Increase Your Prices – I Dare You!
16 Feb
Enhance Customer Experience, Raise Prices and Increase Profitability
Take the Retailer’s Roadmap challenge and work your word of mouth advertising by enhancing your customer’s shopping experience in your store, and then increase profitability through strategically raising some of your prices.
If you provide the best shopping experience for your customers, then your customer satisfaction will go up, word of mouth will travel and you can justify higher prices.
The Retailer’s Roadmap Challenge is a 3 step challenge:
- Decrease your overall advertising budget by 20%
- Redirect your remaining budget mostly toward direct marketing campaigns.
- Invest the savings into the shopping experience
- Dollar for dollar, take the money you saved from your marketing budget and invest it into your people, your facilities and your merchandising in order to enhance your customer shopping experience.
- Raise your prices by an average of 5% (adjusted for inflation)
- Now that you are providing a better shopping experience, you can justify higher prices. This increase will go directly to your bottom line.
Let’s assume that your store is doing $500,000 per year in business and spending 5% of sales (or $25,000) on marketing.
Net result: $25,000 in extra profits go straight to your bottom line! |
I have taught this on many occasions in by book, through articles and in my speeches and presentations on merchandising and pricing strategies. I know many people who have taken the challenge and have told me that they were amazed at the results. Common feedback is that regular customers notice the changes to the store and the enhanced shopping experience, but rarely notice any major difference in pricing.
As a colleague of mine, John DiJulius, likes to say; “The better the service, the less price becomes an issue. Anytime someone is not willing to pay our price, it’s because their experience did not warrant that price.”
Enhance your service, enhance your facilities, enhance your customer’s shopping experience and they will never notice a modest 5% increase in prices. That’s where the profits lay.
Andy Buyting has been in the retail industry since he was six years old. Today, he applies his entrepreneurial know-how to Green Village Home & Garden, one of Canada's most successful specialty garden stores. Green Village Home & Garden is currently expanding into multiple locations throughout eastern Canada.
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If I and a competitor are selling identical products and the service is pretty much the same, the one with the best price will get the sale.
I certainly won’t pay more for the same item with no benefit.
This is especially true if what I am selling is a tool – a real tool made of metal and wood as opposed to some software “tool” that seems to have been designed so that no one can comparison shop. Price wins.
I think that’s very true in a lot of cases, Rick. Price is a hard game to win, but I definitely try not to play too much in that game. When it becomes such a commodity and war for the lowest price, I begin cutting costs across the board, and I know I can’t win that game. Especially when it happens against the big box stores.
One thing that plays more of a factor in this is how people can comparison shop with online stores right when they’re shopping within mine. They pull out their iphone and search out comparable prices of products that are widely sold. This brings in even more need to create an amazing service experience, yet still maintaining a price that’s still acceptable to the customer. If I can get to them before they leave, engage them, and create a touch point with them, I can assist a sale (provided its an easy product to buy, doesn’t require a lot of thinking, research, etc).
I’m interested in your viewpoint. Thanks.