The Power of Mental Accounting In DTC 💡💰

#HTE 281 - Examples, proven strategies, and much more!

April 06, 2024 • Estimated Reading Time: 12 minutes

Hello there, HTE rock stars! 😎

🔥 Welcome to our exciting edition! 🔥

Today in this newsletter, we're diving into key business insights to help you thrive. Let's kick off by exploring The Power of Mental Accounting 💰. Ever wondered why we spend money differently in different situations? Discover how our minds handle money and how it impacts our financial decisions.

Next, we'll delve into Essential Retail Metrics for Victory 📊. Learn about important numbers that help retailers succeed in today's competitive world. From tracking sales to understanding customer behaviour, these metrics are game-changers.

Lastly, we'll unveil Strategies for Enhancing Customer Loyalty and Increasing Repurchase Rates 📈. Explore simple yet powerful ways to keep customers coming back for more. Get ready to supercharge your business with these actionable tips! 🚀

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The Power of Mental Accounting 💰

Essential Retail Metrics for Victory 📊

Increasing Repurchase Rates: Strategies for Enhancing Customer Loyalty📈

Brand of the Week🔥

Top Reads📚

HTE Job Board- Get Your Dream Job With a Click✨💼

The Power of Mental Accounting 💡💰

You might not be a money expert, but you likely split your cash into different pots—for eating out, holidays, and other expenses. It's a sensible way to handle money. But did you know how we label our money affects how we spend it?

🔍 Research shows:

  • We're more likely to splash out on a vacation if it's paid for with gift money rather than a work bonus.

  • We tend to spend more when using a credit card rather than cash.

  • When we get a refund, we often blow it on things we didn't plan to buy.

This is called "mental accounting," where our feelings influence our spending more than logic.

We see this in action even in video games like Grand Theft Auto. Players treat in-game money as totally separate from real cash. For example, spending $10 for a bunch of in-game dollars might seem like a bargain, even though it's not real money.

So, what does this mean for your business?

It means customers don't always make smart money decisions. You can use this knowledge to set prices and run promotions as a business owner. But be careful not to trick people.

Understanding mental accounting helps you sell stuff better, but remember to keep things fair and honest. 😊

How To Apply This

Alright, so how can you apply this right now to sell more?

​

E-commerce

Let customers pay in instalments

  • If you've been shopping online lately, you might have noticed more options to pay for things over time instead of all at once. This means you can spread your payments over a few months or even years.

  • Businesses do this because it makes it easier for people to buy stuff. When we can pay a little bit at a time, it feels less like we're losing a lot of money all at once. It's kind of like when you buy a big ice cream cone, and you're allowed to pay for it one lick at a time!

  • These payment plans are especially helpful for buying expensive things because they make it less scary to spend a lot of money all at once. So, it's like having a friend who says, "Hey, don't worry, you can pay me back later!" 🛒💳👍

​

Subscription

Emphasize long-term savings in your pricing tiers.

  • Just like some games that let you play for free but offer extra stuff if you pay, Ludwig, a writing tool, also has different payment options. 📝

  • You can either pay $14.99 monthly or $59.88 for a whole year.

  • If you go for the yearly plan, it's like paying around $5 every month. 💰📆

That's a big discount of 67% compared to paying monthly! 🎉 It's like getting a good deal on something you always use. And you don't have to do any tricky maths to figure out how much you're saving. 🧮

​

Retail & Services

Entice customers to return with cash vouchers.

If you've ever been to a casino, you've probably received free goodies—like drinks, food, and other nice things—just for being there. 🍹🍔🎁 Casinos do this to encourage people to keep playing.

But to keep the big spenders coming back, casinos offer even fancier rewards. 

But to keep high rollers coming back, casinos use even bigger incentives.

For instance, check out this letter from one of Princess Cruises' casinos: they're not just offering a free room but also giving away $700 to play with! 💰🚢

The offer feels too good to pass up, even if you don't have plans to hit the casinos anytime soon. It's like free moola landed in your mailbox.

Of course, it doesn't take a PhD to know that coupons can help get more sales. The trick here is how you present them.

Percent discounts like "15% off" aren't very tangible. But vouchers that name a specific dollar amount feel like getting handed cash—they're a separate mental account from the rest of your money.

Essential Retail Metrics for Victory 🏆📊

📊 Important Numbers for CPG Brands:

  1. Sell-Through Rates : Shows how well products sell compared to what's stocked initially. High rates mean customers are choosing your products, which attracts more retailers. It's crucial for proving your product's appeal and avoiding stock issues.

