Wednesday, June 3, 2009

Training your customers

I was just watching a commercial from Home Depot, and as many companies are these days, they are advertising lower prices. Seems like a good deal all around - the customers get cheaper products and the companies sell more “stuff”.

The problem is that you’re training your customers to believe that the sale price is the “real” price and the discount was your excess profit! You also train them to believe that any increase goes directly into your pocket as profit.

The automakers fell into this trap with discounts and sales. Customers began to expect that sale price all the time. The other result was that customers who might have bought in May bought in February to take advantage of the savings. So while sales were up in February they were down in May. Why? Cause those folks who would have bought in May already bought in February!

Now, you might lower the price on one item or even on several selected items to get people into your store. Supermarkets have used “loss leaders” for years. Selling one item, sometimes lower than their real cost, just to get you into the store in the hope that you will buy the rest of your groceries while your there. Again, while it gets the customer in to the store, it also teaches the customer that the “real” price of your house brand peanut butter is 89 cents not $1.45 as marked.

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