Giving customers the right cues will help move them towards better shopping behaviors, according to Duncan Simester, a professor from the Massachusetts Institute of Technology Sloan School of Management.
For example, MIT research found that for an apparel cataloger, how a customer service representative responded to an item being out of stock affected how the sale went.
A test of 1,000 reps was broken in to five groups, each given a differing response. Some simply said “This item is out of stock,” while others blamed the outage on a supplier problem. Another said it wasn’t available because it was so popular, while one group offered $5 off shipping if the customer could wait for the item. A final group offered a 10% discount if the customer could wait. During the 30-day test period, 23,000 orders were placed for 63,000 line items, Simester told attendees at the New England Mail Order Association’s spring conference on Thursday. Twenty-two percent of the items were out of stock, a number the catalog found acceptable because backstock might mean items would become obsolete. Ultimately, saying the item was out of stock because it was so popular proved to be the most successful tactic, both in terms of number of orders placed and profitability. Offering the 10% discount was second in number of orders, but last in profitability. This, said Simester, is just “giving away money to people who would have bought from you anyway.
Pricing cues are also important, said Simester. Most consumers know how much a can of Coke costs, but have no idea what is a good price for a package of baking soda.
To determine what is a fair price for baking soda, the customer will look to the prices of other items in the market they are familiar with as “signposts,” he said. If prices in general are good, he or she will assume the baking soda price is reasonable as well.
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