Sunday, 3 November 2013

Conditioning the customer (Part 2)

Hello readers, I regret not being able to post any articles last week. I took a long deserved vacation and was at the beach with my wife and a bosom friend’s family at the time I always blog. I enjoin you to find some time to relax from your busy schedules once every while and spend it with your most loved ones too.


I concluded the last post with a promise to discuss ways of conditioning the customer, who already has a desire to do business with us, to actually follow through. In business, people employ different strategies to urge their customers into action. Sales, coupons, premiums, installment plans and after sales services are some of the strategies regularly used. But, I favour approaches that don’t put any dent whatsoever into the business bottom line. In consumer psychology, they refer to such subtle inducement approaches that have no financial consequence to the business as NUDGES. A true nudge disguises itself so well that the customer feels the decision to buy or close a deal is entirely his; while in actual fact the decision was anything but that. For instance, if you walk into a consumer-psychology compliant store, the same shelf may hold all the shampoo products but only the premium brands will be at your eye level, the cheaper (and less lucrative) varieties will be at your knee level; the store owner is seeking to subconsciously nudge you to buy the expensive one. Why do you think, toys are mostly on the ground or at your knee level? It is because that is the eye level of your babies, who will keep pestering you till you get one for them.

Below are three more nudges.

Limited edition effect
Have you ever thought about the psychology behind limited edition products? Do you wonder whether the manufacturers made only three pieces of the product for some very special people? Or was it two hundred thousand pieces they fabricated before decommissioning the assembly lines? I sometimes do too. And though I may never get the answers, I always allow myself to be conned into thinking that coming across such products is once in a lifetime opportunity. Shrewd businesspeople know how to employ this kind of effect in getting dilly-dallying customers to commit.
Let us use the example from the last post of a shopper who comes into the store looking for a Tommy Hilfiger T-shirt. Imagine that when he walks up to the rack, he finds that the price is a teeny-weeny higher than he anticipated. If there are ten of the T-shirts hanging on the rack, he might consider putting off his purchase till some later period. But if only one T-shirt is on the rack, the fear of losing it to another keen buyer is likely to make him move around some items in his budget, to immediately buy it. It’s the same with a headmistress who declares that she does not want to promise any enrollment slots for your child because she does not want to be put on the spot, especially when the school is nearing its quota.

Payment time frame
Behavioural economists like to talk about this nudging approach advocated by John Gourville. Simply put, this marketing approach convinces you that if you could afford A then you could afford B; where B is an expensive product purchased monthly/annually while A is a cheap product you buy daily. As an example, think of an entrepreneur persuading a group of women who are challenging the high membership fees to register at his gym. If he counters by saying, “If you can spend N70 on a Coke bottle every day, then a N25,000 annual membership fee (which comes to N68.50 a day) is not a bad investment for your health”, he would be presenting a strong case for registering with him. By comparing the cost of something cheap like a Coke bottle which they buy daily to the pro-rata cost of the annual membership he can nudged the dawdling prospects into becoming customers.

Card payment

Finally, one investment you need to make especially if you own a store is installing a POS machine (point of sale). By installing a POS, you not only guarantee security of your funds and convenience for your customers, you actually lower customer’s inhibition to part with their money. It has been demonstrated that paying for goods with a card makes people to spend more. Compared to cash payment, using the card makes for a weaker memory of past expenses and also eliminates the guilt trip that customers feel when they see the cash in their wallets dwindling. Just make sure that they have good value for their money else this approach can come back to bite you on the bum.

Thanks for reading and see you next week D.V.

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