How Customers Think

How Customers ThinkBoot Camp* * * Session 1 / 5

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Swing Tags and Signs1.Introduction to How Customer Think.2.How to use Anymeeting.3.Why use swing tags and signs?4.To $ sign, or not to $ sign.5. What happens when I round my prices.6.How can I increase sales tomorrow. 7.Business Hot Seat

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What is the Science?

Neuromarketing

Science of Shopping

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My purpose is NOT to get into a deeply scientific discussion. I assume you are not a neuroscientist, nor do you want to become one. I want you to appreciate that a tremendous amount of scientific effort has gone into the formulation and development of neuromarketing metrics. They are based on established procedures, principles and findings that are honed in research around the globe, and published in some of the most prestigious journals in the world.

What equips me to teach this bootcamp?

Ive been in sales for over 20 years. For the past 9 years, running my own design business in womens fashion accessories. We design here and manufacture offshore. So that is direct sales, web sales, wholesale and custom product sales.

Prior to my business, I worked in the USA for 10 years, as a corporate sales executive, selling IT solutions to both large and small companies. Like Boeing, Starbucks, Nike and so forth. These sales were complex, and over $1M and often with a timeframe of 8 months to 1 years. And were to large committees.

Ive been fascinated by the psychology behind how and why people buy. Whether it be a person on a large committee buying a multi $ software, or it is a woman purchasing a $100 handbag.

This has lead me to doing a lot of research. That research, coupled with my own experiences and knowledge, are why Im here today.

Lets get on with it shall we?

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Using AnymeetingChat

Found at bottom left on screenSend question to me.

Mood

On menu bar, person iconUse arrows if Im going too fastUse Thumb Up or Down for Understanding (a Nod)

To Ask A Question Mood ?, then send a Chat message

Polls

CHAT say hello. If you have a question for me. Stops interruption to the session

MOOD click on the thumbs up to show me you have found it. I am fine is default. Use arrows to tell me Im going too fast. Use Thumb up or down for understanding what is being said.

ASK A question click on the Mood, ?, and send a message.

POLL do you use swing tags???

Where are your signs?

Women hate to huntMen hate to ask

Get your swing tags and signs on now!

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If women have to ask, they think they cant afford it. If men ask, they think you are changing the price depending on what you think they will spend.

Put on your tags! Make them visible! If you cant attach swing tags, then use signs!

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Swing Tags and Signs1.Introduction to How Customer Think.2.How to use Anymeeting.3.Why use swing tags and signs? 4.To $ sign, or not to $ sign. 5. What happens when I round my prices. 6.How can I increase sales tomorrow. 7.Business Hot Seat

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Do $ signs change how much we spend?Chicken Pie$10.00Chicken Pie 10.00Chicken PieTen dollars

Restaurant LessonsCornell University Study

Relationship between money imagery and selfishness

$

P11, braininfluence

Cornell study looked at several common restaurant price display techniques.Numerical with a dollar sign ($10.00). Numerical without a $ (10.00). Spelled out.

Researchers expected written scripted prices would perform best.

Guests preferred simple numeral prices without dollar signsSpend significantly more than the other 2 groups

Unfortunately, they didnt include WHY!

Link --- Use $signs for products consistent with selfish feelings self-indulgent (sports car), financial independence.Products focussed on others like gifts, charities avoid using financial imagery.

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Swing Tags and Signs1.Introduction to How Customer Think.2.How to use Anymeeting.3.Why use swing tags and signs?4.To $ sign, or not to $ sign. 5. What happens when I round my prices. 6.How can I increase sales tomorrow. 7.Business Hot Seat

POLL RRP TV run 2 polls, one after the other. Short intro You are going to buy a TV at wholesale price You are a reseller. You know that this wholesaler is good to deal with. Using the Poll, answer which do you GUESS is or ESTIMATE is the wholesale price?8

Rounded Prices$4988$5000Round NumberLower Value$5012

University of Florida study

Mental measuring stick

99

University of Florida marketing department study written up in Scientific American 2008.

The participants were required to make a variety of educated guesses. One study - they were buying a plasma TV, and were asked to guesstimate the wholesale cost. They were told the retail price, plus the fact the retailer had a reputation for pricing TVs competitively.

3 scenarios - $5,000, $4988, $5012.

$5,000 - lower wholesale price. Guessed round number.

May perceive $4988 as a HIGHER VALUE than $5000!!!!

WHY?

