Saturday, September 1, 2007

Buyer Beware: Shopping Can Lead to More … Well … Shopping

STANFORD GRADUATE SCHOOL OF BUSINESS—Have you ever walked into a store intending to pick up socks and come out with three bags full of splurges? So what’s the matter? Are you just a shopaholic with no self-control? Or could it be that you’re the victim of forces beyond your conscious awareness?

When such savvy marketing researchers as Uzma Khan of Stanford, Ravi Dhar of Yale, and Joel Huber of Duke noticed that shopping sometimes proceeded unchecked even in their own private domains, they decided to get to the bottom of things. Setting up a series of tests of purchasing behavior, they found that for most people buying that fateful first––and often innocent––item seems to open the purchasing floodgates. This realization, they say, has important implications for how stores are laid out as well as for understanding individual behavior.

In one of the field tests, student subjects were given the opportunity to buy some discounted items from the researchers as compensation for their participation. Some students initially were offered a light bulb, while others received something more relevant to their needs––an educational CD. The idea was to vary how likely people were to buy the first item. Naturally, those who received a light bulb were less likely to buy it compared to those who received the CD. All students then had the chance to buy a second item––a keychain.

Those who received the CD—the more relevant item—were much more likely also to buy the keychain. “That was the case even though the second item was completely unrelated to the first,” says Khan, assistant professor of marketing at the Business School. “It’s not like we offered chips followed by soda, which would naturally go together.”

Shopping is a two-stage process, say the researchers. In the first stage, people deliberate about a purchase, weighing cost and benefits, the degree to which they need the item, and so forth. But once the deliberation phase ends and the buying phase takes over, a subtle psychological mechanism comes into play. “People in this transition go from thinking from their mind to thinking from their cart. The cart takes over,” says Khan. “Once that happens, a roller coaster of shopping can begin.”

The purchase of an initial item creates what Khan and her associates call “shopping momentum.”

The researchers suggest that people are not aware they are prone to such behavior. When asked in hypothetical situations when they would be more likely to buy, respondents generally said that they probably would buy the keychain if they had not made any purchases yet. It is likely, they assumed, that if they had not already made a dent in their wallet they would be more inclined to buy than if they had already spent money. Outside the store, then, people think rationally. Inside the store, it’s a different situation.
While people may be triggered to shop by the sheer act of shopping itself, there are also factors that can stop the momentum. In some cases researchers offered participants a small payment for their services plus items for purchase. People who received the money in two separate installments and two separate envelopes were less likely to make a purchase. What happened?

The simple fact of having to pay from two separate pools––or opening one’s wallet a second time––created another deliberation point, explains Khan. It served to make people think twice about buying, and hence stopped their purchasing in its tracks. The researchers also learned that the more the first item was perceived to be a luxury buy––with the associated guilt––the less likely people were to make a second purchase.

For marketers, the studies imply that necessities are the best drivers of customers’ shopping momentum. “Stores should put momentum starters at the front of the store––things like newspapers and umbrellas in the rainy season, which don’t require a lot of deliberation. Those kinds of things can get customers on a shopping roll,” says Khan. Moreover, stores should place the more guilt-inducing items towards the back.

To reduce customer deliberation points, stores also should have fewer checkout stands available and aim to consolidate the point of sale into one final counter. Department store layouts, where each section has its own register, may, in fact, be discouraging sales because they encourage people to think about their purchases each time they have to open their purse, says Khan.

On the customer end, the studies indicate that to resist temptation, a change in shopping strategy may be in order. “If you’re out doing Christmas shopping,” for example, says Khan, “buy that indulgent item for yourself first. That will curb your shopping!”