Cherry Picking: The Weapon of Choice for Price-conscious Consumers

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Do cherry pickers – those consumers who are extremely sensitive to price and go from store to store to pick the best-priced items and leave the rest – really save a lot of money? A recent paper by Wharton marketing professor Stephen J. Hoch and Edward J. Fox, a marketing professor at the Cox School of Business at Southern Methodist University, found that consumers not only save money but that the savings are enough to offset the time it takes to do the extra shopping. In addition, the researchers found, a substantial number of shoppers exist who are savvy and diligent enough to make cherry picking pay off.

“What we discovered was a big surprise to me,” says Hoch, noting that more than a few marketing experts and consumers consider cherry picking a “perverse” kind of shopping behavior and doubt that all the effort required to be a consummate cherry picker is economically worthwhile.

According to Hoch, the findings hold implications for retailers who are the targets of cherry pickers: Don’t fight cherry-picking and risk alienating customers; instead, try to entice cherry pickers into buying higher-margin items.

Loyals, Switchers and Pickers

The paper, entitled “Cherry Picking,” compared the behavior of three kinds of shoppers: store loyals, store switchers and cherry pickers. Store loyals are people who shop at the same retailer more than 80% of the time. Store switchers shop at multiple retailers but not on the same day. Cherry pickers shop at two or more stores on the same day at least once a month. (Many shop more frequently than that.) The researchers were careful to exclude from the study people who visit multiple stores each month but cannot be said to engage in cherry-picking; they make their additional trips simply because they forgot an item on an earlier visit or for some other reason that did not involve the kind of intense coupon-clipping, ad-perusing preparation that pickers engage in before embarking on a shopping excursion.

Store loyals represented 27% of the sample studied, store switchers 55% and cherry pickers 18%. Fox and Hoch analyzed a sample of 23,452 purchases made during 9,973 shopping trips over a two-year period at two major Chicago-based supermarket chains with a long history of competing against one another.

For each shopper on each shopping day, the researchers determined whether they paid the lower or higher price at the two supermarkets for all purchases in 10 categories for which there existed detailed price data. The researchers calculated the amount the shoppers saved relative to the higher price. On days when they visited two stores, cherry pickers saved 15.6% off the higher price, compared to a savings of only 10.5% on days when they shopped at just one store. Looked at in dollar terms, when shoppers cherry-picked they saved  $22.90 off the higher prices available on days when they visited two stores, compared with $7.85 on days when just one store was visited – a difference of $15.05.

The study also found that all three groups of shoppers spent more money and bought more items on days when they visited two stores instead of one, although the cherry pickers showed the biggest difference – spending 125% more ($115), and buying 130% more items on cherry picking days compared to single-store days. As a result, the marginal benefit that cherry pickers gain from the extra store visit was larger – $17.45 – than the $10.89 notched by store switchers and the $8.68 gained by store loyals.

There appear to be two reasons why cherry pickers benefit more from an additional store visit. The first is that they are experienced shoppers and consequently more accomplished at taking advantage of the extra savings opportunities that come with a second visit. The second reason is that cherry pickers opportunistically divide their shopping trips into two types – small, single-store visits designed to buy just a few items, and major, two-store trips  designed to allow them to fill their shopping carts to overflowing.

One of the study’s key takeaways for people who have been tempted to try their hand at cherry-picking – but doubted that it was worth the effort – is that it can pay off handsomely. But shopping can really pay big-time dividends if shoppers buy a lot of the item or items that their research has shown to be offered at an excellent price. Put simply: If something shoppers need or want is dirt cheap, they should buy the biggest box, bottle or carton available, buy as many as they can afford, and find a way to make room for all the stuff in their basement or garage.

