The Crowds of Black Friday

2009 has been another rough year for the retail sector, as it continues to be battered by rising unemployment, pessimistic consumers, and newly thrifty shoppers. As Black Friday, the traditional start of the holiday shopping season approaches, retail observers are placing their bets. Will customers continue to sit on their wallets, refusing to budge until they see massive discounts? Or will they capitulate in a Christmas shopping frenzy as retailers try to hold the line on prices?

One thing is certain: come Friday, stores will be mobbed as about a quarter of American households shake off their tryptophan-induced stupor and hit the stores (latest one-upsmanship schtick: Old Navy stores will open at 3 a.m., maybe because you can never know the extent of the pent-up demand for cargo pants at that hour of the morning). Last year, Black Friday was marred by a tragic death when a Wal-Mart worker was trampled by an out-of-control bargain-seeking horde. This year, writes the New York Times, stores are taking steps to better manage crowds. The Times reports that Wal-Mart is taking a page from experts who manage throngs at major events like the Super Bowl and the Olympics to prevent crowding. There’s a poetic irony in the fact that as consumers are purportedly pinching pennies, they literally can’t storm the stores fast enough.

Time reports that this year, retailers and shoppers are engaged in a game of chicken as shoppers wait for discounts and retailers try to dig in their heels. But do you think this game of double-dare is the new normal? From now on, might the contest go something like this:

Phase 1: people sit at home on their hands, stubbornly refusing to consume.
Phase 2: retailers put deals and discounts lower and lower and until they finally hit the "magic” percentage off number;
Phase 3: floodgates open; aisles full; cash registers sing; everybody happy; life is good.
Phase 4: retailers quickly repeal the dramatic offers because—oops—they’re too costly.
Phase 5: consumers go back to being unhappy—give retailers the cold shoulder and sit at home, waiting them out until the next time.
Phase 6: see Phase 2.

Agape in the aisle

It all became clear in an interview a few years back with a man named Sherwood Schwartz, the television producer who created the dubious passel of 1970s-era comedy shows like Gilligan’s Island, Beverly Hillbillies, and the Brady Bunch, among others. The interviewer asked him to explain why every one of his shows always began with an expository theme song---a song that would explain in vivid detail the premise of the show (“So this is the tale of the castaways….” and “Come and listen to my story ‘bout a man named Jed….” and “Here’s the story of a lovely lady…”). Schwartz said he believed this was the essential week-in-and-week-out ingredient to the success of his television comedies because, as he put it, “the puzzled cannot laugh.”

Cut to the aisle of your local supermarket. We use video systems to capture and code shopper styles and behaviors in retail stores. This lets us see thousands of repeated behaviors, many of them eye-opening to ourselves and our clients. But whether the study is about diapers, dog food or analgesics, we too often see a hidden segment of shoppers perhaps best described as “the puzzled.” These shoppers stand perfectly still. They stare at the shelf and—I’m not kidding—their mouths are usually open. When it seems like divine Providence will not explode off the shelf to help them find the brand answer they seem to be looking for, the following sequence usually takes place: they reach for a product, they heft it, they turn it over in their hands, they return it to the shelf, they reach for a competitive brand and go through the same “heft, read and regard” routine before putting it back. Then they walk away, shaking their heads ever so slightly (this is one of the reasons we also do intercepts—a way to learn what that whole last bit was all about.)

Obviously marketers need to make sure they’re not losing sales because something about the product or the package or the brand is causing head-scratching in the aisle. But it’s never a bad idea to apply the Schwartz Admonition to the point of sale because of a truth we’ve documented too many times: the puzzled cannot buy.

Sara Lee’s bread is making less dough

Somebody doesn’t like Sara Lee. It almost seems unfair. After finally recovering from the low carb diet craze of the 90s, the company is feeling the squeeze from private label, especially in the bread aisle. Thanks to the recession, customers are shunning name brand loaves (and cakes) in favor of cheaper private label starches in order to stretch their grocery budget. Sara Lee must also compete with price-slashing name brand rivals.

Not to pick on Sara Lee – other packaged-food companies are getting pinched – but you have to wonder whether Sara Lee fully understands the customer motivations and behaviors played out at the shelf that might be causing sales to plunge. The company knows profits are down, but competitors Kraft and Kellogg are turning in respectable numbers as shoppers trade takeout for meals at home. Does Sara Lee know why buyers are reaching for the doughy store brand whole wheat instead of Sara Lee’s innovative Soft & Smooth loaf? Does the company understand on a volumetric basis those who have come to the store fully intending to buy the brand, but then bail in the swirl of the last three feet? And why they bail? Is it price, promotion, packaging or an intriguing blend of yes to all that? Or maybe is it some other lure or allure?

