Relational Vs. Transactional Shoppers
Can't decide what to say in your ads?
Surprise: There's more than one answer.
What is the most important information to put in an ad: Price? Selection? Quick and friendly service? Store hours? Brands we carry? Guarantees? Testimonials? The fact that we're a family-owned business?
Every person has a transactional mode and a relational mode of shopping. And the "right" thing to say can be determined only when you know which mode the shopper is in.
Like a computer operating system, every person on the planet shifts into one of two completely different mindsets while shopping for goods or services: relational or transactional.
- Think long term
- Consider today's transaction to be one in a series of many
- Do not enjoy comparison shopping or negotiating
- Fear only "making a poor choice"
- Hope to find an expert they can trust
- Consider their time spent to be part of the purchase price
- Are likely to become a repeat customer
- Think short term
- Care only about today's transaction
- Enjoy the process of shopping and negotiating
- Fear only "paying ore than they had to pay"
- Are willing to spend lots of time doing their own research
- Consider themselves the expert
- Hinge every transaction on price
- Are a terrific source of word-of-mouth advertising
As you can see, a relational shopper operates with a completely different mindset from that of a transactional shopper.
What’s even more wonky is that—when it comes to shopping—we’re all a bit bi-polar. Each of us uses both the transactional and relations styles of shopping, and will shift between the two depending on the product category. You might be a relational shopper in one product category and a transactional shopper in yet another.
For example, my wife can tell you that I am a relational shopper when it comes to buying clothing, computers and jewelry. Yet, I do a one-eighty and become transactional when shopping for groceries, cars and furniture.
So which shopping mode are you targeting with your current marketing efforts? Relational or transactional?
Relational vs. Transactional Shoppers: A Case Study
Ten shoppers in total, five of these shoppers are transactional, and the other five are relational. All shoppers want to buy the same product with a recommended retail price of $100.
The transactional shoppers will shop all over town at multiple stores before making their decision to purchase. At each of these stores, they ask a lot of questions, then leave. But each transactional shopper will return to only one store to make a purchase. This leaves a score of frustrated salespeople without a sale.
Meanwhile, five relational shoppers visit their favorite stores, make their purchases, and return home, accounting for a total of five store visits, five purchases, and zero frustrated salespeople.
Trans. Shopper #1
Trans. Shopper #2
Trans. Shopper #3
Trans. Shopper #4
Trans. Shopper #5
Rel. Shopper #1
Rel. Shopper #2
Rel. Shopper #3
Rel. Shopper #4
Rel. Shopper #5
Average Sale: $82 - Average Gross Profit: $32* Average Profit Margin: 39%
*Assuming a Cost of Goods Sold of $50 and a pre-discounted, original markup of 100%
Beware of Averages!
- Only 22% of store visits (5 of 23) were made by Relational Shoppers
- 78% of store visits (18 of 23) were made by Transactional Shoppers
- 50% of buyers (5 of 10) were Relational Shoppers
- 50% of buyers (5 of 10) were Transactional Shoppers
- 59% of dollars spent ($480 of $820) were Relational Shoppers
- 41% of dollars spent ($340 of $820) were Transactional Shoppers
- 72% of gross profit ($230 of $320) came by Relational Shoppers
- 28% of gross profit ($90 of $320) came from Transactional Shoppers
- 10% of ad dollars were spent targeting the Relational Shopper
- 90% of ad dollars were spent targeting the Transactional Shopper*
The majority of all retail ad dollars are spent on “sale, price-item and event” ads that target the transactional mindset. These shoppers represent a greater share of overall store traffic than of actual sales or gross profits because they tend to visit a greater number of stores in search of the lowest price.
Consequently, transactional shoppers represent lower closing ratios, lower average sales, and smaller profit margins.
Relational shoppers represent a smaller share of store traffic, but a larger share of sales, higher closing ratios, higher average sales, and higher profit margins.
Intentionally or unwittingly, most companies target either the transactional shopper or the relational shopper. Who have you been targeting?
Much of your decision depends on the customer experience you provide. In other words, I’m talking about identifying your company’s DNA here—things like your culture, staff, selection, pricing and much more. Now align who you are as a brand with the shopping mode of your customer.
If your goal is branding, and you want to become the company your customer thinks of first—and feels best about—when his or her moment of need arises ...
If you’re mildly-obsessive about delighting your customer …
If you hope to create a lifelong customer ...
Then you’re likely going to want to target relational shoppers.
But no matter which direction you take, just remember the old adage, ”Try to please all and you will please none.” It’s more profitable for you to boldly choose who to lose, communicate who you are, and tell the world what you’re all about.
The rest will take care of itself. Capiche?
Information Sources Behind the Transactional vs Relational Case Study:
The terms “Transactional” and “Relational” are condensations of the highly respected research of Myers-Briggs regarding preferences among psychological types. The intent of the MBTI preference test is to reflect a habitual choice between rival alternatives. (i.e. Even though we use both the right and left hands, we will most often ‘reach’ with the hand we prefer. As previously mentioned, every person uses both the transactional and relational styles of shopping, but will respond first and most often with the ‘preferred’ attitude.)
More than 2,000,000 Americans take the Myers-Briggs test each year (www.capt.org) and based on their 30-year database, approximately 50 percent of the nation will prefer a “Transactional” style of shopping and 50 percent will favor the “Relational” method.
According to *Dr. Richard D. Grant, (*Considered one of the worlds leading corporate psychologists) Transactional/Relational preferences will stem principally from the Myers-Briggs Type Indicator. T and F preferences can be colored somewhat by J/P and be ‘salted’ a little by S/N.
The percentages used for markdowns below recommended retail in our example, are reflective of the American marketplace during the past decade. For more information, read the Business Research Yearbook edited by Abbass F. Alkhafaji, Ph.D. - 1146 pages, University Press of America; (May 3, 1994) ISBN: 0819195316 or visit the Center for Applications of Psychological Type at www.capt.org.
*The figure of ‘90 percent of advertising’ being targeted toward the transactional shopper is an educated guess. In reality, it may be even higher than that. Remember, more ad dollars are spent in the newspaper each year than on radio and television combined. Take a look at today’s newspaper and factor all that you see, into the mix of ads that you hear on TV and radio. Then go to your mailbox and see how many pieces of junk mail arrived there today offering you a discount.
WAY·NIK Works Marketing & Advertising specializes in marketing to the profitable Relational Shopper.