Basics of Retail Marketing from a Nine-Year-Old

Nine-year-old Lindsey, who's visiting her grandmother and me, obviously has the entrepreneurial gene.

She decided on Wednesday to open the classic American neighborhood business, the lemonade stand. I suspect there are a few retail marketing lessons every business person could take from her example.


Optimism.

Have you ever met a nine-year-old who didn't believe anything was possible? When told “that won't work,” her response is automatically, “well, what if we did this?”

I'm not recommending that anyone take on the Don Quixote role, but there's something to be said for enthusiasm and attitude.


Location.

Although the ambient temperature hovered in the mid-90s, Lindsey chose to park her table in the direct sunshine next to the street, rather in the shaded (and much harder to see) front porch.

People must know you exist if they are to buy from you. If they can't see you, you're too easily ignored.


Pricing

Her question wasn't “How much can I charge to make maximum profit,” but rather “how little can I charge so that everyone will want to buy?” She settled on twenty-five cents per eight ounce cup.


Advertising.

Lindsey posted signs a block in every direction. She also was quite vocal. Not a pedestrian nor the driver of any automobile on Collis Avenue missed the message that she had “ice cold lemonade for sale.”


Upselling.

As each customer finished a cup of lemonade, Lindsey first confirmed that they were satisfied. “It was good, wasn't it?” When her customer affirmed that it was, indeed, good, she pointed out that a single eight ounce cup probably hadn't completely quenched the customer's thirst. She poured another and held it out to each customer.

Most bought a second cup.


Location, Reprised

Discovering that a crowd had gathered half a block away at a yard sale, Lindsey re-located her table to the yard sale, and offered cups of her lemonade to the hostess, and to the yard sale customers as well.


Summary: paying attention to retail marketing basics is always worthwhile. In a single afternoon, Lindsey grossed thirty-three dollars. And at twenty-five cents each, creating that many customers from scratch seems to me to be a rather impressive success.

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Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about basics of retail marketing may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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Will A Doomsday Cult Buy A New Dishwasher?

Cognitive dissonance.

It's the discomfort caused by two conflicting thoughts.

It's the pain of learning something new, which contradicts what's already accepted as true. And it's often strongest when a person believes something about himself, but acts in a contradictory fashion.

Dr. Leon Festinger, then of the University of Minnesota, first proposed the theory of cognitive dissonance after studying a doomsday cult lead by a suburban Minneapolis housewife.

Marion Keech was convinced that aliens would rescue her and her followers before a massive flood occured at midnight, December 20, 1954. Many of the cult members waiting for the end of the world quit their jobs, sold their homes, and gave away their belongings and savings.

What does a cult follower do when faced with incontrovertible evidence that his beliefs are wrong? Right. He rationalizes. And interestingly, his belief becomes even stronger.

Rather than admit they had changed their lives on an invalid premise (and rather than risk being laughed at), Keech's followers chose to believe their faith had persuaded the aliens to save the world.

Dr. Festinger explained that the more important conflicting ideas are to a person the greater the cognitive dissonance they cause. The discomfort also increases when accepting the validity of one idea requires the complete denunciation of the other. If a person can't rationalize, or explain away the discrepancy, he suffers.

And according to Festinger, when learning the new information forces people to compromise their self-image, they will not learn from their mistakes. Instead of admitting their own fallibility, they'll continue making the same bad choices. (This denial of the evidence also contributes to confirmation bias, in which an individual picks and chooses among the “facts” he'll accept as true.)


When it comes to marketing surveys?

One of the least reliable methods of predicting consumer behavior is to ask consumers what they intend to do. And yet, companies keep using “intent to purchase” surveys to determine the course of their business.

“Do you intend to purchase a hard drive? A dishwasher? A case of Cabernet Sauvignon? A new home?”

Do people really know what they're going to buy?

“In the next year will you buy a digital camera? Shares of stock? An iPhone? A timeshare? A second vehicle?”

Does anyone know?

Some do. Most don't.

Why is that?

When the ideal of “what I want” collides with the reality of “what I can afford,” cognitive dissonance is the likely outcome. We're a nation of optimists. We all want to believe that next year will be better than this one. It's painful to admit that we don't have the power to create the lives we want, even when we only have to admit it to ourselves.

So we deny. We rationalize. We hope. And we don't tell the researchers what we suspect to be true. We don't even tell them what we think they want to hear.

We tell them how we see ourselves.


What can you expect when you ask what people want?

You can expect them not to care that you want to know.

You can expect them not to want to do any mental work to help you get to your answers.

You can expect the vast majority to refuse to answer. They don't have time.

And expect that most don't truly know what they want. By definition, any of these folks who take your survey are giving an inaccurate description of their preferences.

Those who know what they want, and complete your survey, often provide incomplete answers.

And in those very few cases where your survey does compile a complete and accurate description of your customer's preferences, what you have is a static picture of a constantly moving target. Over time, those preferences will become stale and less accurate.

And there's still the question of what you're measuring. When you ask about intent to purchase, are you measuring stated preferences? Behavioral preferences? Predictive behavior? Are they the same? If not, how do they differ?


Be very careful with intentions.

Frankly, the only reliable data tracks behaviors. Actual purchases. Not what people want, but what they've actually paid for.

A recent study of automobile shoppers indicates that 58 percent of those who bought, drove off in a car other than the one they came looking for. And when questioned, a full 42 percent arrived at the lot without having made a clear choice between a new vehicle and a used one. Maybe what they were “just looking” for was a good salesperson.

