Retail Anthropology - The Science of Sales

A study referenced by Scientific American says that people who were given the same wine, in two different glasses, and told that one was more expensive than the other rated the glass they were told was more expensive as better tasting.

This comes back to how price tends to influence perception. Keep this in mind when you're pricing your goods and services. It's generally better to price high and then have a "sale" price or special "member discount" to let the consumer believe they are getting a good bargain on a high quality item. Rather than just pricing the item low.

-B-

Today I was driving home and saw a lady standing by a bus bench holding a box of Krispy Kreme donuts, and a bag that had several more boxes. It seemed clear from her posture (but not from much else) that she was offering these donuts for sale. Unfortunately her efforts were drawing apparently no attention.

About 50 yards further down the road I saw another young lady assuming the same posture with a similar stash of Krispy Kreme donuts; and across the road I noted one or two more folk apparently engaged in the same effort for drivers going the other way.

A moment of background: Recall that I live in Hawaii, on Oahu, and the only Krispy Kreme shop in the state is on Maui. Accordingly a lot of groups - school groups, dance clubs, youth sports groups, etc. sell boxes of Krispy Kreme donuts as fundraisers. Often you see these folks along the side of the road, making their sales to passing motorists.

The problem today's folks had was that they had essentially no signage; not even t-shirts. This caused several problems for them:

1. Drivers had no way to anticipate the sale. Sales like that work best on busy roadways where there are a lot of cars to sell to. The problem with that is that those roadways are busy and the cars tend to be moving quickly and purposefully. If you want to sell to those drivers you need to let them know far enough ahead of time so that they can slow down, pull over, get their wallets out and so forth. You can't just wave at them as they go by at 50 MPH and think they're going to slam on the brakes and buy your goodies.

These folks gave us no warning that they would be selling donuts ahead so there was no way for drivers to prepare.

2. There was no indication of WHY they were selling these donuts. Granted most donut eaters probably don't need a cause, the treat is a treat. But I'm trying to be relatively healthy and so if I'm going to shell out some cash for food that is delicious but not good for me I really need to have a reason. If it's to buy equipment for the Little League kids or books for the school library then I'm a lot more likely to buy what they're selling (or even just give them a few bucks and not take the donuts). If they're raising money for a cause I don't support then I'm not as likely to.

These folks were just random people standing on the roadway and I had no idea if they were raising money for something I supported or not.

3. There was no indication of how much they were selling the donuts for. $10 is pretty typical for a box, but without any signage there was no way to know if these donuts were a good bargain or not. In light of problem #2 (above) it would have benefitted these folks to attract buyers with a good price.

4. There was no indication of WHAT they were selling. I recognized the Krispy Kreme boxes but I'm observant that way. It's a fair bet that a large percentage of drivers had no idea what was in the boxes, if they even noticed the sellers at all (see #5).

5. These sellers were fairly inconspicuous. I noticed them because I'm somebody who looks around when I drive and it seemed odd that these folks were standing by the roadway holding boxes. Otherwise they were just inconspicuous pedestrians with a lot of boxes. No doubt some percentage of motorists never saw them.

So what's the solution?

Simplicity itself.

1. A large poster some distance up the road that read: "Fresh Krispy Kreme Donuts $10 a Box! Help Support the [Insert Cause]! Just 100 feet ahead on the right!" Attach a couple of balloons to the poster.

2. The sellers should themselves have some similar balloons and rather than being solitary folks next to bus benches, they should group together, with their balloons, to attract more attention and create a sense of festival and activity.

3. Another sign next to the sellers that says the same as the first (except for the "100 feet ahead..." bit)

Alert the drivers ahead of time, inform them of what you're selling, how much you're selling it for and why and make it easy for them to find you when they reach you.

Today's folks did none of these things and not surprisingly I saw not a single motorist even slowing as they passed them.

-B-

I guess the old adage about a dissatisfied customer telling 20 people is about to come true.

Today I'm flying Delta Airlines on my way home to Honolulu from my Los Angeles office - at the tail end of a business trip to Puerto Rico. I'm a Gold Medallion member on Delta which usually means I get complimentary upgrades if any are available. Well, my flights thus far have been pretty full - o.k., that happens - except for one flight where I was supposed to get upgraded but a ticketing snafu erased the upgrade. They gave me some bonus miles to compensate me and apologized. O.K., I guess I can forgive that one.

Yesterday, in an effort to ensure my upgrade today, I decided to call in and spend the 15,000 frequent flyer miles needed to upgrade to first class. The lady on the phone was very efficient and in short order assured me that I was upgraded into seat 3A. Wonderful.

I arrive at the airport today to discover that I'm actually in seat 32B. Not wonderful.

I ask the ladies at the counter to correct the problem and they inform me that the ticket was booked thru Northwest Airlines and is not upgradable. This is not what they told me on the phone. O.K., but it's a Delta plane and I've flown more than 60,000 miles on their airline in the last 14 months. There are a dozen unclaimed first class seats (they're offering them for sale for $200 each) so surely they can accomodate me right? Wrong.

As I sit here in the terminal I hold a boarding pass for 32B and an expectation of nearly 6 hours crammed into a small seat with the person in front of me reclined back into my lap.

Rather than give a frequent flyer (who has 4 more trips in the next 6 months) an upgrade (and I was willing to spend the 15,000 miles) they are going to lose me. For my next trips I'll just choose whatever airline is cheapest, I guess. For $200 they are going to lose a frequent flyer. That is pretty short sighted customer service.

-B-

Selling a product is largely about perceived value to the customer. There are a lot of ways to achieve that: packaging, brand reputation, advertising, etc. One way that sometimes gets neglected is pricing.

In "Any Port in a Storm" Columbo goes into a wine shop to learn about wines and asks the proprietor "How can you tell a good wine from an average one?" The proprietor smiles and replies "By the price."

There is a story that has made the rounds of the business schools of a jewelry store proprietor in Arizona who was selling silver/turquoise necklaces for $25 each and sales of the item were very sluggish. On a suggestion from a friend she put a sign out on the necklaces that said "40% OFF SALE! Regularly $50 - This weekend $30!" She sold out of them in a day. Same product and at a HIGHER price. But because the "regular" price indicated substantial value and the sign suggested that they were suddenly a great bargain, the perceived value of the items was higher and people bought them.

Related note -- today I was in a grocery store here in Ewa Beach and saw a display of Pepsi 2-Liter bottles with a sign on them "Super Value! $2.09!" $2.09 is not a super value unless you mean a super BAD value. Almost every other grocery store sells the same thing for between $1.25 and $1.75 on Oahu. I noticed a K-Mart ad the other day advertising it "4 for $5" ($1.25 each). But by putting these on an end-cap with a sign advertising it as a "Super Value" there is a perception by the consumer that the price is especially good.

Luckily for me I pay attention to what these things are supposed to cost.

-B-

If you're in retail you should have some idea what your conversion rate is. Do you know? Do you even know what a conversion rate is?

The conversion rate is the percentage of shoppers who come into your store (or log into your website) who actually purchase something. Why is this important? Because it tells you how effective your displays are, how attractive your products are and how good your prices are.

Know your conversion rate. Then when you make a change such as updating a display or reducing a price you can see how it affects your conversion rate to evaluate how effective the change was.

Knowing your conversion rate isn't as easy as it sounds - to do that you have to know how many people came into your store and how many actually purchased something.

-B-