Daniel Kahneman (Nobel Prize Winner and Author; Thinking Fast And Slow)
A person buying ordinary products in a supermarket is in touch with his deepest emotions.
J. K. Galbraith (Author; The New Industrial State)
“There can be as much value in the blink of an eye as in months of rational analysis.”
Malcolm Gladwell (Author; Blink and Outliers)
All actions are impulsive, especially spending money.
I do a lot of writing and networking in coffee shops. I like to find unique shops but my default is going to a familiar spots like Starbucks. When I go to Starbucks, I know that there’s going to be room for me to work and no one is going to directly bother me to buy more coffee or leave. And I know that whatever kind of coffee I order is going to have enough caffeine in it to jumpstart a horse. Unfortunately, I also know that I’m going to have to stand in line and wait while the guy in front of me decides what he wants even though he had several minutes to decide. If only he would have stopped ogling the brightly lit desert bar that’s positioned right at eye-level.
While I’m waiting, I ogle the desert bar too. Maybe I’ll get the brownie. No, too much sugar. How about the oatmeal cookie? It’s healthier than a chocolate chip cookie, right? No, it’s still a cookie. Okay, what’s below the desert bar? How about a salad or a sandwich? No, the salad is like 5 bucks. By the time I get to the register, I’ve had to make a dozen different decisions – decisions not to buy things. So, with my willpower depleted, my eyes catch on the small display of healthy nuts and gluten-free Kind bars adjacent to the register. I decide to reward myself for saying no to all of the other deserts and more expensive items by buying a Kind bar. The bar is about $2.50. My Americano is only about $2.00. Starbucks just made me voluntarily give them 150% more money than I originally planned. How?
I met Margo Aaron at a marketing and human behavior conference called BehaviorCon. Margo has an M.A. from Columbia University in Developmental Psychology and specializes in behavioral economics, decision-making, and the psychology of how and why people buy. She helps people in business and entrepreneurship tap into (and influence) their customers’ buying behavior. Currently, Margo works with Hunter Straker, America’s only Purchase Design agency. I’ve always been interested in why people buy certain things at certain times. In particular, I’ve wanted to know what influences a person’s decision to purchase something that, rationally, they did not plan to purchase in the first place. On a broader scale, I wanted to know how to influence other people’s actions while preventing other people from influencing my actions. So, I asked Margo to help me understand.
It’s 3PM on a Tuesday and Joe is having the worst day ever. His alarm went off 15 minutes late this morning and then he got stuck in traffic, which really irritates him. When Joe finally arrives at the office, his boss yells at him, his client rips his presentation to shreds, and – as luck would have it – he spills coffee on his white button down.
So, at 3PM on the worst day ever Joe decides, “I need a break,” and heads to the closest store to pick up an energy drink. En route to the refrigerated section, he passes the cookie aisle. Joe looks at a display of decadent cake deliciousness and thinks to himself, “Screw the diet. My girlfriend will never know. Plus, I deserve this.” Joe picks up a box and proceeds to the register. As Joe is waiting in line, he realizes he left his phone in the car and, for the next six minutes, is cut off from the world. He can’t check his Facebook page. He can’t tweet about the insanely slow cashier or the obnoxiously loud woman talking on her cell phone. Joe is left with just Joe. It’s the longest 45 seconds he has ever experienced in his life until he spots a picture of a scantily clad Naya Rivera on the cover of Maxim magazine. Joe grabs the magazine and flips through the pages when, suddenly, he’s up at the register. “Man that was fast” he thinks. Joe leaves the store with two Red Bull’s, a box of Ho-Ho’s, and an issue of Maxim magazine.
So, what does Joe’s grocery store jaunt have to do with business and entrepreneurship? Glad you asked. For starters, Joe intended to buy only one energy drink. But, instead, he walked out with 4 times as many items. How did that happen? Was it chance, free will, or an intricately planned process set in motion months if not years before Joe’s bad day?
