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How real-time feedback influences self-scanning and online shopping
Article by Constant Berkhout, Consultant for Retail marketing and Shopper insights,¬†
In an attempt to improve the shopping experience supermarkets have introduced new technology on the shop floor. Examples are smart shopping carts, hand-held scanners and shopping apps for the smart phone. The consequences on the shoppers‚Äô behaviour sometimes reach further than the intended effect. Supermarkets‚Äô objective of hand-held scanners is to reduce the investment in checkouts and convert these into selling space. And they sell hand-held scanners to shoppers as their best friend to speed up the shopping trip by avoiding the check-out lane. However, these scanners do more than this: They make the prices of individual items more salient and often show a running total. Will this real-time feedback influence what and how much shoppers purchase? A new study by Van Ittersum, Wansink, Pennings and Sheehan shows the unforeseen effects. The results of the study can also be applied to online shopping where people can keep track of their spending during the shopping trip.
The researchers conducted experiments with shoppers in three different environments: A lab store, an experimental online grocery store and a field study in a brick-and-mortar grocery store. As the outcomes were similar for the sake of convenience I will use the grocery field study to demonstrate the effects of real-time feedback during shopping.¬†
Half the shoppers at a grocery store in Atlanta received an iPad that tracked their spending. In both groups participants were asked if they had a budget in mind for their shopping trip and if so what the maximum amount was. To make sure the effect of having a budget was consequential the shoppers could receive a higher reward if they stayed within their budget. In the US an estimated one-third of the population shops on budget.¬†
Budget shoppers that received real-time feedback:¬†
- Spent 35 % more than budget shoppers that received no feedback on their spending. At the same time they stayed within their budget.
- Spent a higher (95 %) share of their intended budget than other budget shoppers did (79 %).
- Purchased 20 % more items. The number of national brands increased by 28 % and the number of store brands remained stable. As a result, the share of store brands declined from 20 % to 11 %.
- Purchased more hedonic products such as chocolate: 27 % of the basket versus 21 % among those without feedback.
Non-budget shoppers that received real-time feedback:
- Reduced spending by 25 % versus non-budget shoppers without real-time feedback.
- Kept the number of products in the basket stabile.
- Almost doubled the number of store brands and reduced the number of national brands by 20 %. The share of store brands increased from 7 % to 18 %.
- Did not change the number of hedonic products significantly.
From a rational perspective you would expect budget shoppers to use any available technology to further reduce their spending. On the contrary the opposite effect occurs: They spend more if they receive real-time feedback. Providing real-time feedback to non-budget shoppers makes them spend less which might be a big shock for supermarkets.¬†
When we apply insights from behavioural economics we come to a better understanding of these results. Budget shoppers use their budget as a reference point. They perceive an overspending as a loss and an underspending as a windfall. When they receive no real-time feedback, they control themselves very carefully by building in a safety margin as they weigh losses twice as heavy as gains. Real-time feedback enables them to spend more of their budget without the risk of exceeding it. Budget shoppers spend the ‚Äúunexpected windfall‚ÄĚ on more national brands as these brands yield budget shoppers more utility. They also feel more free to switch to hedonic products rather than utilitarian products. Real-time spending feedback alleviates spending uncertainty.
The impact of real-time spending makes the price of each product and the total basket more salient for non-budget shoppers. As a result they reduce the overall amount of spending and switch to store brands. Budget shoppers are already inclined to track their in-store spending anyway through shopping lists, calculators and mental counting, so the availability of real-time feedback does not change the salience significantly for them.
Adding smart shopping carts might increase consumer welfare. Real-time spending feedback improved the shopping experience of budget shoppers and resulted in a larger intent to purchase again at the store. These influences did not occur among non-budget shoppers.
With such large differences in effects between budget and non-budget shoppers supermarket managers need to carefully examine the effects on customer satisfaction and store profitability before they implement real-time feedback through new technology in-store or online shopping features. Real-time feedback might benefit both shoppers and supermarkets if:
- The supermarket has a high relative share of budget shoppers, who will increase overall spending as a result of real-time feedback.
- The supermarket has a high share of store brands. Typically, store brands generate a higher margin so that the increased price salience with non-budget shoppers is compensated with a higher share of profitable store brands.
- The supermarket attracts many new budget shoppers by launching real-time feedback as the first supermarket in the catchment area. Budget shoppers indicated to increase their loyalty to those stores.
- The supermarket uses other features of the smart cart shopping technology, such as promotions and loyalty program, to personalise the shopping trip and to mitigate negative effects on spending by non-budget shoppers.
Read more in ‚ÄúSmart Shopping Carts: How Real-Time Feedback Influences Spending‚ÄĚ, Van Ittersum, Wansink, Pennings, Sheehan, Journal of Marketing, 2014