Showing posts with label Consumer Behaviour. Show all posts
Showing posts with label Consumer Behaviour. Show all posts

Tuesday, October 19, 2010

Why transactions are at the heart of all our living

The Retail Plus team wanted me to write on an interesting theme. All about transactions and how they are at the heart of all our living. The more I thought about the topic, the more fascinating it was. At the end, I was constrained by the word count and could only capture the essence of what I thought.

Transactions start at the moment we neogiate with our parents for something we desire and promise all kinds of goodness and saintly behavior in return. It goes on to the more common and recognizable retail transactions we indulge quite often.

The fact of the matter is that transactions can happen only when both parties have something perceived to be of value by the other. Is it any wonder that Retail in India has taken wings only as recently as two decades ago. After all if someone had to book a scooter and wait for a year or so, how many people will be able to have such transactions.

Please click on the link below to read why transactions are at the heart of everything.

Thursday, September 23, 2010

Smart Shopper Series

One of the key feedbacks about “The INDIAN reTALEs” was that it was so informative to the shopper/ consumer. The inside workings and what Retail was all about seemed to help people become better shoppers. As mentioned in the book, we are all not equipped/ educated or taught to shop or make purchases. So, inputs that teach us how Retail works also help us become better shoppers and indirectly make Retailers improve as expectations go up.

In that context I have started a series of articles titled as Smart Shopper Series for The Hindu Retail Plus. These articles would help educate people about becoming smarter shoppers.

The first two articles came out over the past few weeks and the links are as follows –



I was held up in many things including addressing a Youth Leadership Camp and could not share these links before. Shall share the future links promptly.

Please do forward these links to all your contacts and help them become Smarter Shoppers.

Wednesday, September 8, 2010

It all comes back to you!

In my life as a Retailer the most common feedback/ complaint has been about bad service.
  • The staff are not helpful.
  • They don’t know anything
  • They are rude.
Etc. Etc.

However no one pauses to thing how rude, insensitive and demoralizing we are as customers. Today, while shopping there was a pregnant lady who insisted on barging in to ask questions when the staff were attending to me. Subsequently, even while billing, she landed up again and bombarded the cashier with questions although the cashier was billing my purchase. Finally the cashier turned and asked her to please wait at which point the lady turned around in a huff and walked away.

Before someone justifies this behavior to the hormonal issues and stress related to pregnancy, let me ask : how often does one behave this way - man or woman?

Very often is the answer.

Is it any wonder that service levels are dropping?

At the end of the day it all comes back to you. Be a boorish, insensitive and rude customer - you get bad service. Watch this funny video which captures the essence of what I say.

Next time you shop, try smiling, wishing the staff, put back things that you dropped from the shelf and you will see a whole new level of customer service unfold before you.
Video courtesy – Neo Naem, Facebook.

Saturday, September 4, 2010

Are Chain Stores promoting Cherry Picking?

Increasingly I read about promotions which make no sense. Some even border on the ridiculous. For example, many apparel stores offer promotions like buy 3 and get 5 Free or get 50% off and then 40% off.

Either the merchandiser is completely lost and is drowning in inventory and therefore desperate to liquidate stocks or someone forgot to tell them that promotions are very powerful tools and each type of promotion has a specific purpose. For example a bill value based offer is supposed to increase the overall average bill value and needs some thought and date to fix the optimum slabs. Recently I was reading about a promotion where there was an offer on a particular category’s purchase value coupled with an overall bill value and then additional discount for a specific credit card and so on. Does this make sense?

Absolutely not!

Promotions are tools to drive walk ins and also build loyalty through repeat purchase. One of the cardinal rules for promotion planning is that a single SKU cannot have multiple offers.

The other cardinal rule is the selection of SKU itself, especially for advertisements and other public communication. Today, I saw an advertisement for a leading supermarket chain. The communication highlights refilling the groceries and home needs. In other words it is trying to capture the monthly shopping of the household.

In such a case the core products and KVI is mandatory because that is what the customer will relate to immediately and it will also deliver the message of a better price.

Consider this advertisement, which does not feature Rice, Toor Dal or Sugar - some very important KVIs. Oil is featured but a 5 litre jar whereas the average consumption of oil in Chennai Households is 3 litres. What it does feature is Basmati rice, Slice and 7 Up. It does have a sweeping statement about groceries being available at prices expected by the shopper. Such statements rarely have any impact and I shall detail why in a subsequent post.

