BEHAVIORAL ECONOMICS 10 FOUNDATIONS EVERY RETAILER BEHAVIORAL ECONOMICS ... WHATS YOUR STORY? THE FIVE

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  • BEHAVIORAL ECONOMICS – 10 FOUNDATIONS EVERY

    RETAILER SHOULD KNOW.

    This Photo by Unknown Author is licensed under CC BY-SA-NC

    http://www.karmanews.it/8928/uno-centomila-e-oltre/ https://creativecommons.org/licenses/by-nc-sa/3.0/ https://creativecommons.org/licenses/by-nc-sa/3.0/ https://creativecommons.org/licenses/by-nc-sa/3.0/ https://creativecommons.org/licenses/by-nc-sa/3.0/ https://creativecommons.org/licenses/by-nc-sa/3.0/

  • WHAT IS BEHAVIORAL ECONOMICS?

    This Photo by Unknown Author is licensed under CC BY- SA

    This Photo by Unknown Author is licensed under CC BY

    https://fr.wikipedia.org/wiki/Alan_Greenspan https://creativecommons.org/licenses/by-sa/3.0/ https://creativecommons.org/licenses/by-sa/3.0/ https://creativecommons.org/licenses/by-sa/3.0/ http://zotoz.blogspot.com/2013/04/psychology-of-forex-trading.html https://creativecommons.org/licenses/by/3.0/

  • Not Your average consumer….Even if they think they are.

  • 11 MILLION BPS VS 40 BPS

  • $16 $1

  • $986 $971

  • WHAT IS THE DIFFERENCE?

    • Spatula A = $16

    • Spatula B = $1

    •Difference of $15

    • Television A = $986

    • Television B = $971

    •Difference of $15

  • FOUNDATION # 1

    RELATIVITY

    • Relativity is about value.

    • Our brains are constantly making comparisons.

    • However they are not always logical….

  • HOW DOES THIS APPLY TO RETAIL?

    This is called Framing.

  • DON’T GET RID OF THE DECOY!

  • MORE RELATIVITY AND FRAMING.

  • RELATIVITY AND THE INTERNET…

    • Price Referencing.

    • This is why MAP is so important.

    • Spatula vs. Dress example.

    • We compare the relative advantage of local product vs. the alternative.

    - This is why stock is so important, touching leads to perceived ownership (Later today).

  • TIME FOR ACTIVE PARTICIPATION

  • FOUNDATION # 2

    ANCHORING & ADJUSTMENT

    • When your subconscious brain doesn’t know the answer to something it takes a guess.

    • An anchor # gives the brain a shortcut to something it doesn’t know a lot about.

    • This is a form of priming (more on this later.)

    • More Examples:

    • Are there more or less than 10,000 Emperor Penguins in Anarctica? How many do you think?

    • 595,000

    • Are there more or less than 10 species of Octopus?

    • Over 300

  • HOW DOES THIS APPLY TO RETAIL?

    • Example:

    • (A) - Buy 18 great to keep in your freezer for a later date.

    • (B) - Buy them and keep in your freezer for a later date.

    • Option (A) sold 38% more than option (B)

  • ANCHORS ARE POWERFUL!

    Be careful of setting them too low!!

  • WOULD THESE HAVE BEEN BETTER?

    • Lift chair sale 20% off

    • All lift chairs under $2,500

    • Large selection of models

    • Chairs and prices to fit everyone.

  • WHAT ARE YOU ANCHORING TO?

  • WHAT ARE YOU ANCHORING TO?

    • Knee Walker Package

    • Elevating Leg Wedge

    • Cup Holder

    • Basket

    • Fleece Pad Cover

    • Easier to remove than add items.

    • This triggers Loss aversion (later today).

  • FOUNDATION # 3

    FREE IS GREATER THAN ZERO

    • Marketers have tried to avoid the word “Free” as of late because they believe consumers have become immune to it.

    • However, Free still holds a lot more power than “Zero Cost”.

  • EXAMPLE: TRUFFLES VS. KISSES

    Lindor Truffle Hershey Kisses

  • EXAMPLE: TRUFFLES VS. KISSES

    Experiment # 1

    • 1 Truffle = $.16

    • 1 Kisses = $.01

    • Outcome

    • 73% Truffle

    • 27% Kisses

    Experiment # 2

    • 1 Truffle = $.15

    • 1 Kisses = Free

    • Outcome

    • 69% Kiss

    • 31% Truffle

  • HOW CAN THIS CONCEPT BENEFIT YOU?

    What can you offer for free that will close a sale?

    • Free delivery?

    • Free Scooter cover?

    • Free accessory on all mobility?

    • Free Samples for Incontinence ?

