Cherry Picking: An Economically-Grounded Consumer Behavior

The act of cherry picking--taking the best and leaving the rest--is a strategy practiced by a segment of price-sensitive consumers that is here to stay. Cherry pickers split their market basket of purchases between stores to benefit from deals offered at each store. Cherry picking appears to be economically rational for consumers who manifest the tendency. The article "Cherry Picking" by Ed Fox of SMU/Cox and Steve Hoch of Wharton is forthcoming in the Journal of Marketing, January 2005. Findings from the research indicate that this market segment is sizable, heterogeneous, and potentially attractive for retailers, contrary to the popular myth that they are a retailer's nemesis.

In the context of the research, cherry picking behavior was analyzed for consumers visiting two grocery stores in one day versus single-store shoppers. Over a two-year period, consumers in this sample made 22,913 purchases during 9,562 shopping trips. Those who cherry pick tend to have low travel and search costs, i.e., opportunity costs. According to Fox, "Cherry picking can be framed as a strategy of those who are price sensitive. There are many ways to be price sensitive, but not necessarily by going to two stores. This behavior is at the extreme as a manifestation of price sensitivity." Experienced cherry pickers are good at saving money even when they are not cherry picking. They tend to be strategic about their shopping trips and plan them carefully.

Who are the Cherry Pickers
The findings indicate that 20% of households do not cherry pick, leaving 80% who do. The top 10% of those who engage in cherry picking do so on nearly 50% of their store visits. The findings below support the opportunity cost perspective:

 -Households are less likely to go cherry picking when there is a working adult female in the family, presumably because it is more costly for them to spend time shopping for groceries.    

 -Senior citizens, those over 65 years old, are less likely to be employed outside of the home with more time to invest in shopping.  The presence of a senior citizen in the household increases cherry picking by about 15%.    

 -Homeownership implies that a family can hold a larger inventory of shopping goods, increasing the opportunity to accelerate purchases by forward buying.  Homeownership increases the propensity to cherry pick by about 43%.    

 -Wealthy households are assumed to have higher opportunity costs and be less price sensitive.  Indeed, household income has a negative impact on the propensity to cherry pick.    

 -Larger households are assumed to be more price sensitive, both because they have to spend a greater proportion of their income on groceries (budget constraint) and because the returns for price search are greater due to the scale of their purchasing. Each additional person in the household increases the propensity to cherry pick by about 4%.    

 -Travel distances and times also exert an influence on cherry picking. Each extra mile between stores decreases the percentage of cherry picking trips by about 5%.   

Two distinct types of cherry pickers emerge from the research--the over-65 population and large families. The propensity to cherry pick also depends on the day of the week (it is more likely on weekends) and the levels of inventory at home (depleted inventories make cherry picking more likely).
 

'Is Cherry Picking Worth It?'
The money saved from cherry picking appears to exceed shoppers' opportunity costs of time. The savings on cherry-picking days average over $14 more than the savings on single-store days. This economic benefit exceeds the opportunity costs of the extra store visit for a majority of households, given shoppers wage rates. On average, cherry pickers save 5% more on each item they purchase.  Equally important, they purchase 67% more when cherry-picking. Because cherry picking trips are two-thirds larger than single-store trips, coupled with buying items at systematically lower prices, consumers realize a savings per trip of approximately 165% more when they cherry pick. Cherry pickers buy more items that are on deal, and over a third more feature advertised items. Stated another way, shoppers save over 45% more per item when cherry picking compared to when shopping at a single store.


Implications for Retailers
Much of the savings on cherry picking trips is due to the purchase of more promoted items, where this savings is subsidized by manufacturer discounting.  Thus, the burden of cherry picking is borne by both retailer and manufacturer, with manufacturers selling more on deal as a result.  Also of interest to manufacturers, cherry pickers are not brand loyal. Returning to the retailer's perspective, households that cherry pick more often also have more family members and so consume more goods, suggesting that cherry picking households may generate more retailer revenues.  In fact, the top quartile of cherry picking households spends $576/month while households that cherry pick less frequently spend only $498/month.

As long as a retailer advertises products, opportunism in the form of cherry picking is inevitable. While retailers must make broad offerings, they can also find ways to embrace this segment. Cherry pickers tend to cherry pick the second store they visit when shopping two stores in a single day. "You want to become the cherry pickers' primary rather than secondary store," Fox explained. "They buy deals, but they buy everything else like loyal customers." Fox continued, "It's the second store where the behavior is more problematic. They are buying less, and buy at a higher discount. And people are clearly cherry picking across retail formats such as Tom Thumb and Super Target as well."

Cherry pickers are more vigilant shoppers that pay lower prices, but are nevertheless a segment large enough to matter to retailers. Fox advises, "not to marginalize cherry pickers. This is price competition with other retailers; therefore, you want to have the most attractive offers and weekly ads." Fox concluded, "Retailers should want to offer the things people want and care about, while being competitive in the process. It's really about managing the price image of your store."


Ed Fox is the W.R. and Judy Howell Director of the JCPenney Center for Retail Excellence and Assistant Professor of Marketing at SMU's Cox School of Business.

Stephen Hoch is the John J. Pomerantz Professor and Chair of Marketing at Wharton School of the University of Pennsylvania.