To be fair, I have seen other such bright advertisements which ignore core SKUs and highlight offers on SKUs which might not influence the monthly shopping decision.

In this context I wonder what the objective of the merchandising and marketing team is. Do they wish to have people looking to buy only Slice and 7 Up come searching for the offers on such SKUs or do they wish to increase the share of monthly shopping baskets in the catchment?

Something does not seem right.

Friday, July 23, 2010

Will you pay for someone to shop for you?

A few weekends ago I coerced my kids to accompany me for the weekly vegetable buying trip, as my spouse was travelling.

Amongst the various reasons/ excuses given by my children for not coming to do vegetable shopping was that it was boring. To reiterate this point of view my college going son strongly stated that he would never go for vegetable purchases when he grows up. When I teased him about being chauvinistic, he replied with a simple statement of fact that it was boring and that most people in that age group regardless of gender would not be interested in “wasting” their time in such tasks. They would rather hire someone to do this for them.

Initially I dismissed this perspective as a youthful one. However, it has been at the back of my mind. I am now beginning to wonder if India would see a sudden shift in shopper behavior which would not only spawn new services but also lead to paradigm shifts in Indian Retail.

The reason why I am debating this is due to a study that was done more than ten years ago to understand price and value perception amongst housewife. It was interesting and an eye opener to say the least. One of the things thrown up in the study was how a housewife would readily pay a Rupee (Bear with the text till I get the new font!!) more for cleaned Rawa while she would not do so for cleaned Rice. The reasoning was that the perception of the effort justified the extra Rupee as also the fact that she anyways cleans and rinses the rice before cooking.

So, the question in my mind is;

Are shoppers changing? Will they pay and outsource functional (AKA boring) shopping? Is India heading towards a personal shopper service of a different kind?

My personal view is that as of now I don’t see the majority paying to get shopping done. I am basing this on my observation of shopper behavior and price-value perceptions. Even today an advertisement for a Rs. 149/- tawa draws a crowd! However, this could change. How soon, I don’t know!!

Please share your comments and views on this topic. I shall also explore this further and post more regarding the same.

Friday, March 19, 2010

What a Birthday present!!

Almost to the day, it has been a year since “An Indian and A Retailer” made its debut. The thoughts of this blog grew into an in-depth, experiential book about Indian Retail, titled “The INDIAN reTALEs”.

All this happened in the space of the past 365 or maybe 366 days!

And on the first birthday of the blog, I hold a physical copy of “The INDIAN reTALEs” and wish a very happy birthday to the blog.

This book has been published by Unicorn Books and is now available for purchase with an online discount of 25% at pustakmahal (dot) com. It would be available at leading book stores over the next couple of weeks.

Please start enquiring at your nearest book store about the book and get your hands on it as soon as possible.

Thanks to everyone who supported, encouraged and motivated me along this journey. Hope you enjoy reading the tales as much as you have this blog.

Saturday, February 13, 2010

Food Inflation @ 18%. What a joke!!

I received a SMS from my friend Vishy which reads as follows –

“Tur dal rates for one Kg as on 8 pm today (10/2/10) – Nilgiris Rs. 115/-, Spencer’s Rs. 99/-, More Rs. 79.98/-, Fresh – Rs. 88.45, Nadar Kadais – vary between 68 to 85. How can there be so much variation in a KVI like Tur Dal? Do people cross check amongst stores?”

When I spoke to him he was visiting wholesale markets in places like Gulbarga where Tur Dal was being sold for Rs. 38 per kilo. Smaller farmers who sell locally at villages might realize even less at Rs. 32 or so per Kilo. The talk in the wholesale markets was that the prices of Tur Dal had actually come down over the past few weeks. But at the retail end in an urban market, it was soaring!

First is that, this reflects rather poorly on chain stores who are supposed to aggregate volumes and therefore be able to influence the supply chain in order to create value for the consumers. This does not seem to be happening. These chains are at best sourcing from the millers. So, the question is that what or who is driving up the prices? And who is going to bring in changes and advancement of the supply chain if not Retail?

At least Tur Dal can be stored and inventories managed as a buffer to commodity price fluctuations. Now, take the case of a perishable like Tomato. A decade ago the farm gate price used to be Rs. 2 as compared to the Retail price of Rs. 8, while for Potato it used to be Rs.6.5 and Rs. 12. Nowadays, with the retail price being in the range of Rs. 20 odd, do you think there would have been a significant increase in the farm gate prices? Not at all.

