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. 

Big Data is a Big Deal

By Sue O'Shea - Director, Integrated Insight

“Big Data” is a big deal.  It possesses one or more of the following characteristics – high volume, high velocity, or high variety and comes from sensors, devices, video/audio, networks, log files, transactional applications, web, and social media - much of it generated in real time and in a very large scale. Businesses are all collecting, organizing and analyzing data to some degree, but how do companies get the sheer volume under control and mine the data? Big data is only useful if you know how to analyze and glean insights and put the insights into action.  If not, it’s just another report on the desk.

Wired Magazine offered the below insights to help understand the clues that the data is providing.  Among the insights are:

• Treat Your data as a ‘Gold Mine’… and Mine the Gold –   Collecting this valuable information is the first step in truly understanding your customers’ experience.

• Don’t Always Assume You Know What Your Customer Wants or Needs – Allow the data to provide insight.

• Focus on Quality of Your Data rather Than Quantity – Focus on the data that matters most.

• Be Agile – You technology must be agile and able to adjust as quickly as your customers change their preferences.

• Your Business Operates in Real Time – So Should Your Analytics – The ability to gain insights into your customers’ experience and behavior in real time allows you to understand what’s happening as it’s happening.

• The Data is Yours, Use Every Bit of It – It is the granular information about your customers’ behavior and experience that will render the most valuable insights.

• Look at the Full Picture –Enrich data by correlating it with other data that resides in different data stores to make sure you are able to “connect the dots.”

However, before embarking on a big data quest, IBM, a provider of big data IT solutions, recommends getting these things right first:

•  Build a culture that infuses analytics everywhere. Empower all employees to make data-based decisions, instead of relying on instinct and past experience.

•  Be proactive about privacy, security and governance. Ensure that the data being analyzed is safe, secure and accurate.

•  Invest in a big data and analytics platform that is tuned to the task of handling all types of data, regardless of form or function.

Big data has the power to help companies gain a full understanding of customers—what makes them tick, why they buy, how they prefer to shop, why they switch, what they’ll buy next, and what factors lead them to recommend your company to others.  If done correctly, it can help marketers not only make better decisions but more profitable ones for their companies.

If you want to learn more about Big Data, take a look at www.bigdatauniversity.com.  The website offers a variety of free and fee based courses by experienced professionals and teachers.

I Spy...

By Lori Georganna

Chances are you have played I Spy, either as a child or with your own children to keep them occupied during a long trip. Beyond the distraction benefit, this game helps to build children’s observation skills. These same observation skills can help you uncover opportunities with your employees and customers. It requires slowing down, observing what is around you, taking notes on what you see, and discussing it with your employees and customers.

Marcel Proust, French novelist, said it best: “The real voyage of discovery consists not in seeking new landscapes but in having new eyes.”

Here are some ideas to get you started.

• Watch your customers while they are shopping or interacting with your product or service. What do you observe?  Note what they are doing and what is happening around them that may be impacting their behavior or mood?
• Play undercover boss. Employees who deal directly with customers have a lot of insight as to customer needs and behaviors. Step into front line roles periodically for a firsthand experience with customers. You will appreciate what your employees do and they will appreciate you even more for walking in their shoes!
• Be the customer. Go through the journey your customers take with your company. Make sure to take notes of any frustrations you encounter. Also note what your company does really well.
• Hire an objective observer or ethnographer. Sometimes we just can’t get out of our own way or we need an external partner for credibility.

Once you have some ideas, either on how to improve the existing experience, or for a new product or service, call in your market research experts if needed. Some ideas should just be implemented – either because they are low cost or it makes business sense. Other ideas may need additional exploration and research to determine if they will have the desired impact.

For more tips on how to up your observation game check out these links:

http://everydaylife.globalpost.com/improve-hyper-observation-skills-28842.html

http://lifehacker.com/5960811/how-to-develop-sherlock-holmes+like-powers-of-observation-and-deduction

Don’t Lose on Loss Leaders

By Laura Iles - Sr. Consultant, Integrated Insight

As I watch the ads this season, I’m reminded that loss leader strategies are a favorite holiday pricing tactic of the various establishments competing for our dollars. When used appropriately, discounting below cost can be a useful strategy for pulling repeat customers in the door, driving incremental sales, and establishing new clients. But this strategy is not appropriate for every business, nor for every occasion. Below, we’ll look at some of the critical factors to consider in determining whether this particular pricing tactic will achieve your goals.

