Pi-Consulting

Credit card companies, faced with the problem of too many people maxing out their cards, are falling prey to an unexpected variant of the numbers game. Monthly statements tell debtors what the minimum payment required of them will be this month. A new study by Neil Stewart, a psychologist at Britain’s Warwick University, has discovered that the mere fact of mentioning the “minimum number” diminishes the likelihood of card-holders paying more than that amount. People who are disposed to pay more change their minds, and by a significant margin only cough up the minimum requirement on their statement. On that basis, what gets maxed is likely to stay maxed. Source: The Economist

Supermarkets were first launched to promote “shopping convenience”. So why does their layout (which oddly never seems to vary) resemble a “mind maze”, a mental and sometimes even a physical obstacle course? Wouldn’t you rather expect a logical, time-saving and convenient approach to organizing shoppers’ pathways around the store? A penetrating analysis in the year-end edition of The Economist reveals key clues to this apparent contradiction. It’s all in the mind.

Wandering around the aisles of your typical supermarket is a little like being guided by an invisible hand. The owner of the hand knows more about our peculiarities and foibles than we imagine. Psychological principles and mood-promoting devices are deployed in different ways depending where in the labyrinth you find yourself.

The first area you encounter is known as the de-compression zone, which mentally slows, and calms, you down before new stimuli are directed at you. If you are in a Wal-Mart, you will encounter a “greeter”, who makes you feel welcome and powerful, and at least in theory diminishes your propensity for shop-lifting (“It’s harder to steal from nice people”, as The Economist explains).

Less purposeful or more easily distracted shoppers may find themselves drifting from the entrance-way to the racks of good over on the left, where a “chill zone” will tempt you into browsing aimlessly through movies on DVD, books and magazines, and top-ten music discs. The idea is to enhance the receptiveness, acquisitiveness and relaxation of the shoppers who drift into this area.

If you ignore the dreamy entertainment option and instead march smartly from the entrance bay straight to your front, you will find yourself in amongst the fresh fruit and vegetables. In practical shopping terms this makes little sense, since filling the bottom of your shopping cart with lettuces, grapes, peaches and bananas before you load in heavy bottles, tin cans and boxes of beer risks squashing all that soft and vulnerable fresh produce to pulp. Surely they should have located the fresh fruit & veg at the end of your circuit of the store, not the beginning, right? A careless mistake by the supermarket layout experts, perhaps?

Far from it, it’s deliberate. Studies show that inspecting attractive and colourful fresh foods uplifts the spirits, and makes shoppers feel less guilty about buying less healthy indulgence foods later in the same shopping trip.

Why are ‘unavoidable’ needs and daily staples like milk, butter and eggs always at the back of the store, usually in the far corners? Simple, dummy. It means you have to walk past all the stuff you didn’t know you wanted in order to get to the stuff you can’t really do without. For the same reason, supermarkets with an in-store pharmacy nearly always locate them at the back, and surround the waiting line of prescription-fillers with aspirational and discretionary items like hair colorants. High-demand items and special offers are often placed at the half-way point on an aisle otherwise filled with relatively uninteresting goods. If you want the goodies, you have to walk past a welter of purchase options that otherwise might never have occurred to you.

Environmental factors are also drafted in to help us spend more. The fragrant smell of baking bread around the in-store bakery is a sales incentive in itself. For the same reason, you may find a pleasing aroma of fresh laundry wafting around the aisle stocked with fabric conditioners. Playing muzak tracks of French accordion music has been demonstrated to increase sales of French wine, while Bavarian oompah bands steer purchasers towards the bottles of Moselle and Liebfraumilch. Bundles of balloons put us momentarily in party mood, upping the amount of alcoholic beverages we are likely to buy overall. Dear, dear, what suggestible creatures we “hard-nosed shoppers” turn out to be.

