What mangoes at the market teach us about buying behaviour

As an infrequent visitor to the fruit and veggie market I can find it quite overwhelming.  Stall after stall of similar stock, vendors shouting their deals and a strange mix of market aficionados weaving through crowds with their trolleys and bags, and novices, bumping into things as we try to ingest all the information and walk at the same time.  It reminds me of most online retailers - overwhelming those new to the website and designing for those who are already competent. So what can we learn from the behavioural techniques used by grocers to get people to buy?

1. Use a lead item that is desirable
Influencing buyers to select their stall over another is a major hurdle that grocers need to deal with. All stock looks the same, so price becomes a key criterion (sound familiar to online retailers?). Smart grocers therefore lure shoppers with a lead item, promoting a desirable product at a price that is easy for the buyer to understand. At the moment, mangoes seem to be the carrot (so to speak).

Grocer A: 3 mangoes for $5
Grocer B: 2 mangoes for $5 

No question that Grocer A is likely to generate more business because the relative value is easy to understand and whilst s/he may take a hit on profits from mangoes, this grocer has won the chance to sell more items to the buyer.  In colloquial terms, losing the battle to win the war.

What if you are Grocer B?  Should you change your offer?  What's interesting is that Grocer A's offer is powerful because it is contrasted with Grocer B; if that wasn't available it would be harder for the buyer to assess its merits.  Grocer B has a number of options;

• Match the offer
• Choose another lead item (eg nectarines)
• Use a different pricing structure (eg promote $2.50 per mango or 'get two mangoes and a third one free' so that it is more difficult for buyers to do a direct comparison)
• Bundle the offer (eg two mangoes and a punnet of strawberries for $5)

2. Simplify the value assessment
Note that both grocers have used a whole dollar amount ($5) rather than complex number (eg $4.99) in this case.  Why?  In an environment in which there are hundreds of prices displayed, and most per kilogram ($6.99/kg, $3.99, $4.99...) the whole number alleviates the buyer's burden of calculating value, effectively saying "you don't have to strain your brain, it's great value".  In behavioural terms, the whole number relaxes the buyer and increases confidence that they can successfully manage the transaction.  

I've also seen this technique used at Coles, where a discounted item is promoted using a whole rather than complex number. For example, yogurt that is normally $6.24 may be marked down to $4 rather than $3.99.  

3. Gain commitment
The mangoes not only attract the buyer but commit them to transacting with the vendor.  In other words, once the mangoes are in the basket, it becomes hard for the buyer to recant and take their business elsewhere. A couple of things are happening here.

• They have sunk the cost of their time and effort in queuing up and going through the process of sale.  Having committed to doing this with one vendor, the desirability of doing it with another (particularly when the upside is difficult to discern) diminishes.
• We like to think we are good at making good decisions. The buyer has given themselves a tick of approval for buying the mangoes, and therefore is likely to seek to build on that by continuing to shop in the same stall. 

New vs existing customers
As I mentioned, I am a relative newbie to the market and so my attention is soaked up just trying to navigate the environment. I look for simple price cues because my cognitive load is already high.

Experienced market goers on the other hand are familiar with the environment and so have greater capacity to discriminate between vendors, concentrating on micro rather than macro detail.  As such, these buyers are more likely move between stalls, visiting Grocer A for mangoes and Grocer B for potatoes for example.  

It's pretty clear then that each vendor needs to devise different strategies for new and existing buyers. Where lead items may attract new custom, factors like customer service, stock range and quality become central to retention. The same goes for all types of businesses; online and off.  

Lessons from the market
Next time you visit a market, think of it as an analogy for your business.  How are you enticing new buyers?  Are you making your offer easy to understand?  What's your competitive positioning?  How do you gain commitment on a small scale so that it turns into something bigger?  Take a moment to reflect on the behavioural state your buyer is in - are they new or existing? - and how you guide them through the experience of purchase.  Are they overwhelmed and looking at the macro level or familiar and more discriminating on micro detail?  Most of all, put yourself in the shoes of your buyer and from there you'll be able to shape an effective behavioural strategy.

