In this post-recession era, there is little doubt that the average consumer remains extremely price sensitive. While it’s important to provide great customer service, have a store and staff that are warm and inviting, and maintain a inventory variety that is artful and distinctive, price matters. In fact it’s usually the key factor in a purchase decision.
When you ask consumers about a particular store, they may say something like: “That place is expensive, but they have great service,” or perhaps it’s, “inexpensive, but they have poor service and unattractive inventory.” Whatever the customers’ impression, pricing is often part of the store description. So it’s important to remember that pricing plays a key role in a customer’s perception of your business and their decision about where to buy. 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. Some stores become known as habitual discounters and consumers routinely expect to save 30%, 50% or more off the original ticket price. 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.
Regardless of your pricing model, special sale events can be a good way to move dated or slow moving inventory or increase store traffic. Clearance sales, holiday, anniversary, and trade liquidation sales are just a few of the themes that are typically used in the industry.
The success of these special sale events is impacted by a store’s standard pricing policy. A store that is continually discounting or running promotional sales will have a tough time running another significant sale event. Again, they’ve become known as a discounter and the impact of a sale event is less meaningful. It’s a matter of credibility with the buying public. By contrast, a store that rarely runs a sale and is not known for discounting will have a far better chance of success in getting a customer’s attention; sale discounts are meaningful - not just part of the normal course of business.
Whatever your approach, price is an important factor. 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 avoids 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).
- Make sure you have a wide selection of merchandise that covers all price points.
- Treat your best customers with special care and handling. Send thank you cards, remember special dates, and send them exclusive offers. Be sure to stay in touch and get to know their buying habits and preferences.
- If you don’t want to run a store wide sale and you have a mailing list (and I really hope you do) invite your regular customers into an open house for a private sale event and offer them 10% off their purchases during a particular weekend or week.
- 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, SC; New York City; 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.