of 22 /22
Why We Buy: The Science of Shopping CEO’s Should Know the Percentage of Shoppers Who Actually Buy Something In Their Stores1 When I asked how many of the people who walk into his stores buy something, his answer was: all of them, pretty damn near. And when I say it was his answer, I mean it was also the answer of the huge, PC-networked, data-chewing, number- crunching, cipher-loving organization at his command. Everybody there agreed: What we call the conversion rate-the percentage of shoppers who become buyers-was around 100 percent. After all, this corporation reasoned, their outlets were destination stores, so people didn't go there unless they had some very specific purchase in mind. Hence, they believed, the only time shoppers didn't buy was when their selection was out of stock. In fact, the very concept of conversion rate, implying as it does that shoppers need to be somehow transformed:-" converted" -into buyers, was alien to this man and this corporation (as it still is to many other successful companies and executives). I was asking the question because we had just performed a large-scale study of this chain's stores~ And I knew the conversion rate, based on 1 Page 38

Why We Buy

Embed Size (px)


Notes from the book why we buy the science of shopping

Text of Why We Buy

Why We Buy: The Science of Shopping

CEOs Should Know the Percentage of Shoppers Who Actually Buy Something In Their Stores[footnoteRef:1] [1: Page 38]

When I asked how many of the people who walk into his stores buy something, his answer was: all of them, pretty damn near. And when I say it was his answer, I mean it was also the answer of the huge, PC-networked, data-chewing, number-crunching, cipher-loving organization at his command. Everybody there agreed: What we call the conversion rate-the percentage of shoppers who become buyers-was around 100 percent. After all, this corporation reasoned, their outlets were destination stores, so people didn't go there unless they had some very specific purchase in mind. Hence, they believed, the only time shoppers didn't buy was when their selection was out of stock. In fact, the very concept of conversion rate, implying as it does that shoppers need to be somehow transformed:-" converted" -into buyers, was alien to this man and this corporation (as it still is to many other successful companies and executives). I was asking the question because we had just performed a large-scale study of this chain's stores~ And I knew the conversion rate, based on our having spent hundreds of hours counting, among other things, the number of shoppers who entered and the number who made purchases. It was a very good conversion rate for stores of this kind. But it was about, half of what this man thought it was. To be precise, 48 percent of shoppers bought something.

Conversion Rate[footnoteRef:2] [2: Page 40]

Conversion rate measures what you make of what you have-it shows how well (or how poorly) the entire enterprise is functioning where it counts most: in the store. Conversion rate is to retail what batting average is to baseball- without knowing it, you can say that somebody had a hundred hits last season, but you don't know whether he had three hundred at-bats or a thousand. Without conversion rate, you don't know if you're Mickey Mantle or Mickey Mouse.

There Is a Direct Relationship Between Time Spent In A Store And Actually Buying Something[footnoteRef:3] [3: Page 41]

Now, the amount of minutes a shopper spends in a store (assuming he or she is shopping, not waiting in a line) is again an important factor in determining how much she or he will buy. Over and over again, our studies have shown a direct relationship between these numbers.

Interception Rate[footnoteRef:4] [4: Page 42]

Here's another good way to judge a store: by its interception rate, meaning the percentage of customers who have some contact with 'an employee: This is especially crucial today, !when many businesses are cutting overhead by using fewer workers, fewer full-timers and more' minimum-wagers. All our research shows this direct relationship: The more shopper-employee contacts that take place, the greater the average sale. Talking with an employee has a way of drawing a customer in closer.

Know Who Your Consumers Are From An Ethnic Perspective[footnoteRef:5] [5: Page 44]

The issue of retailers not knowing who shops in their stores comes up all the time. A newsstand in Greeley Square here in New York wanted to increase sales and planned to do so by expanding the space devoted to magazines. We pointed out that a large percentage of his customers was either Korean-:-the square borders on a large Korean enclave-or Hispanic. Stock Korean-language magazines (Korean papers already sold well) and soft drinks popular in the Latino market, we advised, and when they did, sales rose immediately. This related issue comes up all the time in New York, Los Angeles and other big cities: foreign shoppers in need of a break from stores and restaurants. Almost no accommodation is made for Asian shoppers, despite their numbers and tendency to spend a lot of money on luxury goods. But there are no sizing conversion charts, no currency exchange rates posted, not even a little sign or two in Japanese or Korean telling shoppers which credit cards are accepted. Smart retailers would reward employees who learned a little Japanese, German, French or Spanish even just a handful of phrases would make a difference, as anyone who has shopped in a foreign country would realize. Restaurants should have menus in Japanese and German on hand.

60% Of What We Buy wasnt On Our Shopping List[footnoteRef:6] [6: Page 54]

Remember that more than 60 percent of what we buy wasn't on our list. And no, this isn't the same as an impulse purchase. It's triggered by something proposing the question "Don't you need this? If not now, then maybe in the near future?"