Today the price of Hybrid Tomato was Rs. 18 and Potato was Rs. 23 and the sourcing price was only Rs. 3.50 and Rs.9. respectively. Again the point of whether the farmer is benefiting from the increase in prices is there. The Retail price rise is not even proportionately matched by the farm gate price. Today evening, the prices of Tomato and Potato had dropped to Rs. 16 and 11. Does the farmer get such low prices to buffer such huge price variations, by the others?

Why does this happen?

Consumer habit, dependence on the retailers and even some amount of apathy, leads consumers to overlook prices of items purchased from their regular store. Trust drives their habit and the same trust also ensures that they do not check the prices or the bill.

As a consumer, when was the last time you checked the price or the bill of some of these basic items?

P.S. – The Retail prices of tomato and potato have been averaged out across a few stores.

Sunday, November 22, 2009

Bucking the trend

Customers in Chennai look forward to the annual year end sale extravaganza unleashed by almost every consumer durable retailer. So it was a pleasant surprise to see these advertisements by a consumer durable retailer who is trying to break this pattern while attempting to grab a larger share of consumer spends by changing the rules of the game. After all Retail is all about breaking shopping habits and gaining through this disruption of established consumer behavior.


In fact the story behind the year end sales itself has its genesis in similar intent; that of wanting to break established consumer behavior and gaining in that process.

December 15th to January 15th is a period called Margazhi in the Tamil calendar and this is somewhat similar to the shradh period observed in Northern Indian. Margazhi is supposed to be a month dedicated to devotion and prayer. Marriages are not conducted during this period and usually any materialistic activity like big ticket purchases is avoided in this month.

Although the idea and intent of this belief was steeped in tradition, religion and culture, it did hurt the Retailers of big ticket items rather badly. Lack of marriage led purchases coupled with people not making even routine purchases for their home led to very sharp decline in sales and usually left the Retailer and manufacturers with large inventory levels at the end of the year.

One innovative Retailer decided to buck this trend and started the concept of year end “Cost Price Sale”. The USP of this activity was very simple and of great interest to consumers. The initial few years saw this sale being conducted on the 30th and 31st of December and the 1st of January. Advertisements and adequate publicity created enough consumer craze and even mild hysteria to get the best deals. All the previous conditioning of Margazhi went out of the window and one could see hordes of people thronging the outlets. It went to such an extent that the Retailer had to take separate premises to conduct this sale in order to manage the crowds.

Like all good things, imitation followed and soon every consumer durable Retailer started having the year end sale in some form or the other. Typically this craze kicks off from the 25th of December and goes on till the 1st or 2nd of January.

I guess the Retailer whose advertisement I have shown above has decided to rewrite the rules of the game by advancing this sale by a whole month.

It might work well enough for the Retailer this year, but whether this is sustainable is doubtful because of the following reasons;

This year Diwali was very early and so November did not see very heavy expenditures by consumers. This is not the case in most years wherein Diwali and its associated expenses is during November and hence shoppers would need at least a month plus to recover.

What started off as a single Retailers innovative gambit has now become a market occurrence and consumers play the cherry picking game by visiting every retailer and comparing prices. In that context would customers blindly trust that they are getting the best deals and make purchases without the reassurance of comparison? I doubt it.

Anyways, let’s wait and see how this pans out and whether a new trend is established.

Tuesday, November 17, 2009

Making a mountain out of a molehill

The “Global Retail Theft Barometer 2009” report has led a flurry of news reports and yet another opportunity for India bashing. Headlines like “Nation of shoplifters?”, “Indians are world’s best at shoplifting” make for attention grabbing news while the more balanced publications still did succumb to headlines like “India No. 1 in Retail theft”, “India tops list of shoplifting nations”, etc.

This is a classic example of misunderstanding or maybe even misrepresenting facts to create a distorted perspective. In that context, let us do a reality check by examining certain facts without colouring them in any way.

First is the study itself. This is based on a confidential survey of only 1069 Retailers, although 4,200 large retailers were supposedly contacted. Which means that 75% of those contacted did not reply or participate in the study. I wonder why?

I have tried to see what kind of a questionnaire was used and am unable to access a copy online. So, will limit my view to the simple fact that one cannot, I repeat, one cannot effectively measure theft. At best it is an opinion expressed. What a Retailer can measure in the difference between physical and system stock. How can this be segmented with precise percentages between theft and other reasons.