    • Free swag? (luggage tags, Key rings, koozies)

    What are you already offering for free, but not listing as free?

    • Free break adjustment on rollators?

    • Free battery testing on mobility?

    • Free assessment on all scooters and lift chairs?

    • What Else.

  • FOUNDATION # 4

    PERCEIVED OWNERSHIP

  • PEOPLE HOLD A HIGHER VALUE ON THEIR

    STUFF VS OTHER STUFF.

  • SO HOW CAN THIS BIAS FOR THINGS PEOPLE

    ALREADY OWN BE USED TO YOUR BENEFIT?

    WELL THE TRUTH IS PEOPLE ONLY HAVE TO

    PERCEIVE OWNERSHIP FOR THIS TO WORK.

  • WHERE IS THIS ALREADY BEING USED IN

    OTHER INDUSTRIES?

  • WHERE ELSE?

  • SO WHERE DOES PERCEIVED OWNERSHIP

    APPLY TO RETAIL DME?

    What Else?

  • PERCEIVED OWNERSHIP

    • This is why having a chair in Brisa is important

    • Different size models.

    • Different size scooters

    • Handing out Incontinence samples

    • Having Stander Displays in your store.

    • Allow the Customer to take ownership of the product in their mind.

  • WHAT COMES TO MIND WHEN I SAY SHARK?

  • HOW ABOUT THE WORD COW?

  • AVAILABLE INFORMATION IN THE BRAIN MAY HAVE

    YOU BELIEVE ONE THING ABOUT COWS AND

    SHARKS, HOWEVER…..

    • On average cows kill 22 people a year in the United States.

    • Sharks however kill less than 1 person a year on average.

  • FOUNDATION # 5

    AVAILABILITY

    • Availability in essence in what comes to mind the easiest from information you have already received, regardless if that information is correct.

  • AVAILABILITY

    • When the brain is posed with a question it doesn’t exactly know the answer to, it swaps the question for one it knows more readily…..pretty lazy really.

    • Example: 24 x 86 =??

    • Your brain may say, 24 x 100 = 2400 so maybe 2200.

    • The brain also values personal experiences and stories over statistics.

    • Keep this is mind when you are updating your social media page and your web page.

    • Let customers know about all of those happy customers you have helped. Post all of those positive experiences. These will help people to connect to your company and have more readily available positive thoughts about what it is you do.

  • MORE EXAMPLES OF AVAILABILITY AT WORK

    In 2014 Norway saw 10 times as many tourists as the year prior. Why

    In 1997 Mars Bars Sells jumped unexpectedly. Can you guess why?

  • SO WHAT ARE SOME LOCAL EVENTS YOU CAN TRY

    TO ATTACH YOURSELF TOO TO BOOST

    AVAILABILITY?

    What Else?

  • WHAT ARE SOME EXAMPLES OF

    AVAILABILITY IN THE HME/DME WORLD?

  • FOUNDATION # 6

    SCARCITY

  • MORE EXAMPLES OF SCARCITY

  • MORE EXAMPLES OF SCARCITY

    • William Shatner’s Kidney Stone

    Sold for $75,000 on ebay.

    British Guiana Stamp

    Sold for $11,500,000 at auction.

    - Scarcity is tied to value

    - Scarcity also ties into loss aversion (Later today.)

    - Wrist watch ad study.

  • YOU CAN EVEN APPLY THE CONCEPT OF

    AVAILABILITY TO SCARCITY. HUH?

    @therealPSL

    By using social media Starbucks has increased the availability of the PSL to potential customers.

  • HOW CAN YOU USE SCARCITY TO GROW

    YOUR BUSINESS?

    • This week only buy a scooter and get a free cover and cell phone holder!!

    • Buy a rollator with a cane holder and ge 50% off of in stock canes!!

    • Buy a floor model lift chair and get $50.00 store credit.

    • This month only bring in your mobility device for free repairs (doesn’t include parts)!!

    • What else could you do???

  • FOUNDATION # 7

    DEFAULT

  • DEFAULTS

    • Every choice has a default, usually it is to do nothing.

    • This is called Status Quo bias.

    • When faced with a decision several people choose to go with doing nothing.

    • In business when you are presenting options it is CRITICAL that you consider what is the default, and what will be more likely to be chosen.

    • This default option can be persuaded through herding.

  • PEOPLE LIKE IT WHEN THEY CHOOSE

    POPULAR THINGS.

  • SO WHAT ARE SOME DEFAULTS YOU USE, OR

    COULD USE IN A DME?

  • NUDGE YOUR CUSTOMER INTO THE RIGHT

    DIRECTION.

    • Your default product or suite of produ