Give People A Way To Carry More Merchandise Easier[footnoteRef:7] [7: Page 56]

The president and I spent about an hour walking through the Milan Spar. As I silly, I liked the place a lot. It had great vegetables, a juicing operation and a small bakery. Problem was, all of the baskets were clustered by the front door: He asked me what the store could do to increase performance. "Watch me," I said. I grabbed three baskets and moved through the store. Each time I found someone with their arms full, I offered them a basket along with a nice smile. No one turned me down.

Where You Should Place Shopping Baskets In Your Store[footnoteRef:8] [8: Page 57]

The lesson seems clear: Baskets should be scattered throughout the store, wherever shoppers might need them. In fact, if all the stacks of. Baskets in' America were simply moved from the front of the store to the rear they would be instantly more effective, since many shoppers don't ( begin seriously considering merchandise until they've browsed a bit of it. The stack should be no lower than five feet tall, to make sure the baskets are visible to all, yes, but also to ensure that no shopper need bend down to get one, since shoppers hate bending, especially when their hands are full. A good, simple test on placement is that if you have to keep restocking a pile of baskets through the day, it's probably in a good place.

Old Navy Tote Bag Example[footnoteRef:9] [9: Page 58]

I take visiting retailers there-it's one of the liveliest, most energetic shopping experiences in the city. As soon as you step inside there's a gregarious, smiling employee greeting you and proffering a black mesh tote bag to carry your purchases. The bags are cheaper, lighter and easier to store than plastic baskets, and they look a whole lot better, too. In fact, when you bring yours to the checkout, the cashier will ask if you want to buy the bag, and a fair number of people say yes, adding one final sale at the last possible moment.

People Have Right Leaning Way if Walking Through The World[footnoteRef:10] [10: Page 79]

This right-leaning bias is a profound truth about how most humans make their way through the world, and it has applications everywhere, in all walks of life. It took us a while to see this pattern, and ever since we've collected data that bears it out (though not in Japan, apparently).

People Tend To Reach And Walk In to The Right Of Things[footnoteRef:11] [11: Page 80]

Shoppers' not only walk .right, they reach right, too, most of them being right-handed. Imagine standing at a shelf, facing it-it's easiest to grab items to the right of where you stand, rather than reaching your arm across your body to the left. In fact, as you reach, your hand may inadvertently brush a product to the right of the one you're reaching for. So if a store wishes to place something into the hand of a shopper, it should be displayed just slightly to the right of where he or she will be standing.

Stores Leave Milk in the Back of the Store In Order To Force People to Walk Through the Entire Store[footnoteRef:12] [12: Page 85]

There's one aspect of how shoppers move that most people are familiar with the quest to get us all the .way to the back of a store. Everyone knows why supermarket dairy cases are usually against the back wall: Because almost every shopper needs milk, and so they'll pass through (and shop) much more of the store on the way to and from the rear.

Woman Shopping Statistics[footnoteRef:13] [13: Page 109]

Woman shopping with a female companion: 8 minutes, 15 secondsWoman with children: 7 minutes, 19 secondsWoman alone: 5 minutes, 2 seconds,Woman with man: 4 minutes, 41 seconds

Occupy The Man Accompanying a Women[footnoteRef:14] [14: Page 109]

In each case, what's happening seems dear: When two women shop together, they talk, advise, suggest and consult to their hearts' content,. hence the long time in the store; with the kids, she's partly consumed with herding them along and keeping. Them entertained; alone, she makes efficient use of her time. But with him-well, he makes it plain that he's bored and antsy and liable at any moment to go off and sit in the car and listen to the radio or stand outside and watch girls. So the woman's comfort level plummets when he's by her side; she spends the entire trip feeling anxious and rushed. If he can somehow be occupied, though, she'll be a happier, more relaxed shopper. And she'll spend more, both time and money. There are two main strategies for coping with the presence of men in places where serious shopping is being done. The first one is passive restraint, which is not to say handcuffs. Stores that sell mainly to women should all be figuring out some way to engage the interest of men. If I owned Chico's or Victoria's Secret, I'd have a place where a woman could check her husband like a coat. There already exists a traditional space where men have always felt comfortable waiting around-it's called the barbershop. Instead of some ratty old chairs and back issues of Playboy and Boxing illustrated, maybe there could be comfortable seats facing a big-screen TV tuned to ESPN, or the cable channel that runs the bass-fishing program. Even something that simple would go a long way toward reliving wifely anxiety, but it's possible to imagine more: Sports illustrated in-store programming, for instance-a documentary on the making of the swimsuit issue, 'perhaps-or highlights of last weekend's NFL action.

