MISTAKE #63: You thought you could ‘buy’ sustainable sales or loyalty
Let’s talk for a moment about how price is often misused as the easiest product attribute to manipulate.
Few shoppers will switch to an unknown product, even if it appears identical to the product they’ve bought in the past, to save just a penny.
Most won’t even consciously register the price difference.
Others will say the possible risk of the product disappointing them outweighs the tiny bit of savings.
And those that do switch are the same people ready to switch again the moment another product is offered for a penny cheaper.
As that price difference increases, more shoppers will switch:
A few more at 5 cents
More at 10 cents
And 25 cents
And 50 cents
Of course, that difference will eventually cause more shoppers to start questioning whether the cheaper product is as good as the product they are switching from. They’ll wonder what they’re giving up for the lower price.*
Every time you use temporary price reductions or coupons or rebates to jolt your sales, you’re acknowledging one of four things:
You have a value issue because your everyday price is too high to attract acceptable trial or repeat purchases among your prime prospects.
Your sales objectives are unrealistic, forcing you to attract anyone you can capture through the discount to increase your revenue.
You’ve trained people to expect and wait for discounts before buying. In effect, you’ve trained them that your everyday price is not your best price.
You don’t have any better tools to respond to competitive tactics.
Price discounting is an addictive drug that can trap you in a dangerous cycle.
It can erode your equity and pricing power. And it can come at a very high cost when you discount the everyday price for 9 current buyers just to attract a one-time purchase from someone that has just told you they’ll switch to whatever product can save them money.
In many categories, I realize the high-low pricing game is both expected and necessary. It cannot be avoided.
But it should also be both a reminder and a motivation that you have failed to find a more sustainable, more defendable position.
MY CHALLENGE TO YOU
Take a look at your budget for these types of programs from the past 12 months. And look at the related ROI.
How well did the program payout, if at all? How much of the results did you view as producing a sustained lift in sales that will be incorporated into future volume forecasts?
And how much time did you spend focused on developing and executing these programs (and not doing more value-added work)?
Not knowing anything about your business, I would confidently say I could invest 20% of that budget (maybe as little as 10% depending on how big it was) in developing a better presence for your product that attracts more core shoppers willing to purchase, and repurchase, your product at its everyday price.
Our business is built around helping clients get beyond pricing as the only lever they can pull to move the sales needle.
Consider the risk of reallocating 20% of that promotional budget next year to make the other 80% far more effective and sustainable.
And consider the potential reward of getting more shoppers to buy your product without having to pay them to do so.
I’d love the chance to demonstrate the RIO of what we do.
*These same patterns form with products that opt to push for a premium price. No one thinks a product priced one penny higher is superior. As that price gap increases, some shoppers will start assuming the premium reflects some sort of superiority. Others will just think it is a poorer and poorer value.