The Psychology Behind Impulse Purchases & The Why We Buy

We’ve all experienced an impulse purchase.  That feeling of reaching for a new product not because you need it but because at 50% off it’s too good of a deal to pass up. These purchases, which grocers rely heavily on seem to surpass your cognitive thinking (good bye budget) and almost occur instinctively. Although not planned consumers enjoy these purchases and retail grocers benefit from increased basket sizes, so the biggest question for retail grocers is… What’s the driving factors behind impulse purchases at retail grocers?

The first idea that comes to mind is around trade spend and ad marketing. Flashy end caps and promotions draw in a shopper but there’s still more to it than that. Over the years there have been a number of studies and experiments that test the psychology behind these impulse purchases and it appears that when combined with additional factors pricing is the underlying driving force. And it’s not just about the lowest price but rather the way the price is presented to the shopper compared to it’s environment.

When designing your marketing plan around impulse purchases here are a few tips to keep in mind.

The Timing of Your Deals Count

Timing your deals to match people’s economic ebb and flow helps you build a loyal customer base and sell more items, even when people are feeling pinched. Scheduling more deals at the end of the month, for example, when the money’s running tight can make people feel less anxious about shopping. This is especially true for staples that they might need but are running low on. Your loyal shoppers will know they’ll get good value for their dollar when they really need it. At the beginning of the month, or even in the middle of the month—for people on a two-week pay cycle—you can focus on selling more expensive items that people feel they can afford when they’re flush. When they have the money to purchase the items, they’ll get more satisfaction out of them than they would if they could ill afford them.

To encourage buying these more expensive or new items, you should schedule your free samples at the beginning of the month or pay period when customers are more likely to have a means to buy them.

Gaussian Distribution Pricing Works

But you shouldn’t raise prices too abruptly or unexpectedly. Many retailers find success with short term sales but research shows that a more gradual approach leads to more sales and higher profits. If shoppers feel your pricing is too mercurial you may lose trust. Instead, if possible, gradually phase out high level sales items so that people don’t notice the sharp spike in prices. Research shows that steadily decreasing the discount resulted in higher revenues, more willingness to pay and a greater likelihood of visiting a store because they had more time to anticipate the loss if they didn’t take advantage of a deal.

Where You Put Prices Matters

Copious research by Dehaene, Bossini and Giraux shows that the way we see things and the way we process visual information becomes hugely important when placing prices and sale data. The research shows that people think of numbers as progressing along a horizontal line from smaller numbers to larger. Consequently, putting your prices on the left side of a price tag indicates that whatever price is there is “small.” But there are exceptions.

If the item has a high price, you don’t want to put it on the left. It won’t convince shoppers that the price is low. Instead, you put the price on the right, which subconsciously communicates higher value. You can achieve a similar effect by having the more expensive price be a little higher up on the product. A price low and on the left says “small;” high and on the right says “valuable.”

The Subtraction Principle

Sale prices operate on a different rule called “The Subtraction Principle.” If you have both the original price and the sale price, and the difference between them is moderate, the sale price should be on the right. Having numbers ordered that way helps consumers do the math and see the advantage to the sale price. It’s easier to subtract from the original price to the sale price and helps customers perceive a larger discount.

But if there’s a big difference between the two, the sale price should be on the right. Because if the difference is perceived to be too great, consumers will suspect the store of manipulating them.

Track the Data

Finally, getting great data on prices for the same item in other outlets is crucial. As researchers found, trust is a big factor in whether people buy from you. If your prices are significantly higher than other outlets, they’ll decide to take their business elsewhere.

We’re learning more and more about how consumers perceive prices, neurologically, visually and emotionally. Fortunately we’re doing so just as we get the tools that let us price more effectively…to fill those baskets!

 

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Seth Nagle, Senior Marketing Manager at RW3 Technologies understands the power of innovation but also its limitations. Attending Salve Regina in New England, starting his career in Silicon Valley, and now living in Austin, Texas; Seth provides a unique tech perspective to a complex CPG and Retail Grocery Industry that is in constant disruption.

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