Deal Customers to Return

Reports of the death of daily deal programs are not only exaggerated, but, it appears, incorrect. In a MerchantCircle survey conducted last month, fully 75% of small business owners who had offered a daily deal said they’d offer another one in the future.
     Their reasons reflect the merchants’ growing sophistication in overcoming two of the most common complaints about the programs: One is that bargain hunters use the coupon, only then to flit on to another bargain at another retailer. The second is that the combination of discount price with administrative costs results in a net loss.
     In the MerchantCircle survey, 37% of merchants who used daily deals reported solid profitability. This is still a minority, but a noticeable increase from the 24% figure in last June’s survey. And more than 60% of those merchants saying they’d repeat a daily deal gave as a reason its effectiveness for customer acquisition.
     At the same time, of those who said they wouldn’t repeat a daily deal, 42% said it was not effective for customer acquisition.
     What made the difference? Probably emotional connection. When any customer comes to your place of business with a daily deal coupon, build an emotional connection. And as you choose among emotions, go for gratitude over happy. It's more profitable to have our customers grateful to us for what we're doing for them than happy about the consumption experience.
     Research at Università Commerciale Luigi Bocconi in Milan, Italy looked at relationships between six emotions and what the shopper with those emotions did after completion of the purchase. The six emotions were anger, gratitude, guilt, happiness, pride, and sadness.
     The greater the extent to which customers said they felt grateful to the retailer for helping to solve a problem or satisfy a need, the more likely the customer was to praise the retailer to others and to say they intended to spend their money with that retailer again. In the study, there was no significant relationship between customer happiness and either positive word of mouth or repurchase intention.
     There are a great many considerations in your deciding whether to launch a daily deal promotion. If you do, be sure to cultivate in each daily deal customer a sense that they owe you for what you’ve done. When the deed being done is a substantial discount on quality products or services, working the relationship for gratitude is a natural.

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Update Perspectives on Daily Deals
Fine-Tune Your Social Couponing
Go for Customer Gratitude and Guilt
Have Unannounced Discounts on Common Purchases

Inspire Customers to Post Repeatedly

What makes it more likely that your satisfied customers will use social networking to recommend your store? The strength of relationship a customer feels with others makes a difference. But more powerful than this is the frequency with which the customer communicates online, regardless of the strength of interpersonal ties. The implication: Inspire customers to post repeatedly.
     That conclusion is suggested by research findings from Forethought Research and Monash University, both located in Australia. The study reinforces two previous research findings:

• A special category of customer called a “market maven” is especially valuable to you. Market mavens are a type of opinion leader. Rather than considering themselves as expert advisors on only certain retail products and services, market mavens counsel others about the whole shopping experience and will then recommend specific stores.
• Go beyond saying to customers, “Please recommend us to your friends.” Say “Please recommend us to your friends and to friends of your friends.” Attend to weak-link referrals.

     Here are a few ways to identify market mavens in your community:

• Ask your staff to be aware of customers who offer suggestions for improvements. This is one trait that distinguishes market mavens from customers who only ask questions, give praise, and give criticism.
• Regularly ask your customers who recommended they shop with you. When you start hearing a name repeatedly, you may have spotted a market maven.
• Team up with other local retailers to exchange information on market mavens. Research at University of Mannheim and University of Texas-Austin finds that market mavens aim to keep current about all sorts of retailers.

     As to the friends of friends, keep in mind that even in these days of raging social networking, word-of-mouth (WOM) about your store is most likely to be passed on via face-to-face conversations.

• Encourage customers to shop with you in groups so you can benefit from what you hear them talking about. Hold special events. Carry enough of a range of items to appeal to friends of friends. Then while they’re shopping, listen to the group members’ chatter. Have sales staff ask customers for specifics about what they like and areas for improvement.
• Give shoppers materials and internet links they can take away with them as conversation starters to share with a broad network of family and friends. This is especially useful for newly introduced products and items for which the purchaser incurs monetary and/or self-concept risk.

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Court Market Mavens for Social Media
Attend to Face-to-Face Word-of-Mouth
Grab On with Weak Connections

Promote Packages to Decrease Refund Demands

When consumers are asked why they stopped patronizing a particular store, many times the answer has to do with how returns and refunds were handled. Therefore, it is in your interest to have liberal policies and procedures when it comes to accepting returns and giving refunds.
     Along with this, it’s nice to have as few refund requests as possible. One tactic is to carry quality merchandise and then let customers know about the quality. Stanley Marcus, former chief executive of Neiman Marcus said, “I believe that retail merchandising is actually very simple. It consists of two factors, customers and products. If you take good care in the buying of the product, it doesn’t come back. If you take good care of your customers, they do come back.”
     Avoid deep discounts. Research at Israel's INSEAD and at Stanford University confirms that when people buy items at what they consider to be deeply discounted prices, they tend to end up feeling the benefits are less than if they'd paid full price. And people who think a product or service is inferior are more likely to request refunds.
     Other research suggests another tactic: Promote the sale of packages of products. Researchers at Harvard University and Hong Kong University of Science and Technology began by noting the frequency of what’s called price bundling. Liquor stores sell wine by the case. Restaurants offer four-course meals. Theatre companies and sports teams promote season tickets.
     The researchers then found that when consumers buy the package, they are less concerned if any one of the components in the package fails to satisfy. One bottle of wine being off is not as likely to lead to a request for corrective action when you’ve a whole bunch of other bottles in the case. If the appetizer fails to meet expectations, that disappointment may be soon forgotten when the delicious entrée arrives.
     There are three sorts of reasons for refund demands decreasing when the consumer has purchased a package:

• The overall experience is satisfying. In accord with Mr. Marcus’s suggestion, don’t allow package sales to become an excuse for inferior merchandise or services.
• The consumer has trouble allocating value to an individual item. This argues for telling the shopper the percentage they’re saving by purchasing the package, but not stating the dollar savings or listing the price of each item.
• The user has had enough before consuming the whole package.

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Let Customers Get Away With It
Bundle Pricing, But Limit BOGOs