PM’s guide for E-commerce & Retail Psychology
Consumer psychology fascinates us all especially the product managers. Learnings do come from all sides and seemingly trivial things we ever did, mould them. We all have been both consumers and sellers at different stages of our life. We even continuously sell and buy things, beliefs, and more often ideas to and from people around us, including our parents, children, and friends. ‘Mom-and-Pop’ stores or ‘Kirana’ stores have also been indispensable parts of our daily lives especially while growing up. For me, some of the most practical learnings in product psychology and business actually came from observing people as a customer myself and working as a sales assistant in my mom’s store.
During my early teens, I grew up assisting my mother in running a small neighbourhood store, selling beauty and cosmetic products. Even though her goal was not solely to earn profits but also to spend her spare time in a meaningful way, I gathered plenty of learnings about business and consumer psychology. Whenever she was too busy or during festival peaks, our family (of four) used to help her with the customers (hence called mom-and-pop stores akin to kirana stores). While we were constantly observing our customers, we all used little tricks imbibed in the consumer psychology to sustain the business - which we obviously did not study in any textbook then.
Doing so, we would test multiple hypothesis in real time regarding the customers’ profile and their needs/wants with the goal to make both the customers (mostly the neighbours) and business happy.
I am sharing below some of the key learnings and their parallels in the product management and e-commerce space. Hope you are able to relate and find them useful.
1) Always think about (all) your customers and users
Know Your Customer - KYC
Knowing your customers, their geography and general preferences can help you serve them better even before they express their needs/wants. Apart from the target customers, there are various other users who are important throughout the buying experience. Kids often accompany their mothers while they go shopping. You can easily achieve 10-20% additional sales and higher profit margins on products for children if your business is targeted at women. Even if women are out for personal shopping like cosmetics, they tend to make emotional (guilt) purchases for their children at home. Buying gifts for other family members and relatives is also common in the business of personal indulgence.
2) Promotions work best to attract customers to your store
Sale or Promotion sign boards are placed right outside the stores to attract the customers. Though discounts are hard to resist, customers usually don’t decide if they are going to buy a jeans or a t-shirt or a different category but they often decide the stores based on the sales and promotions. The limited time promotions build up brand awareness and an urgency to purchase. Be it a store or an app, even today promotions are absolutely necessary to bring customer traffic. E.g. - all e-commerce companies regularly run promotions to attract the users to the websites/apps and build awareness about the products they sell.
3) Stores should be delightful spaces where customers would love to spend time
There is a key difference between a grocery store and a cosmetics store. The cosmetics and beauty products which need trials and are targeted for a particular segment need a store which looks comfortable and engaging for the segment. Customers should be able to spend minutes to hours in the store without getting mentally and physically exhausted. Due to the nature of the products sold, even the small stores dealing with women often have places to sit or stand comfortably. Sometimes, they also have a play area for the children and are generally more visually appealing. In the digital world, colors like yellow, blue, grey are widely used to reduce eye strain (red is usually avoided except for groceries which are not known for involved purchases etc). Apparel and Cosmetics websites and Apps (target audience - females) are generally a lot more classy than websites selling electronics (target audience - males). Reviews and ratings not only build trust but also engage users before and after the purchase. Amazon, Myntra and Lazada have also been experimenting with virtual games to let users engage more on their websites.
4) Recommend products and keep it personal
Give Personalized Attention
Customers want to quickly find the products they want and as a seller it is in your best interest to help them minimize their discovery time. Narrowing down to what customers want from a big assortment is difficult. Sellers at stores do this in a very simple way. If a customer does not know exactly what s/he wants or desires, they ask the customer directly and understand his/her preferences, occasion and reasons of purchase. They let the customers first decide some attributes such as color. They then let them explore multiple variations or patterns in similar colors. Customers often need personal attention to find the right product for themselves. In general, you should recommend the “popular products” if they are looking for commodity products for regular use and recommend products that are unique, exclusive or tied to luxury if customers want it for a special occasion. Though in e-commerce you often can not ask the customer directly but you should support a good search functionality and avoid recommending a huge list of products. Personalization algorithms on websites aim to identify and show the limited items that are most relevant based on user history, search query, location etc. Never recommend something which is not available in the required size-color. Build filters to help customers narrow down their consideration list.
