The Price is Right: Shopping Modes

When Wizards come together, interesting things start to happen, and you learn some cool stuff from some incredible minds.  I’ve been following a thread on a private-newsgroup for graduates of The Wizard Academy – the topic is a discussion of price as the imperative in a shopper’s decision to buy.

You know the basic debate:  price is king versus value is king.  And some of you may recall I weighed in on the subject a year-and-a-half ago.  But I think it’s time to revisit the topic, because it really isn’t as straight forward as you might think.

The issue of price, or at least the perception of price, is integral to the buying decision process and to the characteristics of the personalities for whom you tailor both the buying and selling processes on your Web site.  But before we go too far, I’d like us to think about the two classic modes of shopping:  the transactional shopper and the relational shopper.  This is really where our discussion of price begins.

In a recent Monday Morning Memo, Roy H. Williams laid out the differences between these two modes of shopping (and I’m borrowing heavily from his stuff here ‘cause I couldn’t say it better).

The transactional shopper:  

  1. is focused only on today’s transaction and gives little thought to the possibility of future purchases.
  2. fears only paying more than she has to pay.  Price is the primary determinant of value.
  3. enjoys the process of comparing and negotiating, and will shop at several stores before making a decision to purchase.
  4. does her own research so she won’t need to consult an expert.  Consumer Reports is published primarily for the transactional shopper.
  5. doesn’t consider her time spent shopping as part of the purchase price.
  6. is anxious to share the ‘good deal’ she’s found.  The transactional shopper is an excellent source of word-of-mouth advertising.

  The relational shopper:

  1. considers today’s transaction to be one in a long series of many future exchanges.  The business has priority over the product.
  2. fears only making a poor choice.  Confidence is the primary motivator of a purchase.
  3. doesn’t enjoy the process of shopping and negotiating.
  4. is looking principally for an expert he can trust.
  5. considers his time to be part of the purchase price.
  6. feels confident he has found ‘the right place to buy.’  The relational shopper is very likely to become a repeat customer.

You may incline toward one shopping mode, but nobody is always transactional or always relational.  You probably see bits of yourself in both descriptions.  Also, as with all other shoppers, your shopping mode will very likely be a function of the product or service category.  Eggs tend to be transactional products.  Soda tends to be a relational product.

Because transactional shoppers go all over to get the best deal and love to negotiate, merchants tend to come in contact with the transactional mode more often than the relational mode.  So they conclude price is important to more of their potential customers.

But consider this example.  Six shoppers are looking to buy a TV.  Three of these folks are transactional shoppers; three are relational.  The transactionals each go to five different electronics stores, ask lots of questions and haggle a bit on price.  Then each one buys a TV at one store.  Fifteen store visits total, twelve frustrated sales people, three purchases.  The three relationals each go to their favorite electronics store – one they trust or had a good experience with before – talk with the sales person, purchase a TV and go home.  Three store visits total, no frustrated sales people and three purchases.

Now, here’s the math:  each group of shoppers accounts for 50% of the sales volume, but the three transactional shoppers account for 83% of all store visits, while the three relational shoppers account for only 17% of all store visits.

See how you might start thinking price was the key selling point in a decision to buy?

Price versus confidence.  Transaction versus relationship.  The question of what constitutes value.  The question of how you shape your site based on these modes of shopping.  Important stuff to think about.   So pense for a while on where you think you fit in the equation.  I’ll be back to dig a bit deeper.

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