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Image credit: http://www.rgbstock.com/images/mangoes

Just make a decision will you!!! Overcoming decision quicksand to get the sale

You've been dealing with this customer for what seems like an eternity.  On paper, the decision is an easy one, some might say trivial, and yet they can't seem to make up their mind.  You are going around in circles, with them demanding more and more information and as a consequence, them getting more and more confused.  Oh no!  You are in "decision quicksand"!

When you make something unexpectedly difficult, you get quicksand
In their study "Decision Quicksand: How Trivial Choices Suck Us in" (2012) Aner Sela and Jonah Berger examined why trivial choices suck us in.  In short, the study looked at the association between difficulty and importance and found that if a choice was unexpectedly difficult, then it's perceived importance increased. What had been trivial has now been elevated into a decision worthy of time and effort.  And what better way of churning up time and effort than seeking out more options, sadly taking us further away from being able to make a choice.

Using quicksand in your business
You can use quicksand in two ways in your business.

Strategy 1. Intentionally make it hard
If you want to increase the perceived importance of a choice, make it more difficult.  Provide more options, use complicated language, complex processes and protracted explanations.  In Daniel Kahneman's language, you will be engaging "System 2" thinking which tends to interrupt an otherwise low engagement decision.  Why would you want to?  To force consideration of your product when you are not the preferred incumbent.

A word of warning though, an unimportant decision that is difficult might increase the time involved but it will likely decrease satisfaction.  Makes sense doesn't it?  We end up resenting being stuck on something that we think we should have easily dealt with.  For those who monitor customer satisfaction, it may be worth looking at how your customers perceive difficulty relative to importance because where effort is greater than reward, satisfaction will suffer.

Strategy 2. Simplify
More commonly, you will want to make the decision process for your customer as easy as possible. Fewer options, simple language, easy to follow processes and straight forward explanations.  Here "System 1" thinking will be most likely ruling the roost meaning your customer will be on 'auto pilot' and go with the flow.  Your job of course is to set up the flow!

Getting out of quicksand
So what do you do with the customer is stuck in decision quicksand? Go back to the basics of what they first talked about and why they contacted you. Fight their urge to get more information by concentrating on framing their decision using simple pros and cons.  Something along the lines of...

"Let's go back to when you first walked in.  As I see it you have two choices in what we've talked about, A or A-.  Now A has xyz whereas A- has 123. From what you've described to me, A- is really what you are looking for.  Does that seem right?  OK. That is a great decision, let's sort out (next steps)".

Knowing that decision quicksand can affect us all should help you come to terms with customers who seem to be frustrating you on purpose.  Take the view that they are not being deliberately difficult and instead look at how you set up the decision for them.  After all, you're the choice architect here!

PS Why not join the People Patterns mailing list?  Every month you'll receive a short wrap-up of top news from the behavioural sciences and other nuggets of goodness from me. Click here to sign-up.

(Image from http://www.gsbhealthandsafetysigns.co.uk/danger-quicksand-sign.html)

Special aisle for blokes? Rethinking the shopping behaviours of your market

A great little story grabbed my attention the other day.  A supermarket in New York had set up "Man Isle", an aisle dedicated to the shopping needs and behaviours of men.

According to the Business Insider, Westside Market created the section containing chips, beer, razors, condoms and beef jerky based on two things; more men were shopping and there were common goods that the guys were shopping for.

What can we take from this?

1. Reduce pain points for an under serviced market segment
Structuring their supermarket around the buyer's experience was a great way of reducing pain points and encouraging habituation.  The signifiant pain point? Overwhelming choice. The Man Isle reduces choices to a minimum and positions complementary items (eg beer and chips) together.  The lesson is always to look at your business from your customer's perspective and ensure you make doing business with you as easy as possible.

