Too many retailers are lazy marketers and resort to discounting as the first (and only) option when more often than not discounting is just an exercise in margin destruction. Discounting is a race to the bottom – and inevitable unprofitability. Unless your retail format relies on high volume/low margin sales, discounting should only be part of strategic retail promotions.
 
Beware the tipping point.
Will this particular round of discounting be the tipping point that changes your retail image in the mind of your customers? If you do it too frequently, you will permanently damage your brand and positioning. Even Mercedes resort to discounting, but few people wait for the discounts to buy – unlike some retailers who shall remain nameless.

Does your market consider price as important?
Discount shoppers rate price highly. Non-discount shoppers look for value in service, quality and store attributes. People are not as price-conscious as you may think, so it does not make sense to give margin away when you don’t have to.

The sanity check
Is the stockturn below benchmark? ONLY discount if the product is not moving. The primary purpose of discounting is to get your cash back. This works by attracting more customers to your store and consequently selling more product. If you are moving stock at the benchmark volume, then discounting is usually value destruction.

If you are satisfied with your responses to the above 3 criteria, then:

(a) Choose the right product

• Choose products with high elasticity. [Divide %Change in Quantity by % Change in Price.)

If the PE > 1 the product is relatively elastic. An increase in price would result in a decrease in revenue, and a decrease in price would result in an increase in revenue.

If the PE < 1 the product is relatively inelastic. An increase in price would result in an increase in revenue, and a decrease in price would result in a decrease in revenue.

• Choose products that are KVIs

Consumers seldom have a high level of understanding of comparative prices, except in basic foodstuffs and general commodities. Typically, most consumers would know the prices of a few ‘reference’ items. These items are termed KVIs (Known Value Items.)

Do you know the price for a kilo of table salt? Or a pot scourer?

Exactly. Rather pointless to then discount it because customers simply won't know if/that they are getting a bargain.

(Supermarkets especially should pick loss leaders with great care.)

(b) Pick the right markdown %

Perception of savings depends upon the way in which the price is presented. Discounts of 10% or less have little effect on consumer responses. Small discounts usually fall below the perceptual threshold – popularly referred to as JND: Just Noticeable Difference. Retailers are their own worst enemy in trying to stimulate sales with small discounts. (This works only on very high value items – for instance 10% discount a new vehicle would be significant, but it is nothing for a t-shirt.) A small discount is counter-productive: it simply lowers the consumer’s price image for your store, creating expectations of lower prices without actually adding (sufficient) unit sales.

Have fun

Dennis

You have heard the stats about how 1 annoyed customer will tell 7 others?

Well, I told 80!

As it goes with bad service and outright systemic stupidity, I regaled my MBAs at MGSM with the story of Dell Hell. It started when a major blogger in the US used his blog to slam Dell for their poor response to his problem.  (Read Jeff Jarvis’s tale here.) 

Back story: Dell Hell

• Bought a laptop from Dell some 9 months ago.
• Wife drops laptop – shatters screen.
• Call Dell, they quote me $2,500 to repair.
• I rant & rave and tell them how ridiculous that is when I bought the laptop for only $1200.
• I used this as an example of how very large successful companies don’t ’get’ marketing.

Unbeknownst to me, I had a Dell employee in the class. He took it upon himself to investigate and took great pride to report back the following week on what should have happened. I then received a flurry of emails and a phone call from Dell. I was quoted about $500 or $600 or thereabouts to have screen replaced – and an extended warranty. I was assured that I wasn’t being given any special treatment or price – and I then agreed to have the screen replaced.

• Two days later, technician arrives, replaces screen.
• Follow-up email and survey.

The Present: Dell Heaven

The battery life has been a bit suspect, but with the laptop being out of action for several months and when used, it was only for short stints and usually on AC power. I have been meaning to have it fixed, but somehow don’t get around to it.

• Get email reminder that the warranty will be expiring soon.
• Phone Dell and report that battery lasts less than 1 hour.
• Replacement battery delivered the following day.
• Included was a pre-paid, addressed courier satchel to return faulty product.
• Next day, I receive this email. (Note the tone, content, and even the ‘bumf’ at the bottom…)

---------------------------

Good day Dennis,

How’s it going, mate? This is a quick email to enquire whether the case reported on April 14^th 2008 involving the replacement battery has been resolved to your satisfaction.

If it has, do I have your agreement to close this case from my end?

At the same time, do let me know whether the faulty part has been collected?

If there is anything else I can assist you with, please do not hesitate to contact me.

Thank you and have a pleasant day.

Warmest Regards

Lim Haan-Yu

Technical Support Analyst

Global Commercial Support Services

Australia toll-free                               1-800-633-559

New Zealand toll-free        0-800-444-617

Support website                  http://support.ap.dell.com/

Email: haan_yu_lim@dell.com

How am I doing? Email my manager at Kelly_Yeap@dell.com 

Dell is committed in delivering the best Customer Experience to its customers. You may be randomly selected to receive an online survey from us. We would very much appreciate you taking the time to provide us your feedback on this interaction so that we can ensure we deliver the level of service that earns us your loyalty

-------------------------

Good service is so rare, that it worth celebrating the all too rare opportunities when it is excellent. It is even more necessary when commentators (such as yours truly) have slammed the organisation previously, that, when they get it right, to be ‘big’ enough to tell the other side.