There are various components of shrinkage. Wrong receipts, Wrong billing, Inaccurate stock audits, Unaccounted breakage/ damages and of course willful theft in transit or by store staff or customers. Any retailer can first of all only measure the overall shrinkage and even that is a guesstimate in the case of many operators. To expect them to be able to measure the component of shoplifting is incredibly hilarious. I just loved the decimals in the figure of 45.2% of shoplifting and 23.3% employee theft! It does create an aura of absolute accuracy.

So, it means that the entire range of system and process related issues are responsible for only 31.5% (Note the decimal point!) of the shrinkage. Having been in the industry for so long this is incredibly unbelievable. Most Retailers would state that their fill rates hover between 70% to 85%. In a context where system inefficiencies cannot ensure optimum stocking, to state that the contribution of system/ process errors is far lower than theft is at best wishful thinking.

Only the shrinkage figure of 3.2% has some validity because it is objective and is based on reality. In fact even that is suspect in the case of certain operators who do not have a robust stock audit system in place.

Let’s retain some objectivity when reviewing such reports and not get carried away by fancy headlines and provocative reporting.

Friday, October 2, 2009

Consumer insights; I don’t know how to make the right choice!

Whenever I address any audience with regard to Retail - I am fond of making a statement which inevitably provokes a reaction of shock and disbelief - the statement being - that most of us are not qualified to purchase products. This is not an off the cuff remark, but based on my customer experiences over the years across product categories. Some examples:

  • I have seen ladies sift through rice and hold it up and sniff at it. Most cases when I have asked, they could not tell what exactly they were looking for! This is not an issue of not being able to articulate. This is simply a habit.

  • Even today when one buys vegetables which are not packed, there would be a significant number of ladies fingers which have been mutilated and left behind! Again habit based on an assumption that only those whose tips snap away sharply are tender and worth buying. This particular habit is comical and irritating in equal parts when one sees a customer busily snapping away at the ladies finger and then tossing a few aside for others. I have checked some of the ladies fingers which have been so disdainfully rejected, only to find that they are as good as the others.

  • Customers purchasing furniture in many cases tend to knock on the wooden surface as if it was an occult material that would yield up secrets. These same customers would be completely lost when asked about MDF. The extent of their information is that the furniture seems to be solid (Usually meaning, made of wood) or otherwise (Which means, it is usually particle board)
    And so on and on.
The reality of the matter is that we tend to get very little information with regard to the products we purchase. We are exposed to a lot of information which are usually claims. However, we rarely get unbiased, objective information that would enable us to make a good purchase decision.

In many cases like the rice and ladies finger example our purchase is driven by ritualistic behaviour which is not understood and therefore not questioned.

Although, the extent of such uninformed buying depends on category, the most vulnerable is grocery - simply because in the case of most other product categories like electronics or apparel there is a benchmark in terms of various brands. In fact my view is that the concept of brands is itself largely driven by this ignorance and therefore the consumer needs to be reassured.

How does this influence retail?

Any retailer who understands this and follows a practice of doing things which would help address, allay and comfort the customer will be ahead of the game.

An obvious action point is to accept replacements and returns as mentioned in the earlier post. The more enduring step would be to engage the customer and educate the customer.

It could be simple things like circulating small pamphlets or leaflets about the product, signage or VM in the store or ideally by organising interactions with customers which would engage and educate the customers.

I have chosen to post this topic on Gandhi Jayanthi because there is a connection. His quotation about customer service (Customer is the most important visitor on our premises and so on) which is often bandied about can actually lead to customer disservice if not understood well. If one understands and internalises the universal truth of that statement then there starts an inherent conflict. We assume important people to be informed and knowledgeable, which is not the case with most shoppers. Hence, there is a dilema and retailers often swing to either extremes of becoming patronising/ condescending or becoming servile assuming that the customer knows best.

The ideal approach in today's context would be to internalise the statement of Mahatma Gandhi and execute it keeping in mind the customer insight mentioned above in this post.

Saturday, September 26, 2009

Consumer Insights; Am I doing the right thing?

“Nice to see, but consider it sold if broken” or “No replacement or return of any items once purchased” used to be standard caveats in many stores a decade ago. I was shocked and surprised to see the ‘no replacement’ warning on the bill recently and started wondering if we have progressed at all with regards to consumer rights and consumerism.

