The average customer considers the price of a product to be a key factor in their purchase decision. When you ask consumers about certain retail establishments, they may respond with a phrase such as, “that place is expensive, but they have great service,” or perhaps remark that it’s, “inexpensive but offers poor service and weak inventory.” Whatever the impression, pricing is often part of the description.
It’s important to remember that pricing strategy plays a key role in a customer’s perception of your business and their decision about where to buy. In fact, it’s one of the P’s in marketing 101 that every savvy marketer must pay attention to when establishing a position in the marketplace.
So what’s your price point?
There are two main pricing strategies commonly used today: Hi-Lo pricing and Everyday Low pricing. Hi-Lo pricing is more commonly used by jewelry retailers.
With the Hi-Lo model, the retailer reduces the price on selected key products to attract customers into their store with hopes that they will also buy regular priced products as well. The jeweler may make little or no profit on the price-reduced product, but recoups the profit in sales of the regular priced goods. The goal is to have the customer excited over the value purchase made, thus encouraging them to return.
Everyday Low pricing appeals to the more no-nonsense shopper who typically has less time for shopping. Everyday Low pricing features as low a price as possible for all products. In theory, it makes shopping easier as there is no longer a need to shop around.
It’s very successful, but there are several drawbacks for the retailer, as customer loyalty is most often to the price charged and not to the business making the offer. That means their loyalty is thin at best, and you will have to work harder to keep them, and perhaps never succeed except when you’re the low price leader.
This approach also has a stigma attached to it, inferring that the product quality may not be as good as what other stores sell. The customer may duck in and out of your store and hope not to be noticed, then head home and put your bauble into a little Tiffany’s blue box, yearning to impress.
In a recent survey of 1,000 consumers conducted by Gartner, Inc., 78 percent of shoppers claim to prefer Everyday Low pricing to Hi-Lo pricing. However, one third of those said they prefer to shop a special advertised promotion or shop around for the best deal. Those customers surveyed stated that they had a strong inclination to buy from a Hi-Lo retailer when that retailer offered a promotional discount.
Whatever your approach, price is an important factor to most customers, and even more so in the post- recession world. The method you employ to adjust prices should be a strong part of your business strategy. Successful retailers are better adept at identifying the true market value of the products they sell. They also understand that there are customers who will pay more, customers who may pay more at certain times, and customers who will never pay more.
Additionally, there are things you can do to encourage sales by utilizing factors other than price alone:
- Try to get exclusives. This prevents your store being shopped on a price only basis. Ask your vendors about an exclusivity deal based on geography or time (three months is suggested).
- Treat your best customers with special care and handling. Send thank you cards, remember special dates, send them exclusive offers. Be sure to stay in touch and get to know their buying habits and preferences.
- Keep your sale items toward the back of the store. Force your customers to search for them. Tempt them with your regular priced items before they see the marked down items.
- Offer free services to your valued customers, such as jewelry cleaning or free watch batteries.
It’s critical to determine the right pricing strategy for your business, but it’s just one piece of the marketing pie. Successful jewelers understand that a multi-pronged, strategic and comprehensive approach leads to long-term, sustained growth. Everything has a price - take some time to be sure yours is the one that’s just right for your customer.
Bob Epstein is CEO of Silverman Consultants, LLC. Offering a legacy in sales strategies for jewelers since 1945, Silverman Consultants provides guidance to store owners seeking to turn around a business, sell off unwanted inventory, or liquidate an entire store. With offices located in Charleston, South Carolina; New York, New York; and Saskatoon, Canada; the company helps jewelry store owners and chains formulate strategies designed to maximize revenue in times of transition, whether due to retirement, store closing, or simply when needing a boost in sales. For more information, visit www.silvermanconsultants.com or call Bob direct at 800-347-1500.