In 2007 Only 3% Of Coupons Where Used[footnoteRef:15] [15: Page 122]

Gone: Whoosh! In 2007, less than 3 percent of all manufacturers'Coupons distributed via newspapers, magazines or in the mail were ever redeemed (in response, the coupon industry is making a valiant attempt to move the coupon distribution business online).

What Shoppers Love[footnoteRef:16] [16: Page 168&169]

Amid so much science, we discover in the end its love that makes the world of retailing go round. What do shoppers love? A few important things, we've learned, such as:

TOUCH. We live in a tactile-deprived society, and shopping is one of our few chances to freely experience the material world firsthand. Almost all unplanned buying is a result of touching, hearing, smelling or tasting something on the premises of a store-which is why merchandising is more powerful than marketing, and why the Internet, catalogs and home shopping on TV will prosper and complement, but never seriously challenge, real live stores.

MIRRORS. Stand and watch what happens at any reflective surface:We preen like chimps, men and women alike. Self-interest is a basic part of our species. From shopping to cosmetic surgery, we care about how we look. As we've said, mirrors slow shoppers in their tracks, a very good thing for whatever merchandise happens to be in the vicinity. But even around wearable items such as clothing, jewelry and cosmetics, where mirrors are crucial sales tools, stores fail to provide enough of them.

DISCOVERY. There's little more satisfying than walking into a store, picking up the (metaphorical) scent of something we've been hunting for and then tracking it to its lair. Too much signage and pointof- purchase display takes all the adventure out of a shopping trip; stores shouldn't be willfully confusing or obscure, but they should seduce shoppers through the aisles with suggestions and hints of what's to come. The aroma of warm bread can be enough to lead supermarket shoppers. To the bakery aisle; a big, beautiful photograph of a James Bondian stud in a creamy dinner jacket carries more levels of information than the clearest FORMALWEAR sign can ever convey.

TALKING. Stores attract lots of couples, friends or groups of shoppers usually do very well. If you can create an atmosphere that fosters discussion of an outfit, say, or a particular cell phone, the merchandise begins to sell itself.

RECOGNITION. In that old TV shows Cheers, the theme song went, "you want to go where everybody knows your name." This is a battlefield where the small, locally owned store can still best the national chains, and smart stores make the most of this advantage. Given a choice, people will shop where they feel wanted, and they'll even pay a lime more for the privilege. Even the smallest stores can build customer loyalty just by keeping track of what people buy and giving price breaks when appropriate. Our studies show that any contact initiated by a store employee-and I mean even a hello-increases the likelihood that a shopper will buy something. If the salesperson suggests a few things or offers information, the chances rise even higher. Of course, shoppers don't love pushy salespeople, so there's a line here.

BARGAINS. This seems obvious, bt1t it goes beyond simply cutting prices. At Victoria's Secret, for example, underwear is frequently piled on a table and marked five pairs for $20, which sounds like a much better deal than the $5 a pair normally charged. At even the poshest stores, the clearance racks get shopped avidly. Still, while shoppers expect a certain amount of elbow-to-elbow crowding around the discount table, they won't bite if the physical discomfort becomes too noticeable. They'll extricate a blouse from a jammed sale rack, for example, but if there's no room to back up and examine it as /closely as the full-price merchandise, they won't buy.

What Shoppers Hate[footnoteRef:17] [17: 169&170]

TOO MANY MIRRORS. A store shouldn't feel like a funhouse. At a certain point, all that glass becomes disorienting.

LINES. Not only do they hate to wait, they also hate to feel negative emotions while they do it-like frustration at watching inefficiency, or anxiety wondering if they're in the fastest line, or boredom because there's nothing, for them to .read, watch or shop while they wait. The memory of a good shopping trip can be wiped out by a bad experience in the checkout line.

ASKING DUMB QUESTIONS. New products especially should be out where shoppers can examine them, not behind glass. And there should be enough signs, brochures, instructional videos, newspaper articles, talking displays and whatever else is necessary for browsers to bring themselves up to speed before they ask a question. When stores work at making new or complicated products accessible, sales always increase.

DIPPING. Or bending, either, especially when their hands are full. If it's a challenge to reach down and pick up merchandise, shoppers will pass, figuring that another store will make the acquisition easier.

GOODS OUT OF STOCK. Self-explanatory.


INTIMIDATING SERVICE. Also rude service, slow service, uninformed service, unintelligent service, distracted service, languid service, lazy service, surly service. Probably the single best word of mouth for a store is this: "They're so nice down at that shop!" When service is lousy, shoppers will find another store; bad service undes good merchandise, prices and location almost every time. Regardless of how practical an activity shopping seems to be, feelings always come first, and good is always better than bad.

90% Percent Of All New Supermarkets Products Fail[footnoteRef:18] [18: Page 173]

Close to 90 percent of all new grocery products fail, but it isn't because people didn't like them-it's because people never tried them. In my opinion, a new product introduction that doesn't include a well-funded fully supported (with marketing) effort to give shoppers samples is not a serious attempt.

