Transactional Vs. Relational Shoppers
Can't decide what information to include in your ads?
Surprise: There's more than one answer.
What is the most important information to put in an ad: Price? Selection? Quick and friendly service? Store hours? Brands we carry? Guarantees? Testimonials? The fact that we're a family-owned business?
Every person has a transactional mode and a relational mode of shopping. And the "right" thing to say can be determined only when you know which mode the shopper is in.
1. Transactional shoppers are focused only on today's transaction and give little thought to the possibility of future purchases.
2. Their only fear is of paying more than they had to pay. Transactional shoppers are looking for price and value.
3. They enjoy the process of comparing and negotiating and will likely shop at several stores before making their decision to purchase.
4. Transactional shoppers do their own research so they won’t need the help of an expert. Consumer Reports are published primarily for the transactional shopper.
5. Because they enjoy the process, transactional shoppers don’t consider their time spent shopping to be part of the purchase price.
1. Relational shoppers consider today's transaction to be one in a long series of many future purchases. They are looking less for a product than for a store in which to buy it.
2. Their only fear is of making a poor choice. Relational shoppers will purchase as soon as they have confidence. Will your store and your staff give them this confidence they seek?
3. They don’t enjoy the process of shopping and negotiating.
4. Relational shoppers are looking principally for an expert they can trust.
5. They consider their time to be part of the purchase price.
6. Confident that they have found "the right place to buy," relational shoppers are very likely to become repeat customers.
As was stated earlier, every person has a transactional mode and a relational mode of shopping, so don’t be surprised when you see yourself in both descriptions. You, like all other shoppers, are extremely transactional in certain product and service categories and wholly relational in others. Due to the fact that shoppers in transactional mode will shop all over town and love to negotiate, merchants often wrongfully conclude that most shoppers stay in transactional mode. But in truth, more purchases are quietly made by customers in relational mode.
Here’s a simple Transactional vs. Relational case study:
Ten shoppers in total, five of these shoppers are transactional, and the other five are relational. All shoppers want to buy the same product with a recommended retail price of $100.
The transactional shoppers will shop all over town at multiple stores before making their decision to purchase. At each of these stores, they ask a lot of questions, then leave. But each transactional shopper will return to only one store to make a purchase. This leaves a score of frustrated salespeople without a sale.
Meanwhile, five relational shoppers visit their favorite stores, make their purchases, and return home, accounting for a total of five store visits, five purchases, and zero frustrated salespeople.
Two Kinds of Shoppers (T) Transactional & (R) Relational
T1 3 store $70
T2 2 store $80
T3 5 store $60
T4 3 store $70
T5 5 store $60
18 visits $340
R1 1 store $100
R2 1 store $100
R3 1 store $100
R4 1 store $90
R5 1 store $90
5 visits $480
Average Sale: $82 - Average Gross Profit: $32* Average Profit Margin: 39%
*Assuming a Cost of Goods Sold of $50 and a pre-discounted, original markup of 100% (Keystone)
Beware of Averages!
Only 22% of store visits (5 of 23) were made by Relational Shoppers
78% of store visits (18 of 23) were made by Transactional Shoppers
50% of buyers (5 of 10) were Relational Shoppers
50% of buyers (5 of 10) were Transactional Shoppers
59% of dollars spent ($480 of $820) were by Relational Shoppers
41% of dollars spent ($340 of $820) were by Transactional Shoppers
72% of gross profit ($230 of $320) came by Relational Shoppers
28% of gross profit ($90 of $320) came from Transactional Shoppers
10% of ad dollars were spent targeting the Relational Shopper
90% of ad dollars were spent targeting the Transactional Shopper*
The majority of all retail ad dollars are spent on “sale, price-item and event” ads that target the transactional mindset. These shoppers represent a greater share of overall store traffic than of actual sales or gross profits because they tend to visit a greater number of stores in search of the lowest price.
Consequently, Transactional shoppers represent lower closing ratios, lower average sales, and smaller profit margins.
Relational shoppers represent a smaller share of store traffic, but a larger share of sales, higher closing ratios, higher average sales, and higher profit margins.
Intentionally or unwittingly, most companies target either the transactional shopper or the Relational shopper. Who have you been targeting?
Wizard of Ads specialize in marketing to the profitable Relational Shopper
Information Sources Behind the Transactional vs Relational Case Study
The terms “Transactional” and “Relational” are condensations of the highly respected research of Myers-Briggs regarding preferences among psychological types. The intent of the MBTI preference test is to reflect a habitual choice between rival alternatives. (i.e. Even though we use both the right and left hands, we will most often ‘reach’ with the hand we prefer. Similarly, every person uses both the transactional and relational style of shopping, but will respond first and most often with the ‘preferred’ attitude.)
More than 2,000,000 Americans take the Myers-Briggs test each year (www.capt.org) and based on their 30-year database, approximately 50 percent of the nation will prefer a “Transactional” style of shopping and 50 percent will favor the “Relational” method.
According to *Dr. Richard D. Grant, (*Considered one of the worlds leading corporate psychologists) Transactional/Relational preferences will stem principally from the Myers-Briggs Type Indicator. T and F preferences can be colored somewhat by J/P and be ‘salted’ a little by S/N.
The percentages used for markdowns below recommended retail in our example, are reflective of the American marketplace during the past decade. For more information, read the Business Research Yearbook edited by Abbass F. Alkhafaji, Ph.D. - 1146 pages, University Press of America; (May 3, 1994) ISBN: 0819195316 or visit the Center for Applications of
Psychological Type at www.capt.org.
*The figure of ‘90 percent of advertising’ being targeted toward the transactional shopper is an educated guess. In reality, it may be even higher than that. Remember - more ad dollars are spent in the newspaper each year than on radio and television combined. Take a look at today’s newspaper and factor all that you see, into the mix of ads that you hear on TV and radio. Then go to your mailbox and see how many pieces of junk mail arrived there today offering you a discount.