delay their purchase until it goes on sale the approach is not as advantageous as it is for products that are unique.
The comparison is best made between common clothing purchases versus branded fashion items. Zheng added “my conjecture would be that for trendier items, there is a time value of wearing them, so they are more valuable at the beginning of the summer season versus at the end, for example.” You may get the item cheaper in late summer but will miss much of the trend setting feeling derived by wearing it for the entire season. Some brands have a strong influence on a consumer’s moti- vation to pay full price for their merchandise. Daniel Doiron from the University of New Brunswick studied the lure of Zara which is one merchandiser he feels has a special attrac- tion. In his Harvard Business Review case study he found restricting the supply chain gave Zara their magic. Doiron reported they can produce small production runs, place product in retailers, and lifecycle styles much more quickly than others. Doiron noted “scarcity is a big part of how they influence consumer behavior…there’s always something new, and clothes are never stacked too high.” Zara is effective at targeting brand aware buyers into emotional purchases at full price. Their loyal consumers worry that scarcity of popular items increases the chance the goods will not be available when markdown sales take place. Zara capitalizes on this regret avoidance behavior by having far fewer sales. Doiron added “They mark down only about 15 percent of their clothes…that’s the key in this industry.” The inventory scarcity strategy is working. Their most recent reports on sales and profits show con- tinued growth is a market plagued with challenges. There is a way shoppers can protect themselves from the other typeof regret. If youfindyourself full of regret because you over paid for a non-urgent purchase it is probably because you did not check the cost first. This study discov- ered people who scrutinize the item first and the price later make bad decisions. These shoppers become focused on their desire to own the item. People who view the cost first more closely scrutinize the object’s overall worth accord- ing to Harvard Business School marketing professor Uma Karmarkar, a co-author on the research. Karmarkar added “seeing the price first can attune you more tightly to the value of a purchase.” she said. “And if you consider value more strongly, you might realize the item won’t fill the right space or be truly useful for you.” She offered a conclusion that price recognition leads to pragmatic thinking in almost all cases especially when consumers are unsure of the purchase. However, for those determined to own the item checking the price first does very little to control overspending.
By James Barrie W here would you rather shop: a store with high prices and occasional sales or a retailer where prices are consistently low? Do you like to score that one time only markdown at an expensive boutique or get regular savings at a store that discounts all the time? If you chose the latter, the results of a new research paper published by experts at the University of Texas and the Massachusetts Institute of Technology may surprise you. Their findings suggest that businesses with sporadic markdown sales do much better than value retailers. The study found we all carry regret about “missing out” on a deal. Researchers noted two specific types of regret. Karen Zheng of MIT reported the first type of regret was observed in people who purchased an item at one price and saw it for sale at a lower price shortly afterwards. Zheng said “the other regret is if you don’t buy it and come back to find your size is gone.” She explains her findings by saying “you will wish you had gotten it in the first place and it turns out people tend to believe certain products will be sold faster or sooner than they actually are.” The notion that supply will disappear is so powerful that shoppers become anxious and opt to pay the higher price to ensure they get what they want. This impulse driven worry increases profits for marketers by nearly 10 percent. The study found this strategy is more easily applied to items where the need is not immediate. If shoppers can
Score one for the merchandisers on maximizing sales from impulse shoppers.
46
SPOTLIGHT ON BUSINESS • JULY 2016
Made with FlippingBook Online newsletter