Shanu Singh Guliani

Retailers and Their Pricing Tricks

A joke with some truth: A retail storeowner who advertises to the public as a “wholesaler” on average purchases goods for $100 each, then turns around and sells them for only $105. Noticing this strange behavior, his/her partner asks, “How the hell do you expect us to stay in business?” The man responds, “Volume!”

Some retail stores employ a variety of pricing tricks, to make their discounts seem better than they are and/or to initially attract customers so they keep coming back when the price goes up. The joke above is only one of the pricing tricks employed by retail merchants; the other is the constant “sale.”

The sign reads “sale.” But what does that really mean to the consumer and the other independent merchants?

It’s not an unusual practice for retail merchants of jewelry, handbags, home-goods etc, to buy an item for $100, and the normal markup is $200-$250. But when they mark it up to $500—they know most people are not going to pay that. The store will then run a 50% off sale. The consumer thinks their getting it at cost while the rest of the industry is taking a beating from shoppers who think these kinds of goods are priced unfairly.

Price should never be the basis of your strategy; I understand it also can't be ignored. So how can independent storeowners, who may not qualify for large discounts due to purchasing power---still maintain competitive pricing?

• Find your one thing. Be one of the few in your area to market to women self-purchaser, teenagers, or men. Haven’t you noticed all the advertising for AXE Deodorant? Create a catchy logo or slogan. Purchase a wine and beer license and offer it to your customers of the appropriate age.
• Be innovative. Let’s face it, some of your competition is just plain dumb. So, improve profits through innovative practices. Consistently train your staff on each brand in your store. Send your staff members to local seminars and/or training sessions. Purchase books on selling strategies and have a staff member a week go over a strategy they learned. Purchase brands that offer technology to help support their brand. Get your vendors to send a representative to talk to your clients about their brand.
• Create value. Value is a term used to mean the combination of price and quality. When customers object about price try saying this, “I found that when making a purchase we all want the finest quality, best service, and lowest price. I have yet to find a company that could provide the finest quality and the best service for the lowest price.” You’ll find that most clients will not be willing to give up quality and do not like the idea of inferior customer service. You’ve just helped your customer rationalize and justify the amount they were unwilling to pay moments ago.
• Target the right customers. Not all customers are willing to pay more even for better quality. So make certain you aim your marketing efforts at customers who will respond to the differences you offer and can pay a slightly higher price for that value.
• Build loyalty. Even if you use special pricing (discounts, introductory offers, promotions, sales) to initially attract customers, immediately go to work developing a relationship that keeps customers coming back when the price goes up.

Remember, you’ve got a lot more to offer than just a low price.

Posted by Shanu Singh Guliani on February 27, 2007 | Comments (0)