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　　How to increase sales

　　Published online: Nov 9th 2006

　　From The Economist print edition

　　How shops can exploit people's herd mentality to increase sales

　　1. A TRIP to the supermarket may not seem like an exercise in psychological
warfare—but it is. Shopkeepers know that filling a store with the aroma of
freshly baked bread makes people feel hungry and persuades them to buy more food
than they had intended. Stocking the most expensive products at eye level makes
them sell faster than cheaper but less visible competitors. Now researchers are
investigating how “swarm intelligence” (that is, how ants, bees or any social
animal, including humans, behave in a crowd) can be used to influence what
people buy.

　　2. At a recent conference on the simulation of adaptive behaviour in Rome,
Zeeshan-ul-hassan Usmani, a computer scientist from the Florida Institute of
Technology, described a new way to increase impulse buying using this
phenomenon. Supermarkets already encourage shoppers to buy things they did not
realise they wanted: for instance, by placing everyday items such as milk and
eggs at the back of the store, forcing shoppers to walk past other tempting
goods to reach them. Mr Usmani and Ronaldo Menezes, also of the Florida
Institute of Technology, set out to enhance this tendency to buy more by playing
on the herd instinct. The idea is that, if a certain product is seen to be
popular, shoppers are likely to choose it too. The challenge is to keep
customers informed about what others are buying.

　　3. Enter smart-cart technology. In Mr Usmani's supermarket every product
has a radio frequency identification tag, a sort of barcode that uses radio
waves to transmit information, and every trolley has a scanner that reads this
information and relays it to a central computer. As a customer walks past a
shelf of goods, a screen on the shelf tells him how many people currently in the
shop have chosen that particular product. If the number is high, he is more
likely to select it too.

　　4. Mr Usmani's “swarm-moves” model appeals to supermarkets because it
increases sales without the need to give people discounts. And it gives shoppers
the satisfaction of knowing that they bought the “right” product—that is, the
one everyone else bought. The model has not yet been tested widely in the real
world, mainly because radio frequency identification technology is new and has
only been installed experimentally in some supermarkets. But Mr Usmani says that
both Wal-Mart in America and Tesco in Britain are interested in his work, and
testing will get under way in the spring.

　　5. Another recent study on the power of social influence indicates that
sales could, indeed, be boosted in this way. Matthew Salganik of Columbia
University in New York and his colleagues have described creating an artificial
music market in which some 14,000 people downloaded previously unknown songs.
The researchers found that when people could see the songs ranked by how many
times they had been downloaded, they followed the crowd. When the songs were not
ordered by rank, but the number of times they had been downloaded was displayed,
the effect of social influence was still there but was less pronounced. People
thus follow the herd when it is easy for them to do so.

　　6. In Japan a chain of convenience shops called RanKing RanQueen has been
ordering its products according to sales data from department stores and
research companies. The shops sell only the most popular items in each product
category, and the rankings are updated weekly. Icosystem, a company in
Cambridge, Massachusetts, also aims to exploit knowledge of social networking to
improve sales.

　　7. And the psychology that works in physical stores is just as potent on
the internet. Online retailers such as Amazon are adept at telling shoppers
which products are popular with like-minded consumers. Even in the privacy of
your home, you can still be part of the swarm. (644 words)

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