Sales are an important, obvious, but crude measure of how shoppers interact with brands. If companies hope to stop the slide toward private label, they need to be where the in-the-moment calculations of the shopper occur. They need to take hold of the in-aisle thinking of shoppers who buy the brand, don’t buy it, and most tellingly, the ones who intended to do so and then decided in favor of another.

Drop a quarter in the jar if you like this post

Maybe I wasn’t in an especially charitable mood, but I thought I had seen it all when I recently spotted a styrofoam cup duct taped to the delivery window of a Dunkin’ Donuts, a sight which gave off the weird vibe that drive-through customers should offer a reward to a forearm for handing them a bag.

There are a few topics that are guaranteed to generate heated arguments on the internet. Is it rude ask people to take their shoes off in your house? Is it tacky to have a cash bar at your wedding? And today’s subject, should behind-the-counter employees solicit tips in a jar next to the register? Anywhere you see counter service, you’re likely to see a jar or cup filled with dollar bills and coins. Cold Stone Creamery has raised the tip jar to an art form – workers break out into loud goofy songs when you drop a bill into the jar. Even teachers have gotten in on the act – one instructor conducted an informal experiment by setting a tip jar on his desk, and found that a few of his students threw in some (promptly refunded) change. Nowhere is the tip jar more ubiquitous than the coffee shop, whether it’s the indie rock dive around the corner or corporate behemoth Starbucks. There’s a certain logic behind the coffee shop tip jar; after all, say baristas, bartenders get tips, and making a latte is at least as complicated as pouring a draft beer.

Tip jars have their supporters. Counter service employees are delighted to get a few extra dollars for their efforts. Store owners and managers are happy to have their employees rewarded without having to raise prices or wages. And some customers don’t mind the jars, or even find some of the more creative hand written signs amusing. But other customers are angered by the creeping spread of tip jars. According to internet tipping guru James G. Lewis, “most people hate” the jars, and “tip jars are out of place at any food-service establishment that does not actually bring the food to your table and keep your drinks refilled.” According to a study by the Emily Post Institute, only 30% of respondents feel obligated to deposit money in a tip jar.

There’s been plenty of research on tipping – we know that younger people tip more than older Americans, people in the Northeast tip more than Southerners, and that people tip more when it’s sunnier outside. But the tip jar is a bit of a black hole. We have some anecdotal observations -- according to business psychologist Larina Kase, “Patrons can feel uncomfortable when there is a tip jar for services they feel do not deserve a tip.” But does the tip jar’s potential customer discomfort outweigh the morale boost for employees? It may be time for a well-designed study on tip jars that could determine whether they help or hurt the top and bottom line.

The not-so-gullible consumer

Imagine a patient who goes to the doctor for help with sleeplessness. If the doctor were to prescribe a medication saying, “this may or may not do any good, it’s not especially strong, but let’s give it a try to start out with and see if it helps,” it’s not very likely that the patient’s sleeplessness will be remedied. But if the doctor were to prescribe the same medication with the admonishment, “This is very powerful, so make sure you don’t leave the bottle on your nightstand. You can’t take the chance you might take an extra one while you’re half-asleep. Keep it well inside your medicine cabinet” -- it’s much more likely the patient will get to dreamland.

The power of suggestion can be surprisingly effective. For example, research on placebos has found that they can alleviate pain, depression, and anxiety, lessen the symptoms of Parkinson’s disease, and have even shrunk tumors. John Tierney's recent New York Times article ”Calculating Consumer Happiness at Any Price” explores the power of suggestion in the consumer realm: do we place a higher value on items that we’re told are more costly? According to social psychologists’ and behavioral economists’ research, it depends.

In the lab, there’s evidence consumers respond better to items they’re told are more expensive. If you tell participants the wine they’re tasting costs $90 a bottle, the reward centers of their brains will light up more than if you tell them it’s a $10 bottle. But when customers are spending their own money rather than the hypothetical dollars in a laboratory, it turns out to be difficult to sway people from following their own tastes. Two behavioral economists in Tel Aviv monitored the choices of people who ordered from a prix fixe menu where the actual cost of each entrée was noted next to the items. After three months of testing various combinations of prices, the researchers found they couldn’t sway the customers. They were no more likely to select the entrée with the highest perceived value than any other entree. As one of the behavioral economists said, “Maybe when it comes to food, people do have reasonably stable preferences. Some people like shrimp and some don’t, even if it’s worth a lot of money.” (The fact that Israeli researchers were testing pork shank and shrimp gnocchi as part of the menu experiment is another story…..)

Despite the mountain of laboratory evidence that variations in sticker prices sway consumers, the effect fell apart in the real world test at the restaurant. That should serve as a warning to those of us who study customer behavior. While techniques such as focus groups and virtual reality shopping may provide some insights, it’s vital to watch how consumers actually behave when they’re spending their own money in the store, not just in the lab.