I could not understand the concept of no items can be replaced or returned. This smacks of totalitarian attitude and assumes that the customer is actually more of a “con” sumer.

In that context the kirana store’s attitude used to be and is still a refreshing change. Many a time I have seen products including bags of rice being sent back and the same being replaced.

How does the kirana store owner manage to do it whereas many larger stores are afraid (Yes, afraid!!) to extend this basic customer service?

Simply because the he is a far more astute businessman completely tuned into the basic psyche of a consumer. Almost everyone has experienced the phenomenon called post purchase dissonance. Which basically translates into concern/ worry/ dissatisfaction with regard to the choices made and the product(s) purchased.

The Kirana guy eliminates this by giving the customers a psychological comfort which over a period of time grows into the foundation of his business - the trust of the customer - and therefore a habit to purchase from that store.

Most Corporate Retailers have taken this lesson, but whether it is to heart or is it lip service is something that I leave you to think about. The reason for my ambivalence is, although most of them have a replacement or returns policy, the on-the-ground experience for a customer who wishes to avail this is still not a very pleasant experience.

The usual culprits - internal policies, procedures and paper work ensures that the staff are apprehensive in extending this without any questions asked and in the process make the entire consumer experience most painful.

Lastly, if I don’t have the confidence that the retailer would support me in my moment of post purchase dissonance or even a genuine quality problem, would my loyalty be with that retailer?
Very doubtful.

Friday, September 18, 2009

Delivering a memorable customer experience

This article is the next in the series on how to implement the customer experience element of basic Retail model, in the Indian context. This was published on Sept 17, 2009.

The faith and trust a customer places in a retailer is a function of his shopping experience. Unless a Retailer works towards creating a memorable experience, the chances of success is very slim. There are many ways to achieve this objective. The Kirana stores use a one on one personalised approach which cannot be duplicated by Corporate Retail. So, how should Corporate Retail manage this crucial element?

To read the whole article, please click on this link -


Sunday, September 13, 2009

Some views about Corporate Retail

I have been and will continue to be a passionate advocate of corporate retail which enables a chain of stores. Simply because this would enable too many good things if done well; Like supply chain, development of food processing industry, employment opportunities (Most Important), better tax realisation for the government, so on and so forth.

But then I can’t be blind to the handicaps and shortcomings of this segment too.

Although I have written about the cost disparity between corporate and conventional retail, the fact remains that most conventional shop keepers have learnt fast and got their act together; whether it is in terms of self service or packed groceries! Or even adopting technology in terms of billing systems, etc as reported in Times of India recently.

While corporate retail seems to be floundering! Why?

By now countless seminars, training sessions and perhaps even blogs like mine have created a humongous information base. Media, as always, has capitalised on this craze and one gets to see a large array of magazines about retailing.

Plus there are a handful of experienced retail professionals in India who have not only pioneered Corporate Retail, but have extensive experience spanning across formats and life cycle stages.
So, why is corporate retail struggling against all the conventional ones - be it the ubiquitous kaka ka dukaan or naadar kadai or some of the larger ones.

I believe it is because of the fact that a basic principle of retail has been forgotten. This is called as “Leadership by dirtying one’s hands”. This is my terminology and this translates into leading from the front.

I recall a very poignant memory. During one of my earlier employment stints, I was with Pepsi Foods. I happened to go route riding and was faced with an irate store owner who demanded immediate resolution of an outstanding issue. After polite counter points (Please read as Bull Shit, in CAPS) failed, I had no other choice but to call the office and take inputs/ seek help from the sales head. The secretary (Obviously well trained) promptly said that the head of sales was in a meeting. While I was relaying this message to the shop owner, he grabbed the phone and said in basic Tamil – Amma, naangalla veyillae vitthathaan, aangae AC le meeting nadakum. This means – Only if we sell in this sweltering heat, can you guys afford to conduct meetings in AC rooms. Needless to say, the concerned person came on line and the issue was resolved.

There is an old Tamil folk lore of a King who had a bell which could be rung by any aggrieved citizen and once, even a cow rang it and got justice.

In a country so rich with consumer rights, why is no corporate retail chain displaying any consumer orientation?

Apart from other things like cost structure, is this crucial consumer orientation the core/ key factor which tilts the scale in favour of conventional stores?