Attracting the Right Customers

The first question is whether a loss leader strategy will attract the kind of customers that will remain with the company long term. While steep discounts can entice new customers with a low-risk chance to sample offerings, there is always the chance of drawing individuals who cannot afford to pay full price for the products / services once the offer is concluded, and have no intention of making incremental purchases on that first visit.

This is where market research becomes critical. Understanding existing customers and their motivations will enable the firm to decide whether a discount message of this level will be attractive. Price is not the only loyalty driver – Nielsen research demonstrates that globally, 59% of customers would be most enticed to switch brands, service providers, or retailers for an attribute other than price. Clearly, a dramatic savings message is not the only way to attract customers.

Maintaining the Customer Experience

Prior to execution, consider whether resources exist to manage the volume increases. Depending on how valuable the offer is perceived to be, the deal may end up attracting more customers than the firm is prepared to handle. A sudden spike in online traffic can crash servers and attendance increases may overwhelm stores. Consider whether a more modest savings message would be effective, while helping to preserve the customer experience.

Limitations

Specific limits around the campaign will help to prevent a devaluation of what current customers have already purchased. Loss leaders for specific times (Black Friday) or specific subsets of customers (local residents, particular email lists, etc.) will help to prevent a general weakening of your brand image, as well as shielding the firm from widespread losses if the strategy does not produce incremental sales. As time passes, it is useful to periodically review limitations for any ongoing loss leaders. There is always the hazard of training your customers to wait for discounts if such messages are provided too frequently.

Imaging

Think long term – does this tactic support the firm’s overall image? The danger with any loss leader strategy is the risk of creating a “discount” image. Many businesses utilize this approach successfully, just make sure it’s the most appropriate one for the company. Fencing the offers (e.g. limited time only, a subset of individuals only) will help to mitigate the discount appearance and retain value for the firm.

Create an Exit Strategy

As with any new strategic plan, be willing to utilize an exit strategy if the loss leader tactic is not creating the anticipated level of success. Develop guidelines around targets and time frames before implementation and establish metrics to use in evaluating success. You might cross-track elasticities to measure the impact a loss leader has on sales of additional items, as well as establish a process for tracking new customer retention. Discount messaging is an easy way to drive immediate sales, but determining whether it creates long-term profitability requires tracking the results.

Using a loss leader to drive penetration can be powerful, but it’s not the only pricing tactic available. Make sure it truly aligns with the company’s strategy and the customer’s needs before deciding which course to pursue. 

Inspiration in the Office

By Candy Parks - Director, Integrated Insight

There are people much smarter than me that have built a body of research on the psychology of office design and the impact on retention and productivity.  If you doubt me, follow this link:  http://www.facilitiesnet.com/designconstruction/article/Workplace-Design-Can-Help-Attract-Retain-Generation-Y-Employees--13859

All I know is that I like colors, and colors make me happy and boost my energy.  We read about this in medicine all the time – people focus their thoughts and their attitude and those positive thoughts have healing powers.  I believe office supplies have productivity powers!

Most women love to spend hours shopping for shoes at Nordstrom.  I, on the other hand, get my retail therapy in Office Depot.  Maybe because in one of my first jobs, I had to get office supplies from someone we’ll call Helga.  If I checked her resume, I think I’d find that Helga managed inventory for the Nazi forces.

If you needed pens, she informed you that black ball points were all you needed.  And yellow post-it notes fit the bill – the other colors were simply frivolous.  And according to Helga, the only binders fit for use were 2” and black!  Helga also thought colored file folders were from the devil.

Poor Helga would CROAK if she could see my office today.  Luckily, I now work in an environment where my leaders say, ‘Get what you need to do your job.’  Sooooooo, I have 3 ring binders in polka dots, paisleys, and bright stripes.  I put my most challenging projects in my favorite binders, and psychologically, that perks me up when I have to reach for that binder.  I have post it notes in every size and color and I use them all.  I have flair pens in 12 colors, and I have REAL pencils – not mechanical pencils.  Of course, my pencils are from Vera Bradley and are beautiful, but I use them happily and admire them as I do so.  I have note-taking books in bright yellow, pink, and lime green.  And my bookshelves are lined with colorful cloth baskets to store all my fun supplies.  When a project is done, I transfer it to a boring folder – not manila, but a boring solid color and put it away.  But while something is active, it LOOKS active on my desk or on my shelf.  And I feel active and energized while I work on it. 

