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Retail Daydream: Next-gen haggling and what it can do for marketing

Retail Daydream: Next-gen haggling and what it can do for marketing Brad Berens

If you own a smartphone -- and more and more people buy them each month -- then your iPhone, Droid, or (coming soon) Windows7 mobile device has changed your life. The smartphone is now the lens through which we see everything, linking our physical world to a layer of data and interactivity that changes what we think, where we go, and who we talk with once we get there.

This new data layer defines the third wave of the internet's evolution. The first wave was the birth of the web itself, and the second wave was the birth of two-way social media. Both waves took place in a flabby cyberspace that had no connection with the tactile landscape of our daily lives. To go online was like plunging down a rabbit hole into Wonderland, or through a wardrobe into Narnia. The third wave injects actual geography into cyberspace and vice versa. Today, when you check in on Foursquare, Gowalla, or Whrrl, you're both logging into a database and walking through a physical door.

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However, a lot of the time even after you check into your real space location, you still communicate with people through the handset rather than directly. How many times have you sat in a coffee shop and seen everybody hunched over a phone, silent but for clicking, with no spoken conversations to be heard?

Today's article concerns an unexploited opportunity in the current exciting wave of location-based services revolutionizing customer behavior. This is territory that we're covering extensively in the Geo-Loco track next week at ad:tech New York -- the biggest show in the interactive marketing industry. Both in the Geo-Loco sessions and on the Expo floor in our Mobile Pavilion and App Exchange, we'll explore the technologies and companies on the sharpest edge of this new kind of advertising and marketing.

While canny marketers are jumping into location-based technologies with both feet, the current approach can fail to channel these new customer behaviors in ways that benefit merchants in real space -- largely because the merchants themselves don't recognize their own need to change.

So I want to share a retail daydream. If my daydream were to become a reality -- and it wouldn't take much -- this brave new world would also open up new opportunities for marketers fueled by the most powerful force in our lives: face-to-face interaction.

The most exciting shopper marketing apps encourage lots of interaction with products and with stores. Shopkick for example, like Foursquare, competes for the check in, rewarding shoppers simply for arriving at the store. Scvngr CEO Seth Priebatsch (who is also speaking at ad:tech New York) has created an interactive "game layer on top of the world" in which companies create interactive challenges for users to take in a variety of locations. With augmented reality, Ben & Jerry's put "Moo Vision" 3D images onto their ice cream cartons that viewers could get via their iPhones -- work developed by the Circ.us Agency. These are all exciting and engaging technologies. Going forward, I believe that these technologies will also work to create more robust face-to-face experiences with people -- the original sort of interactivity.

Here's what I mean: Some years ago my friend Bruce Tulgan and I wandered into a coffee shop in New Haven where Bruce proceeded to order a gargantuan quintuple espresso. The dismayed young barista didn't have a handy button for that drink on the cash register, and her eyes widened as she tried to figure out how to ring up the drink. As she was about to charge Bruce for two double espressos plus a single, he interrupted, pointing out the price for an extra shot for other drinks (a lesser cost). He argued for a different way of determining what his drink should cost. Since Bruce is one of the more persuasive people on the planet, he convinced her and got his drink at the price he wanted. It wasn't until we had resumed our jaunt that I realized Bruce had deliberately gone off the menu in order to haggle. "I love negotiating in retail environments," Bruce told me with an ear-to-ear grin. It said something about his ability to change things in the world.

Bruce is an unusual guy, and in his retail haggling was ahead of his time. Many Americans, particularly Anglo Americans, don't like to haggle when it comes to new goods and low-consideration items. If you are in a grocery store and see organic bananas for 93 cents per pound, it probably never occurs to you to bargain for a price of 90 cents per pound because you saw that price the day before at the shop down the street.

Besides, with whom would you bargain? Most grocery store cashiers would look at you blankly and escalate your question to the store manager because they have not been empowered to haggle (more on this later). The same is true when you're looking at a shirt in Target or a pair of running shoes at Foot Locker.

We are comfortable haggling over big-ticket purchases like houses, cars, appliances, custom jewelry, beds, and the negotiated marketplace is alive and well in antique stores, junk shops, used book stores and, of course, on eBay and other online auction sites that twin competition and fast-paced bidding. In those environments, we all love to get a good value through interaction.

But it's a different story if you're, say, in Barnes & Noble looking at a copy of Steven Johnson's brilliant new book "Where Good Ideas Come From" that costs $26.95. You probably won't try to haggle with the clerk for a lower price even after you whip out your iPhone, take a picture of the cover and use the SnapTell application to discover that it costs $14.82 at Amazon. (Don't miss Steven's visionary keynote address at next week's ad:tech New York!) With savings like that, you can afford to wait for the book to be delivered a few days later.

Shouldn't the bookstore still want the sale? And shouldn't it have a mechanism for making the sale besides forcing the customer to join a club that only might result in a discount? SnapTell (an application I use all the time, and which was tellingly acquired by Amazon subsidiary A9) drives my attention from commerce to e-commerce, moving my engagement from the real world to the internet, and possibly using the bookstore's own WiFi network to do so!

But remember: With the third wave, the real world and the internet now overlap -- so why isn't the bookstore taking advantage of this?

Today, the only way for the employees in a Barnes & Noble store to engage with the rising tide of location-based activity would be for somebody to watch Twitter or FourSquare like a hawk for the right hashtag and then try to chase down the customer looking for a better price on Franzen's "Freedom" in the new fiction aisle.

