Amazon isn’t the Northstar, the consumer is

Bigger basket size: another holy grail of retail. But as with the grail itself, retailers can’t just choose blindly, immediately gravitating to the “shiniest object.” The tactics they use to lead customers down the path to incremental purchase need to reflect a nuanced understanding of consumer behavior.

It’s all too easy for sales associates (and e-commerce) to go through the motions of cross-selling, upselling, and downselling in quick succession, when in fact this blanketed approach is more likely to result in customer fatigue than a sale. To know how to grab a customer’s attention, retailers need to have a flair for behavioral economics.

So, how can retailers determine when and how to sell in different directions?

How to design a customer experience that empowers them

Amazon epitomizes the “You bought this product, now you should consider this item” approach. They also operate under the powerful idea that a lower price point is better than no sale at all. But the world of consumer behavior goes far deeper.

First off, different scenarios call for different price points. For example, while a retailer’s instinct may be to price a “preferred option” item more moderately to move it off of shelves, they may be better off using a higher price point to ensure the item is perceived to be of good quality. Many retailers have even jumped from odd ($9.99) to even ($10) pricing to indicate that products are of better caliber.

Loss aversion is another potent area, showing that customers often feel more impacted when you’re taking something away as opposed to giving them something. Especially in the realm of clothing or furniture, it’s a consideration retailers should frequently experiment with:

“Sometimes you may have a bare bones option to entice consumers, and then you can hook them and get them to add more options later. Should we show them the bare bones product and consumers add the options to them? Or should we show a product that’s fully loaded with options and make customers consider each option as they subtract? Which ones have a better chance of selling?”Ram Bezawada, Marketing Professor at Zicklin School of Business, Baruch College

In essence, the question here is how do you design the shopping cart experience so that customers feel like they’re empowered not to miss out on anything? It may be that the fully loaded approach will lead customers to remove less, ending up with a larger cart.

Other ways to make customers feel empowered include:

  • Delaying/deferring payments, if only by a short period of time, to lessen the pain of payment
  • Recognizing not only the power of FREE add-ons or promotions but also providing a third “decoy” option to make the first and second options more enticing
  • Avoiding “decision paralysis,” or indecision due to an overwhelming number of choices, by limiting the number of options available

How are retailers finding success at different touchpoints?

Both Steve Madden and Tiffany & Co. have used a customer service training app to help give their sales associates advanced skills in upselling, cross-selling, and problem-solving. With a picture of real-time results, the app lets employees adjust their approach based on customer response. It’s a great way to understand customer behavior and employee engagement in one place, and it’s helped Tiffany’s drive quarterly sales and profits ahead of analysts’ estimates.

Carhartt has driven a 5% lift in click-through rate as well as lifts in conversion and average order value with a smart bit of cross-selling. Instead of merely throwing related items into the shopping cart, they show customers products that are specifically relevant to them based on what’s selling well in their geographic area.

By offering free two-day shipping from their new Perth Amboy, New Jersey facility, Target has seen rapid increase in the number of orders, basket size, units and sales. It’s basically cross-selling and upselling in one: free shipping leads to more items in basket and higher overall value.

Amazon has used down-selling in their product detail pages with huge success, but a more advanced version of this might actually steer customers away from a product that is far more costly than their needs dictate. It may be a “loss” in the moment, but it’s also a way to establish brand trust and loyalty for sales down the line. It’s no coincidence that 70% of customers feel USAA serves their needs ahead of the bottom line.

Where can tech and smarter merchandising help increase basket size?

Loss Aversion:

  • What if retailers sold complete sets of merchandise with the option to take items off, making the shopper think twice about doing without each item?
  • Could AR/VR be used to emphasize the absence of certain items? “Imagine tackling this project without a power saw,” for example.

Decision Paralysis:

  • Could legacy retailers pilot smaller brick-and-mortar offerings with a highly limited product selection, whether season-, region-, or even function-based?

The “Framing Effect” (giving context that makes certain items more appealing):

  • Are there ways to prove out the quality of items with AR/VR in order to upsell or downsell (without denigrating items)? e.g. “For your upcoming travel needs, this less expensive piece would be just as durable.”

The All-Powerful “Nudge”:

  • Could AR/VR be used to remind customer’s what they’re missing? Say a customer abandons an item from their cart. Could they be served an AR/VR experience (by email, as part of the e-commerce experience, through a loyalty app) that shows them what the item is capable of?

Follow the data to the right pitch.

Cross-selling, upselling and down-selling should be seen more as a connected web than as three levers you pull at the same time. Cross-selling might be called for during one purchase occasion when upselling is not, and vice versa. The more you understand the customer (down to the buying occasion at hand), the more you have a sense for which incremental pitch is appropriate at which moment.

Average basket size, online queries, customer life cycle, life events (as indicated by telling purchases like diapers, for example)—these are among the best signals that indicate in which direction you should sell. If retailers can merge this info with their in-store approach, their sales associates are that much closer to each customer’s True North.

Could you drive incremental sales by predicting trends and customer demand?

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Updated Jan 10, 2019 | Originally published July 2018