5) Share the detailed product information
Know Your Products - KYP
People are hungry for knowledge in general. Knowledge also provides enough justification to buy or not buy something. Make sure you have all the information about the items in which the customers are interested. The worst thing that can happen to a customer is an “unaware salesman”. You must have at least the relevant basic information about your products to avoid the customer fallout. Basic attributes about usage, target customer’s profile, age, discounts, USP will definitely be needed. If you are selling to women, always be ready with more information.
6) Presentation matters
Build Value Perception
A shop brimming with a huge selection is more enticing to customers who are looking for a variety in shopping options. However, a better strategy would be to present a few options in an organized and fancy manner as if they are curated for them rather than presenting a large selection in a crude way. As a seller, your handling and presentation of the selected products speak a lot about the perceived value of the products. Customers subconsciously value a delightful presentation experience which they could take back home. For premium products, it is always best to showcase less options to customers sending the vibes of exclusivity. Moreover, even if the cost of products or raw materials are the same, pricing should be differentiated based on presentation or value perceptions. Though store owners would say “All products are equally good” but better looking products are often priced higher to maintain differentiation and normalize demand even if the cost is the same.
7) Customers need validation of their choices for making the final decision
Let’s say customers have identified a few items that they like. We have to gently nudge them from liking the products to wanting the products. Social validation works best for making purchase decisions quickly. Many of the customers may end up not purchasing at all if they don’t get any validation from the accompanying friends to convert the intention to purchase. A seller usually throws a line “Mam is right” or “this looks beautiful on you” or “this is the best ___ for you” to achieve the social validation from the group. Anchoring is another way store owners use to stimulate desire. They would often put an unlikeable product just fitting the customer’s criteria (but with poor pricing, utility or quality) against an already selected or preferred product to simulate a stronger desire in the latter.
8) For customers, budget ranges may not be flexible but the prices are
Customers choose their price range in the beginning and then agree on a final price for the product/s selected. Perceived value is never absolute but in ranges. Sellers also leave the price negotiations for the end. A small bargaining on the selected product towards the end works more than a small discount conveyed before any items are selected for purchase. Price discovery online is a click away through various websites but most customers are willing to pay small premiums for various aspects like immediate availability, quicker delivery, seller trust, return or quality assurance etc.
9) A lot can change over payment - make them convenient and try luck one last time
Close the Sale
You will be surprised to know how many people leave stores if they do not accept cash or a particular credit card or an online transaction. Customers often don’t have the cash or credit card handy or prefer certain payment modes more for various reasons like convenience, rewards etc. They may never come back if you lose them while transacting.
Moreover, a salesman would always keep the alternative choices floating around you (at the counter) till the very end of the transaction. Rather than taking it back to the shelf, s/he wants you to add that as an additional item or reserve it as a backup if you change your mind on the preferred one. The synonymous experiences in the e-com world are auto-saving of the cart, option of saving the items to wish-list and presenting check-out recommendations just before the transaction step. Even 1% drop rate daily at the final purchase step (ie transaction) is cumulatively a huge loss for the business.
10) Customer relationship and satisfaction give you long term business
Proactively Segregate and Resolve Bad Experiences
Businesses spend months and years building and maintaining customer relationships. This is what builds the chain of customers for them. Trial and loyalty rates are way higher for customers gained through word of mouth. A customer telling another person that the store has the best deals works way more than the marketing dollars. It makes sense to go an extra mile every now and then to entertain some loyal customers beyond your work timings or by taking up their phone enquiries. Mom and Pop stores often request unhappy customers to come at a certain non-peak time or have an exclusive space reserved for them where they could patiently discuss and resolve their issues. They don’t want unhappy customers to be arguing in front of the other customers. In digital products, you should always have an exclusive channel to resolve the issues of your unsatisfied customers. Easy returns and replacements have also been largely adopted by e-commerce companies from their local store counterparts.
Running any business sustainably is hardwork. My mother self-learned and did this for many years. We should all celebrate and learn from such self-made people who have been 10X product managers and 20X marketers way before we learnt the ways through books and courses. There are plenty of other learnings from distributers, whole sellers which I would share some other time. For now, please support by hitting the like and share buttons.