Mental measuring stick based on initial price. it runs in INCREMENTS away from the opening bid. Size of increments depends on the opening bid. Some characteristic of the opening bid itself might influence the way the brain thinks about value.

Most of us are motivated by the desire for a FAIR DEAL. We employ some sophisticated cognitive tools to weigh offers and so on.

Notepad- $20 we estimate it might be worth $19 or $18 or $21. Round numbers. Starting point is $19.95 mental measuring stick is different we are thinking more about the cents, not the dollars - we might think $19.75 or $19.50 is accurate.9

Rounded Prices$20.00$19.00$18.00$19.95$19.75$19.50

Notepad priced at $20.00

What is its perceived value?

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Notepad- $20 we estimate it might be worth $19 or $18 or $21. Round numbers. Starting point is $19.95 mental measuring stick is different we are thinking more about the cents, not the dollars - we might think $19.75 or $19.50 is accurate.10

Rounded Prices$500,000$494,500Closer to asking priceSold quicker

But what about big purchases? Like a house?

5 years of real estate sales in Florida.

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But what about big purchases? Or big sales?

They decided to look into the real world. 5 years of real estate sales in Florida, Alachua County.

Compared list prices and actual sale prices of homes.

Sellers who listed their prices more precisely (like $494,500)

- Got closer to their asking price- Sold more quickly

Buyers were less likely to negotiate the price down as far from a precision price.

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Rounding Errors

Would I sell more items at $499 or $502?

Would I sell more items at $501 or $500?

Avoid $500.

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Maybe you would sell the same amount at $499 or $502.50. Dont know. Good experiment.

Avoid $500 people will undervalue what you have. They will wonder if $400 is a more appropriate price.

Researchers didnt explore whether the lower price is better (we think it is).

Would be interesting to compare precision to minimalist pricing.

Dont simplify pricing (by rounding)

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Swing Tags and Signs1.Introduction to How Customer Think.2.How to use Anymeeting.3.Why use swing tags and signs?4.To $ sign, or not to $ sign.5. What happens when I round my prices. 6.How can I increase sales tomorrow. 7.Business Hot Seat

POLL about .99 or .00 or .88?

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Odd Pricing$29.99$30.00$29.88

Schindler & Kibarian Study: University of Pennsylvania

Would I sell more items to more people at $29.99 or $30.00? Or $29.88?

.99

Worked with a direct-mail womens clothing retailer -- reduced all variables - sales people, missing swing tags, merchandising, layout, weather.

Testing use of .99 or .00 ending and using the variable of .88 ending.

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Effect of .99 and .88 & .00 endings

Catalogue 1 - Was $30 now only $24.00 Catalogue 2 - Was $30 now only $23.99 Catalogue 3 - Was $30 now only $23.88 90,000 catalogues

3 x 30,000 catalogues6 month study

Sale catalogue had selling price and reference price

Lowered by 1c (.99) from .00 price.Lowered by 12c (.88)Collected over 6 month period.

Send me a chat which catalogue sold more?

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Effect of .00, .88 and .99 endings

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What does this mean for me?5.1% increase in the number of people who purchased

2.7% increase in the amount that people spent$2,000 each market day10 market days @ year$20,000 @ year$1600 increase

$1,000 = $800 increase8% increase in total revenues

Amazing revenues didnt hire more staff, improve products, better graphic design, hang up more bunting, overhaul the stall all these costly things.17

What happened next

No more studies!

The retailer refused to participate in the study again, when they saw how much money they LOST through the other catalogues.

Why?$29.99Process left to right=$2.99?$30.00Ignore $.00

Underestimation Mechanism

Association Mechanism

.99

Underestimation digits processed left to right, consumers tend to minimize info-processing effort - may lead them to ignore or pay less attention to the rightmost digits

May disregard the .99 ($29 product) completely ORCould disregard the $9.99 completely and have a potential underestimation of 33%!Not the same as $30.00 because ignoring 0s is ignoring nothing!

.99 does it carry the connotations of a sale or discount price?Studied newspapers, ads that had .99 were usually discounted sale ads. People associate .99 with a discount (rather than 0).

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Swing Tags and Signs1.Introduction to How Customer Think.2.How to use Anymeeting.3.Why use swing tags and signs?4.To $ sign, or not to $ sign.5. What happens when I round my prices.6.How can I increase sales tomorrow. 7.Business Hot Seat

POLL about .99 or .00 or .88?

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Inner Circle Hot SeatYour Turn!