Hi there - Jen here :)

Love 'em or hate 'em, you to admit that Walmart is a retail juggernaut.

Founded by Sam Walton in 1962, they’re the world's biggest company (not retailer - company).

Walmart is also the fourth biggest employer on earth with more than 2.3 million people on its payroll.

(They’re neck-in-neck with the US Department of Defense, the People’s Liberation Army of China, and the Indian Ministry of Defense.)

So how did Walmart get so big?

With a bit of behavioral science and psychology of course - applied knowingly or not…

And no matter what your business or market, there are some brilliant things we can steal from Walmart’s approach.

There are countless ways Walmart uses psychology and behavioral science to their experience — some purposeful, and some by chance.

Today we’re going to cover three:

• Salience Bias in “Action Alley”

• The Anchoring Effect in Rollback Prices

• Authority Principle in how Walmart stocks shelves

1. Salience Bias in “Action Alley”

Walmart is a master at disrupting shoppers’ routines.

That’s why they created an area in their stores called Action Alley. 

It’s a series of pallets with products that sit right in the middle of the aisles.

By sticking these deals in the middle of an aisle — even though this interrupts customers’ shopping routine — Walmart guarantees that people will act on the deals.

Walmart knows that Action Alley clutters their stores, and they got rid of it in 2009 to make its store experience cleaner.

But the sales impact of removing Action Alley was so significant that it was brought back only a year later.

🧠 The psychology behind Action Alley

Why is Action Alley so effective?

It’s down to a behavioral science principle called Salience Bias.

Salience describes how prominent or emotionally striking something is.

If an element seems to jump out from its environment, it’s salient.

If it blends into the background and takes a while to find, it’s not.

Salience Bias states that the brain prefers to pay attention to salient elements of an experience.

Visual salience is relatively easy to measure using predictive AI tools (click to learn my method for using predictive AI with clients like McDonald’s).

Like the example below, heat maps can help us see where customers are looking and what information they’re noticing or missing.

When designing a retail experience, on or offline, there’s a lot of truth to the saying, “If they see it, we sell it.”

2. Anchoring Effect in Rollback offers

Because Walmart relies on its famous “Everyday Low Prices” strategy to bring in customers, they don’t have “sales.”

Instead, they advertise Rollback offers — permanent or temporary reductions in the retail price of an item.

(Sounds a lot like a sale to me, but Walmart insists they are different.)

As you can see from the sign below, the original price is always shown in the upper right-hand corner.

In this case, green beans were 64 cents and are now rolled back to 50 cents a can.

Why does Walmart always feature the previous price near the rollback price?

It’s down to a behavioral science principle known as Anchoring.

🧠 What is Anchoring?

The Anchoring Effect states that our decisions are influenced by the first information we see.

We mentally “anchor” to this information and only consider new information in relation to the first information we see.

For example, seeing the higher normal price of an item next to its lower sale price.

By showing the previous price for each product on their signs, Walmart is anchoring customers to a higher number.

That way, their Rollback price looks like an even better deal in comparison to the higher price.

3. Authority Principle in how Walmart stocks shelves

Walmart’s mission is to offer value, not just low prices.

Every year, their suppliers are required to either:

• Deliver the same quality at a lower price or

• Keep the price and increase the item’s quality

But research has found that customers perceive value as price plus quality. 

If your price is low, but your quality is too low too, customers think your product has low value.

But if your price is low and your quality is high, then your product has high value.

One way that customers perceive quality is by leaning on the reputation of a well-known brand name.

As Stephen Quinn, former Chief Marketing Officer at Walmart told the New York Times,

“Customers really need the assurance of brands… In the past we were focused on low price… But low price on what?”

Walmart found that they could improve sales not by just offering the lowest prices, but by combining those prices with the authority of a well-known national brand, like Sony, Samsung, and Magnavox.

Low price combined with a no-name brand translates to low quality perceptions.

Because brands act as mental shortcuts for product features like quality.

Why?

It’s down to a principle called Authority.

🧠 What is the Authority Principle?

The Authority Principle states that people are more easily persuaded by authority figures. That could include police, government leaders, professors, and perceived experts. Or, in this case, a well-known brand.

For example, when customers see a Samsung television they assume a certain level of quality.

A low price combined with a brand name gets the benefits of the Authority Principle.

This combination creates a feeling of value, rather than just a low price.

If you want to apply these principles like Walmart has, ask yourself:

• Salience: Are there moments in our experience where we can (ethically) interrupt behavioral scripts to deliver value?

• Anchoring Effect: What context do we give customers during moments of decision, especially when it comes to pricing?

• Authority Principle: What are the levers of authority in our experience? In which moments would they create the most impact for people who are making decisions or weighing their options?

Listen, Watch & Read

• Read: Want to be a better speaker? Research says to speak slower.

• Listen: This week on the Choice Hacking podcast - How Uber used psychology to perfect its customer experience. [Spotify / Apple / YouTube]

• Watch: Rory Sutherland: The Behavioural Science of Loyalty, Recognition, and Personalisation [Watch]

Until next time,
Jen

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