I Only Buy What I See
Joe’s spending spree was the result of 4 essential retail marketing concepts that influence impulse buying. The first is merchandising. Merchandising is all about location. Every aisle, every product, and every display is strategically placed in the store to encourage shoppers to buy more. The conveniently placed display of Ziploc sandwich bags in the snacks aisle – merchandising. Or the Mio squirt bottles hanging from a clip-strip as you open the refrigerator door in the bottled water section – merchandising. What about the caramel and chocolate dip next to fresh strawberries? Yep, these are all examples of merchandising.
To understand why merchandising is important, you must understand that your customers are not always actively searching for your products. Product placement serves as a subtle but powerful nudge to the shopper. Let’s face it, humans are lazy. We’re busy. We’re distracted. We’re more cognitively overloaded than ever. And we definitely don’t have time to worry about searching through an overwhelming maze of items to find something we didn’t come to buy in the first place. So, we don’t. Stores know this.
A worldwide survey of 7,000 consumers found that your product is 86% more likely to be purchased and 115% more likely to be recommended when you simplify customer decision making. This means making things as easy as possible to find. Carrefour, a French grocery store, understood this when it moved toothpastes below toothbrushes, instead of having them next to each other. That simple merchandising move increased its oral care category sales from 6% to 16%. Similarly, it wasn’t an accident that Joe glanced at Maxim while he was waiting in line. Had it been in the aisle with Hallmark cards, he would’ve never even known it existed. It was placed in a location where it was easily accessible.
The best way to apply these merchandising principles to your business is to consider your customer and his journey through your “store.” Pretend to be your own customer. What does a journey through your store, or website, look like from the outside? What are people buying and how are they getting those items? What do they look at or consider along the way? If your business is online, carefully consider what your customers click through before they arrive at the checkout page. Track their spending habits. What do they tend to buy together? After a while, you’ll start to notice patterns that will help you position your suite of products to maximize simplicity and accessibility.
I Only Buy What I Feel Like Buying
The second essential concept of retail marketing is mindset, or, more specifically, shopper mindset. To understand this, we need to distinguish between a shopper and a consumer. A shopper is the person who is shopping for your product. A consumer is the person who is using your product, whether or not they bought it. For example, when a mom buys Gogurt, she is the shopper. When her son eats it, he is the consumer.
The shopper/consumer distinction is important because your shopper’s mindset is drastically different from your consumer’s mindset. Allegra, a seasonal allergy drug, told CVS that it wanted to be part of women’s beauty routines. To most of us, that makes no sense. Women use allergy medicine when they are feeling sick, not when they are putting on mascara, right? Well, turns out, in shopper-mode, this is not the case. CVS looked at shopper loyalty card data and found that many women were in fact buying allergy medicine on their shopping trips to the cosmetic’s section. As a result, CVS agreed to let Allegra market to women buying beauty products during CVS’s seasonal allergy program. Allegra put up displays and signs that had messaging such as, “You can avoid puffy eyes, not just conceal them.” The program generated incremental sales for CVS.
We see a similar incongruity with Joe’s trip to the grocery store. When Joe is in consumer-mode, he is healthy and relaxed. Joe likes to go for runs, prefers grilled chicken sandwiches and side salads, and he reads Inc. magazine. However, when Joe is in shopper-mode, his mindset is drastically different. Joe’s needs are different. Joe’s wants are different. And Joe’s overall emotional state is different. When Joe went to the store for a Red Bull, he was discouraged. he was angry, depleted, and feeling like the victim. As a result, the brands that stood out to him in the aisle – and the ones that he ultimately purchased – were ones that spoke to him while he was in his frustrated mindset. By understanding your shopper’s mindset, you’re better positioned to give your customers what they want when they are ready to buy it, not just when they want to consume it. Joe may always want unhealthy desserts, but he’s not always going to buy unhealthy desserts.