The hidden message in the maze is that the seemingly random layout that drives us nuts and feels like the product of lame planning are actually highly sophisticated responses to the way our minds work when we’re shopping. If anything about our aisle-wandering habits is still less than perfectly understood by the supermarket chains’ ‘footfall experts’, mobile phone technology is coming to fill in the gaps. Path Intelligence, a UK-based company working with MIT (the Massachusetts Institute of Technology), has developed a system for tracking shoppers’ movements by their cellphones. The mobile handsets don’t have to be in use, only switched on. They track an individual’s precise whereabouts by the constant signals they exchange with the cellular networks that carry their calls. If you walk briskly past the household cleaning products, but then pause for a minute in front of Mexican Foods, Path Intelligence will know it, and record the duration of your “dwell time”. Apparently whenever dwell-time rises, sales of the items concerned rises even more, by a measurable factor. Standing and thinking about an item on a shelf increases our likelihood of putting it in the cart and paying for it.

If this kind of insight into in-store selling techniques is not common knowledge, there is a reason for that. Too much revenue depends on store-planners keeping their deeper secrets to themselves. Market research giant The Nielsen Company recently launched its Pioneering Research fir In-Store Metrics (PRISM). Major retail chains like Safeway and Walgreens have joined up, but Wal-Mart, the world’s biggest retailer by sales value, declined, citing its “internal data sharing policies” – i.e. no sharing of its internal data.

Now where the hell have they hidden the shoe-polish?

Before the economic downturn changed our mood and our purchase habits, the world was steadily increasing its intake of champagne, with global volume shipments rising by over 2% a year for two decades. Between 2002 and 2007, US champagne consumption rose by 3.5% annually, the UK’s by over 4%, and Japan’s by a fizzy 18%, despite the increasing ubiquity of alternatives like Spanish Cava and Australian or American “methode champenoise”. Faced with this increased demand, the main champagne brands have been boosting their prices by as much as 5-9%. Now the big houses are seeing their sales slump, and prices are falling sharply again. Feel like drowning your sorrows in a spot of cut-price bubbly? Churchill is reported to have said once that “In victory you deserve it; in defeat you need it”. Source: The Economist.

Today marks the “official” start of the end of the holiday buying season. The “!2 Days of Christmas” though when was the last time you saw a partridge in a pear tree?? While all statistics won’t be in until at least mid January, the signs in the windows of the high end Fashion Show Mall in Las Vegas declare the state of the retail economy:

Instead of waiting for Boxing day, stores are giving an early holiday gift to last minute shoppers trying to clear their inflated inventories. While this comes as a boon for shoppers looking for a deal, it bodes a sense of desperation for those retail companies on the verge of bankruptcy. Pi is the perfect tool for taking a look at retail’s core shoppers then identifying those who are bordering on the edge. Armed with this valuable information, companies are able to tailor an advertising campaign to attract those who might be “lost in translation.”

The staff at Pi is optimistically hoping for a happy and healthy holiday and a better 2009, both economically and altruistically. We think the brave new year starts on 1/20/2009.

Here’s an example from Pi’s archive of case-histories.

Young people in Spain mix their spirits with Coca-Cola when they’re out for the evening. The Coke remains the same, but what booze goes in it can be very different.

A leading international Scotch Whisky brand (and Pi client) was deeply concerned that young drinkers in Spain were migrating from Whisky to Rum as their mixer …sometimes in the middle of an evening! Yet no-one could explain why.

Pi’s consumer insight research team ran the Pi-Charts. We looked at three groups:

1. Whisky only mixers
2. Rum only mixers
3. Whisky OR rum, depending on their mood

The analysis examined everything from demographics to lifestyle and leisure, and homed in on attitudinal data about fun and pleasure.

So what was the key differentiator between Groups 2/3 and Group 1?

The rum drinkers turned out to be Salsa music freaks!

Key insights always tell you something about consumers. But sometimes they have surprisingly little to do directly with your product.

In that Whisky/Rum case, it was something cultural: young Spanish drinkers with an urge to dance had a romantic notion about Salsa music and warm Caribbean imagery. All the Whisky brand had to do was change the soundtrack behind their commercials, and the defectors started thinking differently about putting Scotch in their Coke!

At the risk of seeming immodest, Pi had done it again.

MORAL: Pi says “keep an open mind, and let your curiosity run free. Beware of analyses, segmentations etc. which only talk about your product; you may miss the key insight altogether. Try Pi-ChartsTM instead!”.