Of course, there is a time and a place for everything.  No, I’m not going to take my bright polka dot binder to a corporate meeting – I’ll transfer to basic black – but I WILL take my purple flair pen.  If you’re a leader, please don’t underestimate the simple pleasures of office supplies and their potential impact on employee satisfaction and productivity.  It’s so much cheaper than redesigning your office and buying new furniture!

Pricing 101: Taking a Page from Pawn Stars

By Kirsten Snyder - Director, Integrated Insight

If you haven’t checked out the show Pawn Stars on the History channel, then you are really missing out.  The show follows about 3 or 4 items that people bring into the Gold and Silver Pawn shop in Las Vegas.  The items range from old military weapons to pop culture collectibles.  Think of it as Antique Roadshow, only at a pawn shop.  Besides the history you learn from the experts on the show, it teaches important lessons in pricing and maximizing profit.

Understand the price customers are willing to pay.

The pawn shop understands that they need to buy an item at the right price in order to be able to mark it up to make a profit.  In order to buy at the right price, understanding how much an end customer is willing to pay is critical.  Not knowing the price the market will bear runs the risk of overpaying and being forced to sell at a loss.  It can also lead to a slower than expected sales pace.

Understand the size of the market interested in the item.

Another important factor to consider when buying a product is how quickly the item will sell, otherwise known as carrying costs.  The pawn shop can estimate this by understanding how many people are interested in, or able to afford a certain item.  For example, if they buy a first edition Mark Twain Novel worth $10,000, management first has to project how many Mark Twain collectors are in the market and willing to spend $10,000.  Carrying costs are important to consider given money tied up in inventory isn’t available for purchase of new items.

The best channel may not be your own.

The pawn shop may buy an item that’s too good to pass up, but if they need a specific audience to sell to, then the pawn shop may not be the best place for the sale to take place.  Some items may sell quickest and fetch the highest price through a different channel.  For example, the pawn shop purchased a car driven by Steve McQueen in his last movie, The Hunter.  Because this item has a very specific audience, they considered how much profit could be made if they sold it through an auction, in spite of the auction fees.  The pawn shop knew they would have the best audience willing to pay the most money through this channel, as opposed to their own store.

The moral of the story, “Maximize profits by understanding your consumer.  Offer the right product, to the right customer, through the right channel, at the right time and price”.

Black Friday Frenzy or Cyber Monday Mania?

Shoppers are increasingly trading early morning ‘door-busting’ deals for the comfort of online shopping at home

By Sue O’Shea – Director, Integrated Insight

Are you a Black Friday Soldier, a Cyber Monday Surfer, or both?  If all the indicators are accurate, holiday shoppers seem, more and more, to prefer shopping for deals from the comfort of home rather than braving the early hours and frenzy of Black Friday. 

The internet has certainly transformed the shopping experience, and the long held post-Thanksgiving tradition of arriving at 4 a.m. for “door-busting” deals might be its next casualty.  Nielsen recently conducted research that indicated 85 percent of consumers plan on skipping the stores on Black Friday this year. Instead, nearly half of consumers (46%) stated that they will shop online on Cyber Monday, compared with 30 percent in 2012, a significant 16-point increase.  The research also stated that the percent of respondents planning to shop in physical stores this Black Friday is down 4 points from 2012. This is part of a four-year downward trend, where consumers report a declining interest in shopping the Friday after Thanksgiving.

ComScore reported that Americans spent $4.3 billion online from Thanksgiving through Cyber Monday in 2012, with double-digit increases on every day compared with 2011. On Black Friday itself, online sales rose 28% while in-store sales dropped 1.8%. Clearly, consumers increasingly favor online deals over those in stores, especially since they can find the same items online at the same price and with free shipping.  Internet shopping also gives the consumer an easier way to comparison shop without having to drive all over town.

Despite the comfort and ease of internet shopping, there is a certain segment of shopper who thrives on the thrill of the chase and competitive shopping on Black Friday.  I bet some are camping out in front of Best Buy already, so the Black Friday tradition seems safe for now. These intrepid souls may be decreasing in numbers but they do make for a good story on a slow news day.

More power to them, but I will be at home clicking away with a cup of Christmas cheer!