I Only Buy What Makes Me Feel Better
So far we’ve reviewed the importance of having your product in the right location (merchandising) and understanding who your shopper is when they’re ready to purchase your product (shopper mindset). The third essential concept of retail marketing is messaging. During Joe’s trip to the store, Ho-Ho’s stood out to him because they communicated the following message: Sucky day? You know what makes a sucky day better? Chocolate. Icing. Cake. Something you can eat in the car. Yea, that’s right. Ho-Ho’s. We got you. And we won’t tell anyone.
Messaging like this is impactful because it is connects the brand to the shopper and, as a result, becomes relevant in that critical purchase decision moment. If these brands were communicating their health benefits and their Eco-friendliness, Joe would never have noticed them. Just like he didn’t notice all of the other healthy items in the store at that moment.
Ho-Ho’s understands that their shoppers are emotional eaters. Their shoppers reach for a box of their desserts because they want to indulge. They are looking for an escape. They are looking for a simpler time, like when they didn’t have to answer to a boss. This is the momentary release Joe knew what he was going to get when he bought the Ho-Ho’s. He knew he was going to get a processed bag of chemically infused, high-fructose-corn-syrup covered, magical decadence. He was reminded of this when he saw the Ho-Ho’s logo on the box and the picture of a happy kid biting into one of the cakes and the tagline reminding him that the product is “delicious” (versus, say, low in calories). Hostess’s cakes stood out to Joe because they communicated what he needed to hear (their message – an escape, indulgence) when he was listening (his mindset – frustrated).
I Only Buy When I Have A Reason To Buy
So, why did Joe buy two Red Bulls instead of one? Simple – and it’s our fourth concept: promotions. When Joe walked over to the energy drinks, there was a deal: “buy one get one half off.” And, it was worth extra points on Joe’s store membership card. The mere Buy-Get promotion made Joe buy another can of Red Bull and it kept him from buying other brands like Monster or Full Throttle. Promotions are a great way for quick incremental sales lifts and influencing game-time decisions by the shopper.
A word of caution though: putting things on sale is not always a good way to drive brand equity. For the company behind the product (for Red Bull it’s an Austrian company called Red Bull GmbH) this matters. Red Bull wants its shoppers to choose its brand over and over again, not only when it’s on sale. However, promotions are a great way to incentive your shoppers to try new products. New shoppers might be hesitant to try your brand because they don’t know what they’re getting. It’s a risk. And risk makes people emotionally uncomfortable. By offering your product for a discount, you ease their tension. You put your shoppers in a better emotional state by giving them a reason to buy. The incentive lowers the risk.
Recently, Coca-Cola did this by creating an end-cap display (a display at the end of an aisle) that read “Build Your Own Pack.” It displayed 22 different Coke products that shoppers could mix-and-match in either 8 or 10 pack boxes. This allowed shoppers to buy what they were already buying (Coke and Diet Coke, for example), while trying out a new brand (Mellow Yellow Zero, anyone?) without having to commit to an entire box. The promotion was a big success. Not only was it a great way to get shoppers to buy new brands, but it was also a great way to get shoppers to buy more overall.
So, in thinking about your own business, whether it’s online, brick and mortar, or just plain ole in-person – consider these four areas:
1. Merchandising: How can you make it as easy as possible for your clients to buy from you?
2. Mindset: What are your shopper’s needs, wants, and emotions at the point of purchase?
3. Messaging: How are you making your shopper’s feel better? What needs and wants are you fulfilling?
4. Promotions: How can you use promotional incentives to stand out from the competition and entice new shoppers to buy your product? How can you take away their risk.
Which of the above have you used to effectively influence someone’s behavior? Or, how has your behavior been influenced by one of the above?
Margo Aaron grew up fascinated by why people behave the way they do. Combining that fasciation with her love of food, Aaron works as a strategist bringing insights-based shopper marketing solutions to consumer packaged goods (CPG) companies and retailers.