Let’s start with a question…
Are there more 4 letter words in the English language that begin with the letter K or that have K as the third letter?
What did you guess?
If you’re like most people, you will have guessed that there are more 4 letter words that begin with the letter K.
You will have quickly thought about words starting with K – e.g. kite, kill, kind, knee. It was probably quite easy. Then you will have thought about words with K as the third letter. But it was harder. A few seconds in and you’ve still only thought of cake.
It’s much easier to recall words by their first letter than their third letter. So we assume there are more of them. Though in this case there aren’t. There are many more words that have K as the third letter than the first letter.
This is an example of what Daniel Kahneman, the Godfather of Behavioural Economics, calls “Question Substitution.”
Instead of answering a difficult question (e.g. are there a lot of words that have K as the third letter?) we answer an easy question instead (e.g. how many words can I think of that start with the letter K?).
Our brains like taking the easier option.
Why are we talking about this? Because this is the way that shoppers shop. It’s the way that they shop because it’s the only way to shop.
Shoppers don’t have the time, energy, or expertise to think through every decision they make.
They can’t spend five minutes in the toilet paper aisle. Assessing the relative softness and strength of each product. Working out the cost per roll of different pack sizes. Trying to decide whether it’s worth paying more for the one with the cute puppy on the pack.
Then going through the same process in the next category. Then the next. Then the next.
They will spend way too much time trying to answer hard questions.
Instead they answer easier questions. And they will be doing this a lot right now in relation to value.
Here are some examples…
The Halo Effect. Harder Question: Is this a good price for product X? Easier Question. Do I think this store or brand is good value? The best example of the value halo effect in action is in Discounters. It’s so good that most Discounter shoppers don’t really have to think about price anymore. They know that their basket of products in Aldi or Lidl will be cheaper than elsewhere.
This applies even when they are buying premium products. Most shoppers aren’t thinking “£8.99 for a 6 pack of Peroni…how does that price per bottle compare with other stores?” They are thinking “I’m in Aldi, so it must be a good price, right?”
The halo effect is really powerful. It multiplies across a store (or brand). If you are perceived as low priced everything is seen as great value. Even when it’s not. If you are perceived as being expensive everything is seen as expensive. Even when it’s not.
Scarcity. Harder Question: What is the probability this deal will still be available next week? Easier Question: If I buy this now, I know I’ll get the deal, right? This is about time limited activities. It could be promotional in and outs. Think “Middle of Lidl.” It could be about reducing the length of time a promotion is available. Think one week. One weekend. One day. It could be about offers that are only available to certain shoppers. Think Clubcard prices.
It is also about mixing things up. Many brands have too regular a promotional cycle. Same discount (e.g. down to £1). Same frequency (e.g. once a month). The more predictable you are the more easily shoppers can fall into line with what you are doing. Only buying when you are on deal.
To play to the scarcity principle well you need to be unpredictable. Shoppers don’t know what they will find in the Middle of Lidl. You need to be exceptional. Do things you don’t normally do. You need to be believable. Everyone knows the DFS sale is not going to end on Monday, right?
Bundling. Harder Question. How much do each of these products cost and how much will I save? Easier Question: Does this feel like a good deal? The lunchtime meal deal is the classic example of this. Good for shoppers – it feels like good value. Good for retailers and brands – it prompts shoppers to buy 3 items. Retailers are doing the same with Meal for Tonight bundling. But it can go much wider.
It could apply to snacking. Think snack + drink. It could apply to Desserts. Think a mix & match deal. It could apply to drinks. Think spirit + mixers bundle. It could apply to personal care. Think bathroom bundle. Bundling is an under used tactic. It signals value to shoppers. It drives incremental cross category purchasing.
However, when you do it remember one thing. Don’t overexplain. Instead keep it simple. The bundle and the price. Help shoppers answer the easy question not the hard one.
Some shoppers need to get good value. But all shoppers want to get good value.
The easier the questions you serve up, the more likely they are to feel they are getting it.
One final thing… We’ve pulled together a short deck of brands and categories that are doing are good job of making value easy for shoppers. If you’d like a free copy, please reply “yes please” to this blog.
Feel free to forward. Have a great weekend. Speak to you in fortnight.