Wednesday, January 29, 2014

How Your Salespeople May Be Diluting Your Rate

“I think we have a promotion I can give you!”

By Joni Newkirk - CEO, Integrated Insight

It happened again last weekend.  While I am thrilled to have traded my old iPhone 3G for a brand new Samsung Galaxy 4 for just $6, I still cringe when I think about the transaction.  A very competent and beyond helpful sales person offered me not one, but two special promotions.  Promotions I did not know about before entering the store, nor inquired about once there, just offered up in the context of being helpful.  And it happens on a regular basis at the grocery store.  I’m often asked if I have any coupons and the answer is always no.  But sometimes, I happen to buy something that is indeed listed in that week’s promotional flyer and almost always, the cashier feels obligated to find the coupon in her pile and use it on my purchase.  No asking required.  Just being a helpful cashier.

This is pure dilution for the company.  While one or two items at the grocery store may seem insignificant, over the course of the day and across many cashiers, it adds up.  In the case of the phone, it was a quick loss of $150 in just 30 minutes.  I walked in knowing what I wanted.   I wasn’t shopping price, hadn’t been elsewhere, and didn’t even have a contract to worry about - just needed a new phone with as little hassle as possible.   On the other hand, “save the sale” tactics can be quite effective if executed well.  On the same weekend shopping trip, our purchase of outdoor furniture included a “save the sale” item which the salesperson played like a pro.  Without squelching their desire to be great salespeople, companies need to make sure their employees understand the why behind basic pricing and promotional offers.    Consider the following for starters:
  • Advertised promotions are designed to drive new customers or more frequent purchase from existing customers.  Those who are motivated by price will find the promotion and take action.  Those not motivated by price are unlikely to feel slighted if not offered something they knew nothing about, and surely do not expect you to do coupon clipping for them.
  • “Save the sale” tactics are not promotions.  Use them sparingly and only when the sale is actually in jeopardy.  First offer the most logical choice or better, and revert to a lower price option only if the customer balks and is prepared to leave.  Let the lower price be driven by an alternative item, not just by dropping price.
  • Unadvertised “promotions” have the greatest potential to backfire, calling into question the company’s price integrity.  It was after the “promotional offer” was applied to my phone that I began to feel as though I wasn’t paying a fair price to start – all because of the way in which pricing was manipulated on the fly.  Despite the great price on the phone, I no longer felt in control.
Effective promotions generally deliver on all of the following:
  • Lend themselves to compelling marketing messages.
  • Target specific audiences and time periods.
  • Are fenced to avoid dilution.
  • Have a strong sense of urgency.
  • Can be yield managed.
Share your insights on pricing with your front line team.  The more in tune they are with your pricing strategy, the better they can help grow the business. 

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