Regardless, you can easily see that surveying intention to purchase provides pretty much useless data.

Information is moving faster than ever. The rate of change keeps accelerating. And it's unfortunate that in some industries, by the time changes in customer behavior have become obvious, its too late to adjust and stay competitive.


How can you predict what people will buy?

Even people who don't know what they want can usually rank their preferences.

Ask them to choose between options.

Ask them for trade offs.

Help them to the decision point. Help them to choose which products, or even features and benefits are worth more to them.

Would they like a cell phone that can give them directions to the nearest Italian restaurant? Sure. Who wouldn't?

Would they pay an extra $100 for it? Ehhhhhh, maybe not.

If there was only one extra feature beyond basic telephone service, would they give up the ability to play MP3s in order to have those restaurant directions? Absolutely not.

Would they give up the four function calculator? OK, perhaps they would, but they still won't pay extra for the directions.

Ah, now you have a way to uncover some truly meaningful information about market demand.

In the absence of actual sales data, identifying the trade offs important to your customers will give you a much better understanding of what they'll pay for.

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Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about predicting customer purchasing behavior may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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If Elected, I Will Not Serve

How much are we willing to pay for a non-material experience?

Among the super rich it's no longer enough to give a loved one a new Maserati GranTourismo (MSRP $110,000). Now, the proper gift is a private concert by the Rolling Stones (MSRP $4,000,000).

Or so I'm told.

Even those of us who are not so rich seem to be more often choosing day spas or trips to Italy over the more traditional leisure activities. (When was the last time you went bowling?)

Sociologist Melanie Howard suggests that, as people have more expendable income and more options, we are, as a society, hauling ourselves up Maslow's hierarchy of needs toward the apex of self-actualization.

She says, “There’s this emerging idea of ourselves as projects — we are no longer labelled by our education or gender, or born into a social situation that we then play out for the rest of our lives. We can do new things, pick up new skills, learn a new language. Because we’re living longer, we have more time to think about who we really want to be. We are all asking ourselves, ‘How can I get more out of my life?’”

What do we want to be?

Involved, apparently.

A couple of days ago I received this e-mail from Bill Drew, Jr, of New View Options blog:

“Hey Chuck,
Just saw a news report that you were on. Cool! Here is the link: www.News3Online.com
Best,
Bill”

My first thought was that this was a co-incidence, one of several other Chuck McKays which includes a high school English teacher, a medical doctor, and the disc jockey from CKLW.

Then the disclaimer popped up to explain the hoax, and offered to help me perpetuate it on my friends.

But my second thought was, “Wow. They customized this experience for me eight times in slightly less than two minutes.”

It's the Personal Experience Factor.

It's exactly the topic my colleague, Mike Dandridge, speaks and writes about.

It was through Mike that I first learned of the 1999 book, The Experience Economy, by B. Joseph Pine II and James H. Gilmore. He drew my attention to Pine's and Gilmore's observation that the price of coffee depends largely upon the way it's delivered to the consumer.

“Consider, however, a true commodity: the coffee bean. Companies that harvest coffee or trade it on the futures market receive -- at the time of this writing -- a little more than $1 a pound, which translates into one or two cents a cup. When a manufacturer grinds, packages, and sells those same beans in a grocery store, turning them into a good, the price to a consumer jumps to between 5 and 25 cents a cup (depending on brand and package size). Brew the ground beans in a run-of-the-mill diner, corner coffee shop, or bodega, and that service now sells for 50 cents to a dollar a cup.

“So depending on what a business does with it, coffee can be any of three economic offerings -- commodity, good, or service -- with three distinct ranges of value customers attach to the offering. But wait: Serve that same coffee in a five-star restaurant or expresso bar, where the ordering, creation, and consumption of the cup embodies a heightened ambience or sense of theatre, and consumers gladly pay anywhere from $2 to $5 for each cup. Businesses that ascend to this fourth level of value establish a distinctive experience that envelops the purchase of coffee, increasing its value (and therefore its price) by two orders of magnitude over the original commodity.”

Its time to stop selling simple "services."

Highly profitable companies are those which sell those services as individual experiences. Those which sell at retail assume their “guests” will want to purchase mementos which remind them of a specific experience.

Walt Disney Company has been the shining example of selling the experience since the opening of their first theme park in 1955.

Progressive Corporation makes both the purchase of vehicle insurance, and the settling of claims an experience. Check out their web site to get a feel for the purchase, then imagine the effect their claims adjusters have on accident victims when they show up with a van designed to calm them. Refreshments, mobile phones, and someone to arrange to have your vehicle towed and repaired, perhaps even to set up overnight accomodation for you if necessary.

Want to visit Apple's stores in Great Britain? Use their “online concierge” to plan the trip. Apple sells much more than iPods and Macs. Apple now sells hospitality. In other words, an experience.

Pizza Hut offers to host your child's birthday party. In addition to feeding the birthday party, they provide birthday cake and other amusements.

And this is perhaps the way to mass produce individual experiences. Treat the whole company as theatre. Treat the underlying goods and services as props.

Can you do this with your customers?

Can you stop focusing on delivering a less expensive widget, and instead deliver a memorable experience, of which the purchase of the widget is only one of the steps?

Can you, like the practical joke nominating Chuck McKay for President, embed simple customizations into your presentation, and customize your experience for each shopper?

__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about creating individual customer experiences may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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