Herb Sorensen Knows What Your Customers Are Thinking

Herb Sorensen, author of Inside the Mind of the Shopper, has spent his career studying the microscopic analysis of millions of shopping trips. He knows what customers are thinking. Sorensen believes improving the efficiency of the retail experience is no longer an option and explains how to improve customer engagement through enhanced customer experiences.

What sparked your interest in the "science of shopping" and compelled you to write Inside the Mind of the Shopper?

My interest in shopping, per se, began with an accidental curiosity in what customer traffic patterns might look like if you had a map of the paths of hundreds or thousands of shoppers in a store. This came from seeing many years ago a time lapse photo of automobile traffic through an intersection, and the thousands of days I had spent over the years, virtually living in supermarkets, interviewing and observing customers.

Once we had adapted RFID tracking developed for the military in Desert Storm to the problem of tracking customers in stores, the real science began. It was almost like I was back in graduate school doing my first serious scientific research. It was exciting and strange to be conducting customer-focused research in a mundane commercial environment. After nearly a decade of this, and approaching retirement, I realized that I had to organize and write all this down. My customers weren’t calling for the information, but I sold my company to a global organization, TNS, that was interested in a book, and supported me in writing it.

Your research is based on the idea that since the earliest days of trade, marketing aims to close the gap between merchandise and the customer in two basic ways: bringing the merchandise to the customer and bringing the customer to the merchandise. How has the economic downturn altered marketing and the customer creation process?

The basic role of retailing remains the same. However, it is true that casting the problem of retail as one of bringing merchandise to shoppers vs. bringing shoppers to merchandise does focus solely on the physical issue of delivery, fulfillment and customer satisfaction. We can also focus on the process by which customers become aware of product options (advertising) and their means of expressing acceptance of the offer, which, with the advent of technology, means that this may occur far from the actual point of physical customer fulfillment and delivery.

One significant shift in packaged goods retailing, with the economic downturn, has been a move by customers to favor hi-lo pricing over EDLP—every day low pricing. This is not a rational response, but an emotional response. It is what keeps hi-lo pricing strategies alive. (Hi-lo: Most prices are higher than they need to be, but the shopper has items on sale that he or she can, hopefully, cherry pick to reduce the total bill.) Even committed EDLP (more efficient) retailers must be seen as offering "specials" to attract the customers.

Despite what has been a disappointing year for retailers, some states are faring better than others, including California, Nevada, Arizona and Florida*—Meccas of bargain shopping and outlets. What sort of trends do you think we will see regarding retailers remaining competitive?

If you are speaking of those named states as thriving, we must be reading different analysts. Richard Florida’s commentary in The Atlantic Monthly is the best I have seen: http://www.theatlantic.com/doc/200903/meltdown-geography. Those states are economic basket cases, hardly a formula for anyone thriving.

On the other hand, Walmart remains in the van, leading the way to American prosperity through driving waste and inefficiency from the world’s largest industry. Walmart is hated by an assorted assemblage of anti-prosperity, faux-consumerist malcontents. Nevertheless, every household in America saves upwards of $1,000 per year because of Walmart, whether they are customers of Walmart or not. This is simply because of Walmart’s impact on pricing, including that of its competitors.

The biggest trend you can expect to see is more prosperity in the heartlands and less on the coasts, with some notable exceptions.

I aggressively support customers by aligning my work philosophically with what Sam Walton began many years ago—blowing waste and inefficiency out of the retailing process. Only by letting the winners win, and the losers die, will everyone win in the end.

What is an example of a company in the last year that has revamped its strategy to better connect with customers on a psychological level?

An excellent example is the interplay between Tesco and Walmart in the growing small store competition. Tesco was first out of the gate with their Fresh & Easy offer, which was countered months later by Walmart’s Marketside. There is a lot more to this, but just in the past few months Fresh & Easy has adopted elements of hi-lo pricing with a new line of lower cost merchandise. As I noted before, hi-lo appeals to emotional, psychological thinking, not economic rationality. So that would serve as a case study.

During this economic crisis, customers are shopping less. In light of this, what surprising trends do you see in customer spending on a global scale?

I don’t study global trends, per se, but there is an interesting concept called "licensing" that I see impacting customer’s food shopping. Basically, the concept is that if the customer buys some meritorious foods like salad or fruit, the customer feels "licensed" to then purchase something like candy or ice cream.

Extending this concept to the economic downturn, you find that customers who are economically distressed and can’t take the tropical winter vacation feel licensed to reward themselves with a steak or other premium reward. Candy is a small pleasure, perhaps not necessary, that presently continues to serve as a licensed reward for customers who are otherwise suffering. You will no doubt see other irrational but explainable behavior of this type in the coming months.

*According to RBS Greenwich Capital

Interview by Blake Landau, publisher