Are small purchases the lifeblood of business?

SmartCompany, August 7, 2017

For some businesses those small, often incidental purchases can make a real difference when it comes to generating revenue and boosting that bottom line.

For the local milk bar it’s a packet of gum or chocolate bar that a customer grabs when they run in for milk and bread. For newsagents, it could be a $1 scratchie or packet of stickers for the parent with a demanding child in tow.

So how can businesses make the most of these incidental or impulse buys? And is putting up barriers – such as minimum spend requirements for non-cash transactions – making it more difficult?

Here we get some insights from social researcher, business trends expert and author Michael McQueen, as well as small business owners about how to create great incentives – or gateways – to really drive those incidental purchases.

Firstly, creating roadblocks in the customer journey is a surefire way to halt those impulse buys – and it’s likely to result in customer dissatisfaction too.

(Roadblocks) create friction for the customer,” McQueen says. “Every point of friction that leads to irritation, confusion, complexity or bureaucracy will stand in the way of a customer making a purchase, especially an incidental one.

“Things like not having EFTPOS/credit facilities, prices not being clearly marked and carry bags costing an additional amount are all good examples of friction in the convenience retail sector.”

McQueen says ditching minimum spend requirements can also help businesses drive sales and ensure customers walk away happy.

“When you know how much the charges are for transactions, the notion that any business would place a minimum spend is ludicrous,” he says.

“They have become locked in the paradigm that every convenience for customers should come with a corresponding cost or restriction. This sort of mentality is outdated, small-minded and could see the demise of a business very quickly.”

A proven tactic in opening gateways to incidental purchases is knowing where to display those ‘grab and go’ items, he says.

“This power of suggestion is a big reason behind the psychology of product positioning,” McQueen says. “The moment the premium of convenience outweighs the additional cost we pay for it, we’re glad to spend.”

Small business owners Alison Lai and Sophia Masters, who run a sub-newsagency and lottery outlet in Melbourne’s Ascot Vale, agree.

“When we need to increase awareness of particular items, we would normally place them as close to the EFTPOS machines as possible, or close to the Tattslotto products counters.

“We find consumers only pay attention to products right in front of their faces, therefore products have to be placed where customers often stand. These are the prime real estates in our store.”

McQueen says other ways to ensure a great experience for customers include:

Knowing your clientele: Larger retailers use loyalty programs to capture customer data and draw insights that allow them to customise their offering more effectively. The beauty for small businesses is those high-touch relationships; that sense of being ‘known’ by a local business is a key competitive advantage that big stores can’t match.

Be the customer: Try to see your store through their eyes. When a customer walks in, what does the store look like, smell like, sound like? Putting yourself in your customer’s shoes can reveal some powerful insights that can improve the experience they have.

Have reward cards: This is a clipped card system whereby people purchase something X number of times to qualify for a free item, or reward. Research indicates that the best way to make these work is to give customers a card and give them a psychological ‘head start’ by clipping the first three or four.

Special offers: Proven tactics include offering ‘three for the price of two’, or time-bound discounts such as ‘20% off for today only’.