January 5, 2011
Q&A with Kit Yarrow, consumer psychologist
Posted by: Aaron Baar - Chicago in North America
Kit Yarrow spends her time getting into the minds of consumers. A professor of psychology and marketing at Golden Gate University in San Francisco, she explores what motivates consumers, the marketing messages that spur them to action and why people buy what and when they do. We talked to her late last year as we were exploring one of our ‘10 Trends for 2011,’ The Urgency Economy—the idea that as time-sensitive deals experience a renaissance among younger, hipper and more “in the know” shoppers, the “act now” strategy will extend beyond the Web.
Where do you think this Urgency Economy comes from?
The problem [retailers] have is that there’s an abundance of choice. And consumers need a reason to pull the trigger. And an age-old reason to actually make a purchase has always been fear of missing out, the heightened emotion that comes with the possibility that a sale or a price or a product won’t be available the next time the consumer comes around. With the competition in retail today, not only because of the economy but because consumers have the world to choose from with the Internet, there has to be a reason to get somebody to buy something.
So has it been increasing, and will it increase even more?
The idea of temporary reductions and then back to full price is newer. I don’t think “increase” is a big enough word to describe how it’s a phenomenon—it’s mushrooming in popularity with retailers. There will be a backlash to that—the thrill won’t be as intense in a few years for consumers. And it won’t have the same effect. But right now it’s kind of the magic potion.
What’s fueling this? Was it the recession? The availability of online and social marketing and things like that?
Well, so there’s social media and online. And there’s the mentality for consumers that they’re very, very interested in bargains. And consumers are really more open to innovation. They’re not shy about approaching new techniques by retailers. I think even just two years ago Groupon couldn’t have worked because consumers really wouldn’t have trusted it. But today they’re much more open to innovative types of promotions.
Why wouldn’t they have trusted it?
Think back to three years ago yourself—getting an e-mail with a marketing message in it was a little bit more of an intrusion than a welcome guest. So the idea of trusting something like Groupon or understanding that a promotion really is for a short period of time … it’s like it was a slow crawl and then a sudden burst of trust. And part of that was fueled by necessity. Consumers felt like they really needed to find ways to save money. And they were much more open to looking at different opportunities.
But this urgency approach isn’t new. Kmart has had the Blue Light special, QVC has a countdown clock in the corner. It had been a very down-market technique. What changed?
It seemed in the past it was like getting rid of products. The consumer looked at a lot of those specials with a “loss leader” mentality. And now consumers look at it more opportunistically. It’s an opportunity to get something of value.
And what it’s tapped is their sense of “I’m so smart.” Gilt Groupe—part of the reason why that works is it’s a membership, e-mail-driven product. And consumers feel like they’re in the know, capitalizing on something other people aren’t smart enough or savvy enough to know about. And so they feel like they’re getting this reduced price because they’re a better shopper and smarter, not because the retail is dumping something or using a tired old tactic to get them.
How does technology play into this Urgency Economy? Does the immediacy of the Internet fuel it?
People multitask using technology constantly. And they actually look forward to a break in their work activity when an e-mail pops in about a shopping opportunity that’s temporary that they have to address right then. It’s like a little mini-vacation.
With the e-mail, what’s happening psychologically is that you’re forced into making a decision about whether you want something or not. What I’m finding with Groupon is that people that didn’t know they needed a hot air balloon trip suddenly decided they did. And I think a lot of consumers are spending money that they wouldn’t otherwise have spent.
So will this start pushing us back into pre-recessionary shopping behaviors?
I look at it more like the rule-outs—that people weren’t allowing themselves to consider things like pedicures. And that’s been since the recession. And I think that once people do get that pedicure, they might get it again. It’s breaking them out of that recessionary mind-set of not even considering a lot of luxury-oriented purchases. They wanted to do it all along, and now they have permission.
So is The Urgency Economy basically an extension of “I want that” to “I want that now!”?
I don’t think the idea of getting it now is the point. I think it’s, “I didn’t know I wanted that until I realized I might not be able to have it later.” People are buying things they didn’t really plan on buying, didn’t necessarily need or know they wanted. It’s presented into their consciousness through these urgency promotions. And once it’s in their brain, then it’s something they are considering. So part of it is that these urgency promotions bring a whole new category of products back into consideration for consumers. And then part of it, too, is that fear of missing out and the need to act quickly.
Is this moving into the offline world of retailing?
We’ve seen a great increase in the number of “midnight madness” sales. I was doing a little research on why in the heck everybody went so crazy during those tax holidays, and I was thinking, “Why are people so wacky about saving 4 or 5 percent?” That doesn’t make sense to me, when every retailer is going crazy offering them 20 to 30 percent off. What I’m hearing is they don’t know when they should buy or when something’s going to be on sale.
Do we see that happening more in the brick-and-mortar world in the coming year?
I think it’ll happen more. And then right after that, I think people are going to give up on it. I’m just getting enough of a sniff of a little bit of wariness about the authenticity of the opportunity. Especially upscale consumers, who are maybe a little bit more sophisticated shoppers—I think they’re going to find it to be just more white noise.
Now, do you see location-based technology playing into The Urgency Economy?
Absolutely, without a doubt. Especially where you might go into a mall and receive a promotion on your phone, I think people will consider that an opportunity. I think that’ll be huge.
Finally, name one trend we should keep an eye on in the near future?
Actually, one of the things I look at most often is, in fact, what you called about. I was very excited about the idea of urgency playing a big role in getting people to buy things. I think retailers are becoming really creative around how to become relevant and get people to pull the trigger using a whole new array of psychological tools, including limited supply, personalization options, catering to people’s need to feel central, seen and relevant.
If I were going to say one thing, that would probably be it: that today consumers need to feel like they’re important and relevant and seen. There are a number of ways retailers are doing that. And one of the ways is through urgency.
Photo credit: Misti Layne
