Loss leaders don't work with all customers. Grocery stores were the first to pioneer "loss leaders" those really cheap items that the store loses money on, but get you in the store to buy more items. Well it turns out some people hop from store to store only buying those deeply discounted items.
Sale Shoppers Annoy Grocers as They Save - New York Times: "Grocers loathe the shoppers known as 'cherry-pickers' -- people who visit several stores on a single grocery run, choosing only the sale items in each. ' ... A recently published study by Professor Fox and Stephen J. Hoch, a professor of marketing at the Wharton School at the University of Pennsylvania, examined cherry-pickers in Chicago. It found that households with elderly residents were 15 percent more likely to cherry-pick and those with nonworking adult females were about 16 percent more likely.
Cherry-pickers get better with experience. A family that cherry-picks on 4.3 percent of its grocery runs, the median frequency, averages $11.93 in savings per cherry-picking trip. But families that cherry-pick 20 percent of the time save an average of $15.76."
The elderly and women that don't work: two demographics with lots of time on their hands. The question for stores is whether the loss incurred by these cherry-pickers is outweighed by the aggregate extra sales the promotions bring in.
One solution would be more targeted promotion. For example, require a minimum amount spent for the discount to take effect. Another solution would be to target the promotions for certain hours of the day, such as 5 - 8 p.m. when people are getting off work and will only stop at one store.
Sale Shoppers Annoy Grocers as They Save - New York Times: "Grocers loathe the shoppers known as 'cherry-pickers' -- people who visit several stores on a single grocery run, choosing only the sale items in each. ' ... A recently published study by Professor Fox and Stephen J. Hoch, a professor of marketing at the Wharton School at the University of Pennsylvania, examined cherry-pickers in Chicago. It found that households with elderly residents were 15 percent more likely to cherry-pick and those with nonworking adult females were about 16 percent more likely.
Cherry-pickers get better with experience. A family that cherry-picks on 4.3 percent of its grocery runs, the median frequency, averages $11.93 in savings per cherry-picking trip. But families that cherry-pick 20 percent of the time save an average of $15.76."
The elderly and women that don't work: two demographics with lots of time on their hands. The question for stores is whether the loss incurred by these cherry-pickers is outweighed by the aggregate extra sales the promotions bring in.
One solution would be more targeted promotion. For example, require a minimum amount spent for the discount to take effect. Another solution would be to target the promotions for certain hours of the day, such as 5 - 8 p.m. when people are getting off work and will only stop at one store.
