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Marketing to 'cherry pickers'.

THESE PEOPLE ARE OUT there, in droves. You might even be one of them yourself. Their seemingly wayward shopping behavior has for years confounded retailers and researchers. According to new data from more than 23,000 grocery purchases over a two-year period, it appears that these shoppers are doing quite well for themselves.

These shoppers are the "cherry pickers"--so sensitive to prices that they may spend hours hopping from store to store to pick the best-priced items. They pore through stacks of coupons, planning their shopping trips for intricate patterns of retail attack that would make Norman Schwarzkopf proud.

They also have a substantial impact on retailing. Professors Stephen Hoch of the Wharton School and Edward Fox of SMU examined a database of purchases made at two major Chicago-area supermarket chains. Based on these purchasing patterns, they categorized grocery shoppers three ways. Store loyals, 27 percent of the sample, shop at the same retailer more than 80 percent of the time. Store switchers, 55 percent of the sample, shop at multiple retailers within a category but not on the same day. Cherry pickers, the remaining 18 percent of the sample, shop at two or more grocery stores on the same day at least once each month.

The researchers were careful to screen out non-cherry picking behavior from that of the true cherry pickers. For example, they excluded those who visited multiple stores each month but made their additional purchases because they forgot to pick up one or more items on an earlier trip.

The cherry-picking group was particularly interesting to Hoch and Fox, in large part because of what marketers have generally assumed about these types of buyers. The dominant view has been that, although these highly price-sensitive consumers invest a lot of competitive energy into their shopping, they couldn't save enough from store-hopping to justify the time and gas money involved.

Hoch and Fox found otherwise. They examined each shopper on each shopping day, calculating whether they paid a higher or lower price at the two supermarkets for all purchases within ten product categories. Next, they calculated how much the shoppers actually saved relative to the higher price. On average, the cherry pickers saved $22.90 off the higher prices on the days they visited two stores compared with the $7.85 they saved when visiting only one store; the savings from visiting two stores was $15.05. Hoch and Fox took this result and compared it to the cherry pickers' opportunity cost (a function of the average extra time spent times Chicago-area wage rates). They concluded that this cherry picking behavior makes sense economically for most households.

An important difference was evident between cherry pickers' behavior at first-choice, "primary" stores versus others. In their analysis, for each household Hoch and Fox determined the store at which shoppers spent the most money and coded that as the primary store. Then they looked for any different patterns of spending at the primary store versus secondary stores. As you might expect, the secondary stores take it on the chin from cherry pickers, because price-sensitive shoppers go to these stores to buy specific low-cost items and nothing else. Secondary stores sell less per shopper and, to make matters worse, earn lower margins while doing so.

So who are these cherry pickers anyway? There are a few distinguishing characteristics: They tend to be older, middle-class and to have slightly larger families than do most people. However, Hoch and Fox found that demographic differences from non-cherry pickers were pretty small. As Professor Hoch put it, "Some cherry pickers are rich. There are skinflints everywhere."

So how should retailers respond to these, um, frugal shoppers? If you're hoping to break the cherry picker from his or her task, you'd better be particularly adept at store layout and cross-selling; cherry pickers come into a store highly focused. A much better bet is to generate enough loyalty to be the shopper's first choice, thereby preserving some margin.

Actually, "generating loyalty from customers" sounds like good advice for any marketer, doesn't it?

Jim Karrh, Ph.D., is associate professor of marketing and advertising in the University of Arkansas at Little Rock's College of Business and senior consultant with CJRW Executive Strategies in Little Rock. E-mail him at jakarrh@ualr.edu.
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Title Annotation:On Marketing
Author:Karrh, Jim
Publication:Arkansas Business
Date:Feb 2, 2004
Words:713
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