 

This is now somewhat ‘old hat’ for most shopping centre practitioners, and probably for most progressive retailers too. (These findings were part of my thesis in ’97 – before it was ‘old hat’, and only has become main stream in the last 5-6 years. And like any good research, it has stood the test of time.)

However, I thought it might be worthwhile publishing this ‘for the record’ so that you now can know (and say) with confidence, based on scientific evidence, that these two shopper profiles exist.  

But more importantly, it is worth considering what the practical uses of this typology are?

So, for the record:

Type Q: The functional, utilitarian patron who shops of necessity, as quickly (hence: type Q) as possible because it is a chore. This type of behaviour is characterised by small but frequent purchases which are purely aimed at acquiring merchandise for consumption. Duration of the visit is usually short, and only a limited part of the centre (if it is a large centre) or a small (convenience) centre is patronised. Target stores are usually supermarkets for grocery shopping. 

Type R: The hedonic shopper who does not necessarily buy a lot but has fun and enjoys the shopping task. The visit to the centre is in a relaxed (hence: type R) manner. The aim is to enjoy the shopping experience and the actual purchase and consumption is secondary. That is the patronage behaviour does not necessarily extend to buying behaviour - or is limited to entertainment orientated consumption.

** Shoppers may switch roles during a single visit.

And, it is useful knowledge (for retailers) because:

ONE: Not every patron is a customer every time; so don’t overdo the pushy sales techniques when they are Type R.  This means you (and your staff) must be able to recognise Type R. Can you?  Is your staff trained to differentiate the signals?

And when they say ‘just browsing’, they are not necessarily Type R, they are usually just camouflaging their behaviour to put annoying or incompetent sale people off.

TWO: How are you catering for these shoppers who are not buyers? They obviously came into your store for something (they’ll buy next time) but what are you doing for them this time? Even if you are a ‘convenience’-type operator, there are plenty of opportunities for your to connect with the Type R, because that means they will come back (maybe next time) as Type Q.

It is easy for competitors to match your physical offer. However, if you build a few of these other drivers into your proposition, you might be able to build a more sustainable competitive advantage.

(If you are interested, I blogged here about reasons why shoppers choose certain destinations which can be used to think about your ‘offer’ as something more than a pair of shoes or a loaf of bread.)

Be Smart: Have fun

Dennis

 

Whether it be your personal life, in business interactions, or on the retail shop floor, first impressions are critical. Once someone mentally labels you as "likeable" or "unlikeable," everything else you do is viewed through that filter.

You can't change this—the human brain is hardwired in this way as a prehistoric survival mechanism—you can learn how to make those decisions work in your favour.

First, a few facts:

• The period of time available to create a first impression is proven to be 7 seconds.
• First impressions are more heavily influenced (by a factor of 4 x) by nonverbal cues than verbal ones.

There are six ways to make a positive first impression with your non-verbal cues:

• Adjust your attitude. Before you turn to greet someone, think about the situation and make a conscious choice about the attitude you want to embrace. Consciously decide to be: friendly, happy, receptive, patient, approachable, welcoming, and helpful.
• Smile. Need I say anything?
• Make eye contact. Looking at someone's eyes indicates interest and openness. (To improve your eye contact, make a habit of noticing the eye colour of everyone you meet.)
• Raise your eyebrows. Open your eyes slightly more than normal to simulate the "eyebrow flash" that is the universal signal of recognition and acknowledgement.
• Shake hands. This is the quickest and most effective way to establish rapport. Research shows it takes an average of three hours of continuous interaction to develop the same level of rapport that you can get with a single handshake. (Just make sure you have palm-to-palm contact and that the web of your hand touches the web of the other person's.)
• Lean in slightly. Leaning forward shows you're engaged and interested. But be respectful of the other person's space. In most business situations, the comfort zone is about two feet away.

Not only must you master these non-verbal cues, but during the verbal communications phase, you must follow these two golden principles:

• Use the person’s name within the first minute

When you meet someone, ask and remember their name, and repeat that name later in the conversation. And as you do, anchor the positive emotion (which your use of his name evokes) by touching the person lightly on the forearm.

The impact of this brief touch comes from the fact that you have aroused positive feelings in an individual by remembering and using his name, and as you touch his arm, those positive emotions get anchored to your touch. Then at subsequent meetings you can reactivate that initial favourable impression by once again lightly touching your acquaintance's arm.

• Listen attentively.

People consider good listeners the most likable of all types of people, because they are basically ‘hearing’ themselves. Good listening skills allow you to ask sensible questions and gather valuable information to help you sell what they really need.

(Adapted from the work of Carol Kinsey Goman)

As always - have fun today.

DENNIS