2. Target a Profitable segment
Westside had researched the trend toward male shopping and determined the segment was worth targeting. This is important - it's only worth customising the experience if you expect to gain a return on your investment through market share, volumes or margin.  Part of the consideration should of course be any impacts on the rest of your market. For instance, if Westside had been very aggressive in its targeting of male shoppers it may have inadvertently disenfranchised female shoppers, so striking a balance in how it catered for different shoppers was vital.

3. Give it a try
The team at Westside created the aisle on the basis of insight, observation and throwing a list of ideas together.  They knew what they liked shopping for, so that was the basis of how they stocked the aisle and they are willing to test and learn on the basis of market response. We can sometimes forget that our own expectations of customer service are a great source of knowledge for how our customers like to be treated - after all, we are all consumers, and that the main thing holding us back from growth is fear of failure.

Westside have differentiated themselves by rethinking how their business can better serve customers.  I hope you can too.

PS Why not join the People Patterns mailing list?  Every month you'll receive a short wrap-up of top news from the behavioural sciences and other nuggets of goodness from me. Click here to sign-up.

(Image from http://www.businessinsider.com/inside-the-man-isle-2012-7?op=1)

Money jars of the mind

Does the money you put aside for bills have the same value as money you spend on fun and entertainment?  Behavioural Economics would say no because we tend to think differently about money depending on its context.  It's called "mental accounting", and whilst it has nothing to do with the mental health of your CPA it is very important to know about if you are running a business.


How ING Direct are using mental accounting
ING Direct in the US have cleverly designed savings accounts that can be split out into mental bank accounts.  ING customers can create as many sub-account buckets as they want and call them by a nickname (for example 'Trip to Australia', 'New car', 'Rainy Day' and so on).  According to the article in The New York Times, ING have introduced the tool to help people reach their savings goals but this is really about good business because in order to acquire funds through personal savings accounts ING (and all banks) have to overcome some behavioural blockers.

ING Direct My Savings Goal

Behavioural blockers
To get us to save more, banks have to overcome our

1. tendency to think short-term (ie I'll buy smaller items now rather than save towards a bigger goal) 
2. laziness (ie it's too hard to save so I won't bother) and
3. 'bunny in the headlights' inertia when overwhelmed by choice (ie I get confused by which bank and which accounts I should have so I'll just stick to what I have)

Behavioural enablers

ING's new savings site overcomes the behavioural blockers by using the following techniques;

• Vividness - we are more likely to act if we can readily comprehend the outcome.  By graphically representing the savings goal and allowing the customer to use personal and meaningful descriptors for the sub-accounts, ING are helping make the savings goals come alive.  Just think how much more likely you are to save towards "ski trip $2000", "emergency fund $500" and "new car $25,000" than leaving it all lumped into a generic account.
• Hedonic framing - we get a bigger buzz out of separate gains than a single one of equal value.  By splitting the accounts into specific goals, ING is improving the customer's willingness to save because there is simply more opportunity to attain success.
• Hyperbolic discounting - our impatience means we tend to like gains that we get now more than waiting for larger gains later.  This means we risk whittling away at smaller balances rather than building towards the larger target that might feel too far away. By breaking the goals into specific accounts, we can concentrate on a mix of shorter and longer term objectives and control our impatience without jeopardising the collective savings target. 

Business applications of mental accounting

There is an opportunity for every business to map out the 'mental accounting' that applies to their industry in order to look for behavioural blockers and enablers.  In short, it's about making the purchase decision easy for your customer.  Your customer will more readily spend money with you if they feel comfortable about justifying it to the bank manager in their head, so using the same principles that ING are using to motivate spending rather than saving, consider making the benefits of purchase to the customer vivid, encourage payment by credit rather than cash because it separates the pain of cost from the joy of purchase and if your product or service delivers a longer term payoff, bring some of the benefits forward to ensure the customer gets gains in the shorter term.

Images
ING from http://www.mybanktracker.com/bank-news/2012/05/17/ing-direct-tool-helps-set-savings-goals/
Money jar from http://totalwealthcoaching.com/wp/wp-content/uploads/2009/03/moneyjars1.jpg