Here's what I think should happen instead: When a customer walks into Barnes & Noble and connects to the store's free WiFi network, there should be a prominent button on the log-in page that says, "We aren't afraid to bargain" and drives the customer to a Barnes & Noble shopping application or mobile site that hooks into the various online shopping engines (PriceRunner, Google Shopping, even SnapTell).

As the customer browses, they should scan the items in their basket with the phone and keep a running tally. When they're done shopping, they should have three buttons to click on the phone -- one that says "pay & exit," one that says "pay cash," and another that says "bargain." If the customer presses the first button, they can simply walk out of the store having paid with a credit card. They save time, experience instant gratification with their purchase, and the store doesn't need to pay a cashier.

If they press the second button, they'll get a message that sends them to a clerk (they can also simply walk up and pay cash, of course, without using the app at all) where they hand over their money and walk out.

But if they press the "bargain" button, they'll go to a different desk where they can haggle with an empowered salesperson, somebody working at least partially on commission who can negotiate a fair price that keeps the customer happy and retains a profitable sale for Barnes & Noble -- perhaps even convincing the customer to buy a magazine or notebook as well. Will the customer pay more than they would at Amazon? Probably. But they'll also pay less than before bargaining, won't have to pay shipping, and won't have to wait. Moreover, they will walk back to their car having experienced a face-to-face human interaction fueled by the internet rather than despite the internet.

On the surface, what I'm proposing is similar to AisleBuyer -- one of the winner's of the PepsiCo10 challenge event that we produced with PepsiCo last summer. But AisleBuyer exists to limit interaction with employees. It reduces costly person-to-person contact and enables customers to shop, get coupons, purchase, and leave the store without ever having to talk to another human.

I don't deny that AisleBuyer is onto something. In data from the most recent report by the Center for the Digital Future at USC's Annenberg School (where I have the privilege of being a senior research fellow), we see an interesting three-year decline from 30 percent to 24 percent among internet users who said they were uncomfortable without face-to-face contact in online shopping. Folks are getting used to automated shopping.

On the other hand, that same data shows a two-year slight 2 percent uptick in people who would miss the presence of fellow shoppers if they only shopped online. So there is room for both the people-free AisleBuyer strategy and my people-plus-databases-powered new form of haggling.

So why do I think that face-to-face interaction is a better retail experience, and what does this all have to do with marketing?

Most businesses want to scale and the enemy of scale is friction, which is why the internet has been such a boon to so many businesses that can exploit its frictionlessness, but also why the internet has been bad for newspapers and other businesses that are in the business of distributing physical bits of media rather than information (CDs and books spring to mind).

But while friction is bad for business, for life it is a different story. Friction creates the most satisfying and memorable moments in our lives. You probably don't remember your first email or instant message, but I'll bet you do remember your first slow dance and your first kiss. From a physiological perspective, friction is how we wind up bringing babies into the world, and why we enjoy the process of doing so. Simply being around other people lights up our minds across the range of our senses in neuroscientific ways that we're only beginning to understand. Just think about how much more likely you are to laugh out loud at comedy when you watch it in a crowded theater, or at the very least with another person, and you'll see what I mean. Friction leads to satisfaction, not always, but often.

The internet is the consummate frictionless environment, and once we are searching for something it becomes, to quote John Battelle, "the database of our intentions." But this is more true of particular intentions than general ones: it's more true of searching rather than it is of exploring. If all I want is to buy the Franzen book, then I can order it on Amazon and the job is done, but if what I want is more nebulous -- something fun to read, for example -- then wandering in a bookstore and talking with a sales clerk can lead to a higher degree of satisfaction, particularly if it's the same sales clerk with whom I have been chatting about books for several years.

I've been talking about book buying a great deal here because it's a clear example, but the same holds true for consumer packaged goods. A bottle of Mr. Clean is a bottle of Mr. Clean, and one day soon information about where the cheapest bottle of Mr. Clean is for sale within a 10 block radius of a customer's current location will be only a click away on a smartphone.

We do not as a culture have a good metric for that higher level of satisfaction driven by context, and because of this lack, we wind up making decisions about where to buy goods like groceries and sweatshirts based on price alone. Generally speaking, though, customers don't necessarily want the best price -- they just want a better price than the first one they see. 

For marketers -- particularly marketers of retail environments and shopper marketers focused on the customer "near the point of purchase" rather than in the wild -- a haggling-friendly environment can activate more parts of the customers identity and create a more cognitively satisfying experience than searching and clicking.

Traditional retail cannot compete on price, so it has to compete on environment. Digitally decoupling fixed price from a retail environment might rescue a portion of the sales slipping away from commerce to e-commerce. Moreover, when we add on top of this a layer of manufacturer coupons, promotions, and the sometimes-simple pleasure of talking with another person, we work to create a satisfying context.

Everything that can be digitized eventually will be digitized. The smartest folks in business and marketing today will spend time thinking about what cannot be digitized, the remainder of the digital division problem. If I'm right, then that remainder will be the fertile soil of success.

Brad Berens is chief content officer for iMedia, ad:tech & CMO Executive Summits.

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A trusted advisor to companies of all sizes and a respected voice within the interactive media industry, Dr. Brad Berens has enjoyed a wide-ranging career that features storytelling as an organizing theme. These days, he divides his time among...

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