Reaching out and creating a connect with customers is a simple thing and there are enough and more simple, cost effective ways of creating this connect. However, at a macro level the organisation needs to be aligned and honest to delivering this customer delight. That by itself would diminish the usual corporate games and enable people to work towards consumer delight.

Is Corporate Retail listening? Or rather, are they interested?

Friday, September 4, 2009

Installation on the same day; Did it build the brand?

Expectations created and not met are not only dangerous, but deadly for any retail brand!

Consider the example of an advertisement I shared some time ago wherein a powerful pain point for consumers had been leveraged to hopefully build credibility and thereby creating a competitive differential for that retail brand.

Now let me share the other side of the story.

When I was recounting this during the MBA class I teach retailing for, several hands went up wanting to refute and share a counter point of view. For most, the claim in the advertisement was downright hilarious as their real time experience in getting the air conditioner installed took anywhere from a week to almost a month.

Is it any wonder that the retailer has realised the folly of a hollow promise and has dropped that claim/ promise from the subsequent communication. Still, they could not desist from a somewhat similar claim of providing installation on Sunday, if purchased on that day! Let’s see, if this one lives up to the expectations being created.

As Mr. Ogilvy said; the customer is not a moron. The sooner retailers realise it and constantly keep it in mind, the better for the retail brand.

Saturday, August 1, 2009

Retail Brand Building

Retail brand building happens at the customer’s home. Expectations created needs to be met and if possible surpassed. Take the example of this advertisement which I saw today. This retailer has smartly identified one of the core pain points of consumer durables purchase; Delivery and installation.


Note the promise of having a running AC tonight. After spending a fairly significant sum of money no one would like to chase the retailer or the installation team to start enjoying the benefits of such a purchase.

A simple promise to enable you to enjoy the benefits almost immediately is indeed a powerful one. If this expectation is met and maybe surpassed, where do you think the customer would buy their next consumer durable from?

So, where does the faith and trust in the retailer get built? At the customer’s home, post the installation when the room is chill and comfortable. Same is the case when one purchases almost everything, especially grocery and rice.

Simple but powerful truth of retail!

Wednesday, June 24, 2009

Shopping in a nighty; The paradigm shift!

The recent posts about the anniversary triggered off a flurry of “Do you remember” conversations. One such incident recalled was about when the head of RPG Foodworld once rather cryptically mentioned in a group that I was responsible for getting women in nighties to shop at the store! The incident and the background deserve to be shared in this forum.

We once had a group of women who were invited to share their view of shopping, where they shopped and why. There were many interesting and even startling feedback points with regards to the modern air conditioned stores as compared to the tried and tested kirana.

One very interesting comment made by several ladies was that they need to dress up and look smart if they were to visit the modern stores, whereas they could walk across in even a nightie to the kirana store. Apparently, the uniformed staff who spoke in English, the modern ambiance, etc had created a self induced sense of very high standards with regards to purchasing from the modern format stores. This obviously did not help the stores as it was seen as slightly intimidating and definitely not “my store”.

One needs to understand that in the Indian context, dressing up means precisely that and starts with a smart saree or similar attire, hair to be groomed, etc. Imagine the consequence. Even the housewife staying next door to such a store would have to spend considerable time and effort just to get ready for shopping. Thereby making the whole expedition not a very convenient choice, unless one was going out as a family outing!

It was an interesting insight and one that became the starting point for lots of initiatives which were rolled out to make the customers feel at ease and not make the store so intimidating as to be almost unapproachable.

Cut to a few years later and we were launching the chain in a new city. The recent batch of management trainees had been dispatched to participate, experience and learn from the launch. At an informal get together the then head of RPG Foodworld was asking these youngsters about their experiences when one person quipped that the customers were so comfortable and accepting of the store that a lot of them were seen shopping in their nighty. That’s when the head made the remark of how yours truly was responsible in bringing women shoppers in their nighties to the store.

Needless to say, I spent that evening explaining away this comment while my colleagues would often ask me as to which consumer attire I was working on next!

Thursday, June 18, 2009

Service expectations while purchasing durables or electronics

A few years ago when we went to purchase a fridge I recall the comic confusion that the various sales persons standing at the durables store created. There were three or four salesmen standing around and when we pointed to a fridge and asked them to show us the features, first they were reluctant. Then one person reluctantly explained how the concerned salesman had gone for his tea break. While I was wondering on the absurdity of having individual salesmen for each product, another elaborated that I was enquiring about brand A while all those present were representing Brand B or C or D. Finally one person did try to at least engage us till the time that the concerned salesman returned!

