According to InfoScout.com, a national dollar store chain
has identified Gen Z's (under 24) and Baby Boomers (55-64) as their primary
customers.
The article then goes on to point out that while aluminum
foil is only a dollar at the dollar store, the box you buy contains 27 square
feet of product.
In contrast, at a well known big box store, you can get 75
feet of foil for $2.08.
That means that you are paying 3.7 cents per square foot at
the dollar store, versus 2.7 cents per square foot at the big box store. A premium of 37%.
Interestingly enough, when this fact was pointed out to the
dollar store fan (a Boomer) and then he was asked where he would buy his foil,
he responded "At the dollar store."
When asked why, he replied "Because it is a dollar."
What's
going on here? What have we learned
about consumer behavior that can explain going to the dollar store in the first
place? Why are Gen Z's and Boomers more
likely to shop at the dollar store? Why
did the person keep going to the store despite the evidence presented? Would another approach have been more
successful in persuading him to shop elsewhere?
Which one and why?
Stone,
J. (2017, November 7) Boomers As
Value-based Consumers. mediapost.com. Retrieved November 8, 2017, from
https://www.mediapost.com/publications/article/309858/boomers-as-value-based-consumers.html?utm_source=newsletter&utm_medium=email&utm_content=headline&utm_campaign=106027&hashid=qPjrjs2d4CzuoIyymSYheeVOsxs
14 comments:
I think for most shopper are willing to satisfice quality for quantity on house essentials. There is a significant trend of affluent shoppers moving away from traditional brands and accouterments to save money for other things they consider essential like experiences. (vacation, dinner out, drinks, etc.)
Dollar stores are usually in convenient locations and have all your essentials for $1, so people tend to stock up on things.
I think people continue to go to dollar stores because of the fear of missing out. Most dollar stores have staples of off name products, but they sometimes get buyouts from big brands like Gatorade, wise and other famous names.
When I first read this post, the large popcorn video from class popped into my head. I also remembered how only 1 person who did buy the smaller bag of popcorn said "It's all I need". Which would also apply for anyone else with retirement high on their list of priorities. So I guess it makes sense when looking at it from a retirement perspective. Baby boomers are on the cusp of retirement and would seem logical to quit spending as much on household 1 and done goods. Honestly, it seems like the smart thing to do now that I think about it. I always over use the household good items I could be getting at the dollar store, such as foil, plastic cups, paper napkins, ect.
Also, I believe it will be quite difficult for other consumer markets to try to steal these customers from the dollar general. I defiantly don't think they can use scarcity. As to the fact that these products are everywhere. So trying to spin it as it was, would be a waste of time and money. However, I would probably try the liking and reciprocation.
For example, Target could run an add campaign that tailored to baby boomers. I would also try to come up with some kind of way spin it as a way to save for retirement though a rewards program or something. That way it has the feel of "reciprocation" where the baby boomers would buy from Target, and in return target will some how help them save for retirement. Still though this is a long shot.
As for Gen Z, these people grew up during a recession. Plus, they are young, and when you are young you are broke. Hence why they will probably shop at the dollar store. If I were a dollar store owner, I wouldn't worry about losing these consumers until get get older and start bringing in their own income.
I think it is Dollar store's unique shopping mode that appeals the Gen Z and Baby boomers. While a dollar might seem a little, there are all kinds of stuff that ranging from different uses that can be purchased in the store. Moreover, as a Gen Z, I find it a very simply way to calculate the total price of my purchase. Simply counting the number of items in the shopping cart and I can know the cost of my shopping.
The more specific reason I think dollar shop is attracting Gen Z is that Gen Z enjoy shopping in physical store than millennials--according to a new research on PricewaterhouseCoopers. Gen-Z are normally budget limited and thus I think dollar shop is attracting to them.
For baby boomers, according to Statista, Shoppers of the Baby Boomer generation named the product price as the most important feature when choosing between groceries. Even though other stores might have a better deal on aluminum foil, but the unit price of aluminum foil is 1 dollar, and it just looks so little.
In week 5 of this course, we studied Motivations. I'm reminded of an article "Happiness, Inc." which spoke about how powerful joyful emotions can become preeminent in the consumer's mind and lead them toward buying practices that may or may not be in their best interests.
For the Boomers, it seems to me that they would derive a sense of personal satisfaction from shopping in the Dollar Store for foil (despite the fact that for double the price they would get 3X more product elsewhere) because it triggers a psychological sense of frugality within their minds. They probably recall the horror stories of the Great Depression which their parents (relentlessly) told them and may have been raised with a mindset of saving a penny wherever possible for that unforeseen 'rainy day.'
For Gen Z, being strapped for cash is commonplace but the idea of getting value while spending less money is always appealing. In this manner, both consumer groups derive happiness in their purchases for entirely different reasons.
Alternative marketing approaches that might woo Boomers and Gen Z would be if a competing store used Authority to present themselves as the sensible choice for the value-conscious consumer.
I think that baby boomers prefer purchasing at dollar stores because dollar stores offer them a convenient way of shopping. Also, the smaller environment makes them find out the products that they need very quickly. In this case, the consumer insight of Baby Boomers is: I want convenience. According to the research, Gen Z prefer shopping at physical retail stores. Since they don't have a lot of money to buy things they want, shopping at dollar stores is a cost-saving way for them to purchase.