People Loose A Sense Of After Waiting More Than 90 Seconds In Line[footnoteRef:19] [19: Page 202]

We've interviewed lots of shoppers on the subject and have found this interesting result: When people wait up to about a minute and a half, their sense of how much time has elapsed is fairly accurate. Anything over ninety or so seconds, however, and their sense of time distorts-if you ask how long they've been waiting, their honest answer will usually be a very exaggerated one. If they've waited two minutes, they'll say it's been three or four. In the shopper's mind, the waiting period goes from being a transitional pause in a larger process (purchasing goods, say) to being a full-fledged activity of its own

When Consumer Are In A Line Try To Distract Them[footnoteRef:20] [20: Page 205]

Diversion: Almost anything will suffice. One bank we studied used a TV tuned to soap operas to entertain the line-a bad idea, we thought, because to enjoy a soap you need to see the entire half hour. A much better solution was used by another bank, in California, where a big screen TV played old Keystone Kops shorts during the afternoon, when most customers were retirees. Everybody's considering video systems these days, but some low-tech entertainments work just as well. Many food stores serve free samples, a good time-killer that promotes new products. Positioning racks of impulse items so they can be shopped from the cashier line is smart merchandising, but it's also good time bending. Also keep in mind that the first person in line doesn't require much diversion-he or she is in the on-deck circle, just waiting for the sign that they're up. Merchandising materials, signage, shoppable racks and anything else should be positioned for the second person in line and back.

Good Example On How To Market Something[footnoteRef:21] [21: Page 220]

Here's a good example of the terrible magic that smart merchandising can perform. I once heard a talk given by the vice president of merchandising from a national chain of young women's clothing stores in which she deconstructed a particular display of T-shirts. "We buy them in Sri Lanka for three dollars each," she began. "Then we bring them over here and se,,: in washing instructions in French and English-French on the front, English on the back. Notice we don't say the shirts are made in France. But you can infer that if you like. Then we merchandise the hell out of them-we fold them just right on a tasteful tabletop display, and on the wall behind it we hang a huge, gorgeous photograph of a beautiful woman in an exotic locale wearing the shirt. We shoot it so it looks like a million bucks. Then we call it an Expedition T-shirt, and we sell it for thirty-seven dollars. And we sell a lot of them, too." It was the most depressing valuable lesson I've ever had.

Activated Fixtures Receive A lot More Attention Than Non-activated Ones[footnoteRef:22] [22: Page 222]

Endcaps and freestanding displays are staples of American retailing. Some of them succeed and some fail, depending on how they work once they are placed in the store. As with signs, you can't say which are good and which are not until you see them in action. The latest trend in displays is the so-called activated fixture-one that uses movement, especially moving lights, to get the attention of shoppers. Our testing of types of fixtures has yielded some impressive results: In soft drink coolers, the activated version was noticed by 48 percent of shoppers, compared to 6 percent for the nonactivated one.

An Example Of How To Attract Customers[footnoteRef:23] [23: Page 224]

Here's a final tale. A big-name soft drink maker had just spent a lot of money a new supermarket displays and hired us to test the prototype. When I arrived at a supermarket with the client, we looked in through a window and saw a giant pile .of soda cases just sitting on the floor-a huge, bright, monochromatic mountain of pop. "I wander why they left it there like that," she said. "It sure looks like a mess." Before she could arrange to have the sodas stocked properly, I asked if we could just videotape it as it was for a day. By our measure, 60 percent of the people who passed that mountain noticed it, a higher rate than much of the firm's in-store merchandising materials ever scored. Clearly, that big mass of color was all that was required to stop shoppers in their tracks. There's a lesson in there somewhere.

Public Spaces Count As Much As Merchandise In Stores[footnoteRef:24] [24: Page 279]

Public spaces, seating, bathrooms and parking lots outside your doors are just as critical to sales as pricing and visual merchandising.

Store Managers Should Related To The Genders that They Are Selling To[footnoteRef:25] [25: Page 284]

I told a largely male executive group at Wal-Mart that I could tell the gender of the manager in any of their stores based solely on how recently the women's dressing room had been painted. I don't know if I am responsible, but a few months later, I noticed that lots of Wal-Mart dressing rooms had gotten spiffy new paint jobs. Male managers hate the soft goods sections, because like cosmetics, they eat up labor costs and are more likely to have theft problems, whereas hard goods such as TV sand minifridges are easier to get onto the shelf and ate much easier to keep track of. Women by nature have a better understanding of how soft goods work and what they can do for the business. Ten years after I made my dressing room comment, Wal-Mart still has an underdeveloped clothing business. One simple way of improving it would be to increase the number of female store managers.