I am sure most of you would have had this experience.

Later on when I was handling the marketing for a durables store, such similar experiences prompted the team to relook at the way the store staff interacted with customers and went on to become a key differentiator.

It might definitely help the durable retailers if they were cognizant of this dissonance being created by what is called company promoters as also internalize that the consumers are changing.

Typically the various brand manufacturers agree to place these salesmen or promoters as they are called. Hence, most are briefed and trained only with details of a particular brand. Of course there is a fair amount of churn within this group and it would not be uncommon to see a person be a salesman for Brand A and a few weeks or months later for Brand B. Although this and the fact that they all work together makes them all aware of the various brands, the tendency is to constantly steer the customer towards one’s brand. From a customer point of view, this is not only confusing but extremely annoying too.

Today the reality is that youngsters are emerging or rather have emerged as a significant consuming class, especially of Electronics. These consumers are well informed and usually have done some homework with regards to the products, brands, features, etc. In such a context having to face a virtual race amongst the salesmen is not the best thing that a store can do.

Secondly, there is a large group of educated consumers who are older and who typically indulge in high- end electronics and durables. Such consumers again do not appreciate pushy selling because they are looking for additional inputs, details and explanations with regards to the various features of a product.

And then you have the average consumer who is looking for functional benefits and is often technologically challenged. Yet again, not a good choice to practice hard sell. They look for some information and lots of reassurance!

So, essentially the purchasing pattern for this category of products is fast moving towards informed and knowledgeable decision making by the consumer instead of being hustled into a sale.

Most modern durables chains are aware of this shift in consumer behavior and they have the store staff to offer nonpartisan inputs and help in the purchase. However, the larger universe of small operators still relies on the company promoter route, simply because it helps defray the man power costs. What they seem to be missing out is that if the customers dry up, there would be no store and no costs left to defray!

Saturday, June 13, 2009

How consumers think about retail pricing

In the retail context, communication of prices or offers is a fine mix of science and art. It is more of science because one needs to truly understand the consumer’s mind set. Understand is an understatement. It requires that the retailer get under the skin of the consumer and communicate, almost telepathically!

A simple way of communicating prices or offers is by stating the MRP and offer price, for the relevant pack size. However, the consumer does not always think in such a simplistic linear manner.
The consumer’s mind anchors the prices of a few products which are referred to as KVI’s (Known Value Items). The perception of value basis pricing is defined by the price communicated for such KVIs. Prices perceived to be lower than the benchmark price of a KVI leads one to believe that the store offers great prices and hence lots of savings. This is a classic example of the halo effect theory.
KVI’s as a concept is more relevant in a non-MRP scenario as there are no published prices on any product. However, in the Indian context this is very relevant for groceries, fruits and vegetables. Additionally, even with a MRP, the offer price or “Our Price” as many retailers say, is a powerful perception driver. Non Stick Tava at Rs. 149/-, when seen by a customer who is used to a price point of Rs. 250/- becomes a strong influence with regards to the pricing of that store.
Next is the pack size. Most of us are not mathematical wizards and prefer to be presented with numbers which don’t require my mind to do calculations and then be able to benchmark with my KVI.
Groceries, Fruits and Vegetables are usually benchmarked in per kilo basis, in our minds. Even though we might purchase lesser or more and never in exact multiples of a kilo, our minds pegs the per kilo price and we prefer to use that as a comparison.


I came across this offer communication recently and would like to take this as an example to drive home the point. If I were planning this communication, the following would be changed.

  1. Price would be per kilo. The pack size price can be mentioned if required. But the per kilo price is more important.
  2. Savings can still be basis the pack size, but should be mentioned clearly that this is for a 20 kg bag.
  3. In groceries, fruits and vegetables the consumer does not think of MRP. The prices are dynamic and basis the market price. So, it might be a good idea to mention market price, then MRP (Only if required) and lastly Our price. If the pricing has been managed well, there should be a difference between market price and MRP itself, further reinforcing the price-value image.
  4. Lastly, the savings if mentioned as a difference between Market Price and Our price would be even more powerful, if point 3 has been done.
Retail might appear simple and easy to do. It actually is. However, it requires a lot of common sense and a deep, instinctive understanding of the way consumers think.