The trick of repackaging and price-setting make me realize that most customers tend to give more attention to face value. Most customers just focus on the ending result, namely the ultimate price or the ostensible value that is presented to them. For example, people prefer to buy the product that is $5.99 instead of $6 because they feel good when they get a deal.
Also, as we learned in class, it seems like the decisions costumers make are more emotion-driven. Boomers have a preference for dollar stores as the stores facilitate their shopping with convenience and cost-effectiveness. Even though aluminum foil at a dollar store is slightly overcharging than in a big box store, I assume boomers won’t just go there just for buying aluminum foil. Boomers perceive that the overall savings would be much larger than the total they can save in a big box store. They feel that they gain more deals form a dollar store than a big box store. Yeah, it is all about feeling.
In order to persuade them to shop elsewhere, liking can play a role here. To speak the language that boomers prefer to hear to alter their preference, such as providing the benefits they perceive in dollar store. Other than that, scarcity is an important technique to differentiate the store from dollar stores. In other words, to offer inclusive information and unique benefits to customers.
I think that a lot of the overpaying has to do with convenience. At the dollar store, people tend to stock up on things. Especially when it comes to home supply shopping, people want bulk quantities so they don’t have to shop as often. Get Z is very price sensitive, so shopping at the dollar store works. To get them to shop somewhere else, supermarkets can up their rewards programs and market them so that they get these customers.
One could assume that the only reason behind the loyalty of these consumers towards the one dollar stores would be that they automatically assume that it's a better deal. It's not uncommon for consumers to get fooled by the appeal of lower pricing (I've fallen for that myself).
If, however, we want to give the consumer more credit, we could also follow the assumption that their shopping habits are better suited for lower pricing. If, for example I am someone who doesn't use aluminum foil regularly enough for the 1 cent/ft^2 to matter, then I'd just buy the foil for $1 and use up my remaining dollar to buy something else.
I was surprise that people sometimes just think about the actual price rather than the price per sf. Even though it is more expensive than the actual sf, they focus on the result.
I think these kind of person, it is more easier to show the actual product to compare both of it. I think in this situation, price allure people and especially baby boomers don't want to think so complicated during shopping. They just want to buy it simple. But maybe Gen Z will compare the proportion and they might choose the second one if they success for persuasion.
In my point of view, I think people feel 1 dollar is cheaper than 2.08 dollars despite they are paying 37% more for the same product. Gen Z and Baby Boomers like the dollar store since they got used to shop in the dollar store and it become a part of their behaviors. On the other hand, dollar store sounds like a cheap place to shop since their prices are so low. There is another way to persuading them to shop elsewhere, that is make their aluminum foil cheaper than 1 dollar, but with the same amount. Therefore, people may find out that there is a cheaper place than the dollar store.
i think the reason why it happened is because one dollar shop is a symbol for cheap price and good value. And another important reason why people buy aluminum foil from one dollar shop is probably because 27 square feet of aluminum is enough for home uses, 75 feet of foil sounds way too much in people's head.
i think it is going to be hard to change people's mind to shop at 1 dollar store, especially for the baby boomers.
Although it may seem strange to purchase something when you have the knowledge that you can get triple the amount if you just paid slightly more, but think about how guilt free the sound of spending a dollar is. Dollar stores are often perfectly located for impetuous needs and often the convenience of having it right there outweighs the difference. Many Gen Z's are still codependent on their parents and often live dollar to dollar, so spending $2 for something you could get for $1 may seem unreasonable despite the evidence. I think the same aspect applies in the head of boomers, why spend the money when that's all you need at this moment? I think boomers would be more convinced if the other stores had both options in the same place, when physically seeing the size difference often it becomes clearer that you are saving money by getting the larger size. I don't think boomers care as much about exclusivity, but I think the aspect of scarcity will apply to Gen Z's. They want to feel like everyone can't access what they have.
This is much like the Amazon phenomena..many products on amazon are cheaper then what is found at other stores. People begin using amazon because of the money they save on small purchases not realizing that sometime larger ticket items are more costly then competitors. The perception is of "a great deal" which is what attracts customers. Once the customers have that perception of a store they stop checking if the deal is actually good because they are emotionally invested in the idea that they found the best deal possible. Also, perhaps Boomers know the power of "less is more". How many times have I bought a family sized box of oranges at Costco and threw half of them away?! Too many. It is possible that boomers know they don't need 5 years worth of tin foil and they can save money immediately by getting less for more.
Hi class!
I think often times, we think short-term rather than long-term (or at least I do). I tell myself, "I am only paying $1 now," as opposed to, "I am saving $1 dollar later."
I also think that perhaps you are losing money on the aluminum foil, but what about the other items? I would argue that for the rest of items, you are probably saving money. So to that, I ask, is it worth your time to go to the other store to save the extra $1? In my opinion, no. That is a lot of effort to save only $1 when you are saving on all other items.
That said, in order to change the behavior of such consumers, it must be shown as a loss. Meaning, "you are losing X amount of money." To show what the consumer is gaining will not change his or her behavior; again, it has to be what he or she is losing. This is something we have discussed throughout the course of the semester, and research continues to reveal that this is true!
See you soon!
Grace
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