“Cherry picking is worth it because of a combination of factors,” Hoch explains. “When people go cherry picking, two things happen: They double the number of discount opportunities that will be available to them because they go to two stores. And, because stores have deals on more than one item, that expands the opportunities for cherry pickers to save money. But even this in itself would not necessarily make cherry picking worth the effort of driving to more than one store. The second thing, the thing that really makes cherry picking worth it, is that these shoppers buy more items than other shoppers. To make cherry picking pay off, you have to buy a lot of stuff. Cherry pickers intuit that they need to increase economies of scale to take advantage of the discounts available. They plan in advance to buy a lot. They save a lot not only in percentage terms but in dollar terms, which is what really counts. At the end of the day, you don’t deposit percent savings into your bank account; you deposit dollars.”

A Cherry Picker Profile

Just who are these cherry pickers? Demographically, they are not much different than most people, except that they are single-minded about sniffing out low prices and pouncing on them.

“They are people with a little more time on their hands than most of us or, if they don’t have a lot of time, they have figured out how to be efficient and fit in two trips in one day,” according to Hoch. “They tend to be older – 55 and above. Retired people are often price-sensitive because they are on fixed incomes. Cherry pickers also tend not to be wealthy and to have slightly larger families than most people. But these differences are small. Some cherry pickers are rich. There are skinflints everywhere. From our data, it’s clear that people plan to be cherry pickers; it doesn’t just happen. They read the food ads in the newspapers. They plan their day; [they know that] they are going to pick some cherries here and different cherries there.”

Fox and Hoch were also interested in learning how cherry-picking varies depending on whether the store is the shopper’s primary grocery outlet or a secondary preference. “The reasoning for this analysis is that it is one thing to be a shopper’s primary store, where every so often the shopper cherry-picks [the store’s] competition and thus spends a bit less money in [the primary] store that week as compared to a non-cherry picking week,” the researchers write. “It is another thing to be a secondary store – the one which is actually being cherry-picked. Not only do shoppers fail to spend as much in [that] store, but when they do patronize it, they opportunistically buy more sale items.”

Since Hoch and Fox could not directly observe whether a store was primary or secondary, for each household studied they determined at which grocery chain the shoppers spent the most money and designated this as the primary store. Their finding was not unexpected: Secondary stores are hurt more by cherry-picking than primary stores because the pickers go there to buy low-cost items and virtually nothing else. Not only do secondary stores sell less per shopper, they also earn lower margins on what they sell to cherry pickers.

This, the authors write, is “a state of affairs that the secondary store might (fairly accurately) characterize as adding insult (selling a higher percentage of lower margin, discounted merchandise) to injury (receiving a significantly lower share of the shoppers’ market basket expenditures).”

Fox and Hoch also crunched a lot of data related to the amount of time cherry pickers spend shopping and how much money, given Chicago-area wage rates, they could earn during that time. The results showed that cherry picking is economically justifiable for many households when weighed against “reasonable estimates of their opportunity costs.”

Message to Retailers

Hoch says retailers – those in the grocery business and other types of retailing – should simply accept that cherry picking happens and to do what they can to encourage shoppers to buy other goods. He recently read a news story about two giant retailers waging a cutthroat battle to sell toys this Christmas season. At one stage, one of the retailers decided to take a handful of popular toys and sell them at cost – an obvious and probably successful attempt to increase traffic in its stores. Hoch says he is not sure, but it is likely that the retailer then used the tried and true sales trick of “putting those toys in the back of the store so that customers have to walk past a lot of merchandise” before they can do their cherry-picking.

In considering the impact of cherry picking on the retailers being cherry picked, “the fact is that cherry picking gives shoppers access to more of the consumer surplus – more than 5% of the premium (higher) market price per item,” the researchers write. “Is this tolerable or excessive? That is a tough question in the absolute, though comparing this savings to supermarket gross margins of roughly 25% and net margins of 1.5% – 2% suggests that cherry picking has a material effect on customer profitability. However, it is clear that cherry picking shoppers are far more likely to be unprofitable for their secondary stores compared to their primary store. Not only do secondary stores sell less per shopper, but they also make lower margins on what they sell to those cherry pickers, who really do ‘pick the best and leave the rest.’”

The challenge for retailers, Hoch adds, is to figure out how they can cross-merchandise so when people come in to buy that one item [that is on sale], they can increase the customer’s basket size. All retailers try to do this, but it’s not easy.”

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