  2. Sales Velocity : Measures how fast products sell in a period. This helps manage stock and see if there's strong demand. Fast sales mean happy customers and efficient turnover, preventing products from sitting too long on shelves.

  3. Units Per Store Per Week (U/P/S/W) : Tracks average weekly sales per store, showing which areas are receptive to your products. It helps plan where to focus marketing and distribution efforts.

  4. Sales per Facing : This check shows how efficiently shelf space is used to generate sales. More sales per shelf mean customers notice your product and buy it, which convinces store managers to give your product more space.

  5. Data Analysis and Storytelling : Using data to tell a good story helps convince retailers. For example, showing regional sales boosts your brand's credibility. Having skilled analysts on your team is essential for understanding trends and making smart decisions.

📝 Additional Insights:

  1. Smart Distribution : Focus on targeted Distribution instead of trying to be everywhere. Rushing into nationwide Distribution without considering demand can lead to problems. It's better to start small and expand carefully.

  2. Presence Doesn't Equal Sales : Just because your product is on the shelf doesn't mean it's selling. Competition and shelf visibility matter. Ensure your product is available, combat competitors, and engage with customers for better sales.

  3. Long-Term Growth : Aim for steady Growth instead of quick fixes. Build loyalty with customers and retailers for lasting success. It's about quality, not just hype.

Increasing Repurchase Rates: Strategies for Enhancing Customer Loyalty📈

🧩 Boosting repeat purchases is a common challenge for brands. Often, they're puzzled by a handful of vocal customers while missing out on the silent majority who keep coming back for more.

  1. Listen to Your Customers 🗣️:

  • Customer-centricity goes beyond reacting to every piece of feedback. It's about making strategic decisions based on both data and direct conversations.

  • Start with simple surveys and follow up with personal conversations to understand your customers' needs.

  • Make changes gradually and involve your audience in the process to build loyalty.

  • Utilize platforms like Typeform for surveys and incorporate incentives like gift cards to encourage participation.

  • Consider implementing Net Promoter Score (NPS) surveys to gauge overall customer satisfaction and identify areas for improvement.

  1. Focus on Actionable Metrics 📊:

  • Understanding the time between purchases is crucial. Avoid bombarding customers with marketing messages right after they've made a purchase.

  • Personalize your communication based on their buying patterns and preferences.

  • Identify common products purchased together to enhance cross-selling opportunities.

  • Experiment with personalized emails, SMS, and direct mail to engage customers at the right time and with the right offers.

  • Segment customers based on their behavior and tailor marketing efforts accordingly to maximize effectiveness.

  • Monitor metrics such as customer lifetime value (CLV), purchase frequency, and average order value (AOV) to track the effectiveness of retention efforts over time.

  1. Master Cohort Analysis 🎯:

  • Different customer segments have different journeys. Analyze sources and mediums to tailor experiences that resonate with each group.

  • By understanding these segments, you're not just guessing but crafting personalized journeys for your customers.

  • Utilize cohort analysis to track customer behavior over time and identify trends or patterns that can inform marketing strategies.

  • Consider factors such as seasonality, promotional events, and customer acquisition channels when analyzing cohorts to gain deeper insights into customer behavior.

  • Implement A/B testing to experiment with different marketing tactics and messaging to determine what resonates best with each cohort.

By taking a strategic approach and focusing on actionable metrics, brands can increase repeat purchases and build lasting customer loyalty. 🌟

Brand of the Week🔥

ByHeart focuses on crafting infant formula that mimics breast milk's composition. Their formula offers proven benefits, like easier digestion and better nutrient absorption. With a special protein blend, ByHeart ensures good nutrition while being gentle on babies' tummies. They maintain high standards, testing for over 700 contaminants and avoiding common allergens and additives. 

Through their OpenHearted initiative, every purchase helps provide formula and support to underserved communities. ByHeart isn't just changing the infant formula industry; they're redefining how babies are nourished with care and science. Join ByHeart in giving babies the best start in life. 🍼💖

Top Reads📚

Grove Co. Rebrands & Chooses Aluminum Packaging ~ 4 April 2024 Beauty Packaging

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Phew! That was a lot, right? But hey, knowledge is power🌟. We hope this edition gave you some insights and maybe even cleared up a few doubts.

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