Trick or Treat? How to Spot Retail Traps
Treats and trickery are popular themes this month as families prepare to celebrate Halloween.
They're also strategies used by retailers to get consumers to spend more.
Customers focused on getting a bargain may not notice the following traps used to part them with their hard-earned cash. And these traps aren't the shriek-inducing ones that shock you on Halloween; they're subtler and often disguised as treats, making them far more deadly to your budget.
'Tis the season for changing leaves, hearty meals and pumpkin-spiced everything, a fact retailers won't allow consumers to overlook. Pretty displays of pumpkins and swirling scents of cinnamon play on consumers' nostalgia during this time of year. While these sensations bring smiles to shoppers' faces, the underlying strategy is far from innocent. "During the holidays, it's important that our store features seasonal aromas and music," says Miles Bergsma, director of brick & mortar for etailz Inc., speaking about Wollnick's General Store in Spokane, Washington. "We've found that if customers are greeted with a shopping experience that reflects the season, they will stay longer and spend more."
Benjamin K. Glaser, features editor for DealNews, agrees. "Researchers have found that certain colors, sounds, smells and even physical sensations can increase spending," he says.
The color red, for example, has an interesting influence on diners and shoppers. "In a restaurant, seeing red makes you think you're hungry," says Joanie Demer, co-founder of The Krazy Coupon Lady. "In a store, it makes you think you're getting a deal, even when you aren't."
When it comes to online shopping, there's no promotion more coveted than free shipping. According to the 2015 Holiday Shipping Survey published by Pitney Bowes, 60 percent of surveyed shoppers admitted to increasing their spending to qualify for free shipping. Threshold offers, as they're called, are a common upselling trick, says Mari Corella, director of digital merchandising for a global beauty company. "A popular practice for online retailers is to offer free shipping, a discount or a free gift once a certain order value is reached," she says.
Online shoppers likely recognize the strategy, but they may be surprised to learn this next part: "This order value is often up to 50 percent more than the average order value." In essence, retailers double customer spending while making them feel they received a good deal in free delivery. Sneaky indeed!
The order in which shoppers are presented products can contribute to how much they spend. Consumer psychologist and retail consultant Bruce D. Sanders found hotel room shoppers paid an average of $19 more per room when they reviewed options from highest price to lowest price, compared to those who were presented with the list in reverse. "The price of the first item considered becomes an anchor for what the shopper expects to pay," Sanders says.
Sorting products by highest-rated may seem like a smart way to find the best value among low- and high-priced items. However, it's more complicated than that, Corella says. "Even when sorted by 'most relevant' or 'recommended,' price point plays a large role in the algorithm, making higher-priced items sort to the top."
A related tactic is something called the "decoy effect," where the existence of one product is designed to increase sales for another product. Vassilis Dalakas, professor of marketing at California State University San Marcos, offers an example from Williams-Sonoma. "The store was offering a bread maker for around $279 but had difficulty selling it," he says. So they introduced a pricier bread maker for $429, which drove consumers to purchase the lesser-priced option. "From a consumer psychology standpoint, it's important to recognize the power of reference points," Dalakas says. "As consumers, we often have difficulty making a decision, so we try to use something that makes it easier for us to compare available options so we can decide on which one is best."
Consumers love using coupons to knock down the price of their purchases, while retailers lament their negative impact on profit margins. Jerry Jao, CEO of Retention Science, a customer data and retention marketing company, points to dynamic discounting as a popular method for retailers to stay competitive while maximizing profits. Based on data collected by a retailer, one customer may receive an email for 20 percent off her purchase, while another receives an email for only 10 percent off her purchase. "The retailer knows what it takes to convince each to make a purchase," Jao says. "By not giving away the biggest discount to all buyers, retailers can avoid cannibalizing the impact of big promotions around the holidays."
Another deceptive discount is the bounce-back offer. Mark Harrington, vice president of marketing at Clutch, a consumer technology provider, describes these deals as "a bonus to be used at a later date for spending a minimum amount and often requiring a minimum spend." For example, spend $50 now and receive a coupon for $25 off your next purchase of $75 or more from Nov. 1 to Nov. 15. "These types of offers get the shopper to return and make additional purchases, increasing revenue, margin, shopping time and customer affinity for the brand."
Corella considers bounce-back offers one of the best deals merchants can provide to shoppers. "However, the redemption is incredibly low as customers often times forget to redeem."
Keep these retail tricks in mind, dear shoppers, for the holiday shopping season looms and with it the prospect of disappearing dollars.
Kendal Perez is a spokeswoman for CouponSherpa.com, a popular source for online, in-store and mobile coupons. She also blogs at Hassle-Free Savings and enjoys yoga, decluttering, craft brew and obsessing over her dogs.