Retailers must offer price and durability

Retailers must Offer Price and Durability

For decades, retailers have advertised low priced goods with the plan to up sell the customer when they came into their store.  Car dealers are legendary for this tactic and consumers with extra disposable income or a line of credit are receptive to paying more than they planned when they are presented with a better product with all the options.

In fact, more than three quarters of consumers who entered a store looking for the economy model of a lawnmower, car, sofa or whatever,  have been effectively up sold during more prosperous times. Consumers see the benefits of the better items and associate the higher price with quality and durability. They may pay 50% more for this item than the advertised economy model, but envision keeping it for a much longer period.

Today, consumers will fall into two camps, those able to afford the up sell and those that simply cannot. In the past, customers who could spend more for more durable goods may have made up 80% of the population. Today, it’s around a 50 – 50 split.

This means that many consumers in our New Economy will need to focus on price only, and forego the consideration of paying more for durability. In the past many retailers would keep one unit of the advertised economy model just to comply with advertising laws and usually took their time selling it. Today, if your organization wants to do business with both consumer types, it’s critical that you offer models of economy as well as durability .

Recently, a well known store advertised a gas barbecue for $89. This was quite an impressive price for such an item! As expected, this shop sold barbecues from $89 up to $1,000 in many shapes and sizes. Upon examination of the $89 barbecue, one can see why it sold for $89. The frame was shaky, it had one little burner and looked like two seasons might be its maximum life expectancy. In earlier times, you’d expect them to have one of these units on display, and up sell the consumer to a barbecue of better quality perhaps for twice the price or even more. It certainly makes sense if you can get ten years or more out of the $350 barbecue. It can actually work out less per year that way too.

However, this store had done their homework and had piles of the cheap barbecue. The company understood that no matter what, consumers in the new price camp will not be up sold out of their tight budget. Their mentality is to buy the cheapest “until things get better”. This store knew that it was important to offer products that offer both price, and units that offer durability so that they can do business and retain both genres of consumer. If your store does business the old way and just stocks one unit of the economy model and it sells out, the price driven consumer will need to shop elsewhere and may never come back, even when times get better.

Recognize the two different consumers and appreciate that in these challenging times, those driven by price are an expanding group. In fact, it remains to be seen whether a portion of these consumers stay in the Price camp forever regardless of how the economy rebounds in the future. As witnessed during the depression of the 1930’s, many consumers never left this price camp of fear that history would repeat itself.

Take Action Today:

1) Review the price and durability consumer mentalities with your sales team. Train staff to demonstrate and sell items to these two consumers that have very different needs and priorities.

2) Review inventory and make sure that you offer both product types, in larger quantities.

3) Fine tune the balance in your store between price driven and more expensive durability driven products based on your specific customer demographics.

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