Almost invariably when you compliment someone on the clothes or shoes they are wearing, they tell you the origin story of how they found that outfit. More often than not, you’ll also hear about the fabulous deal they got when they bought it.
While deals and discounts are great for origin stories of outfits (and other products), how a retailer handles those deals relates directly to how many origin stories get told. Plus, no matter how many deals and percentage discounts you offer, the Value Equation is still in effect.
While sales and events might draw traffic, the real purchasing decision comes down to the Value Equation. Does the item I’m about to buy seem to be worth the price I am about to pay? Or more simply put …
When we walk into a store we immediately start asking those questions of every product we see. At what price would I buy that item?
For most of the store, the answer is “Free”. So you walk right by those items until you find the item you want. When you find that item you immediately assign a price you would be willing to pay for that item. I often call that the Perceived Worth. Then you look at the Actual Price. If the Actual Price equals the Perceived Worth, the item goes in the cart and your origin story begins.
The problems arise when the Actual Price is not equal to the Perceived Worth. If the price is much higher than you thought, you walk away and keep looking. If the price is much lower, you first have to figure out why. Is the item inferior? Is the quality bad? Does it not do what I thought it would? Did I overestimate its worth? Until you have satisfied that question, there is no origin story.
WHAT’S THE PRICE?
The worse problem is when there is no Actual Price (or at least no clear sign on what the discount might be). Now you have to engage a sales clerk to make a Value Equation decision. Or you might have to take the item up to the register to have them scan it to see if it fits your Perceived Worth.
Many guys will walk away from the purchase of anything that wasn’t the one item they came in to purchase if there isn’t a price on it. Many introverts will do the same.
You’ll lose all impulse sales on the items that aren’t priced.
You’ll also lose sales if the discounts aren’t clearly marked. While the origin story might become awesome when a customer gets to the register to find an extra 30% off, if she had known that discount before she got to the register, she might have bought multiple items. As it is, now she doesn’t want to hold up the line to try to find a couple more in her size or have to get back in line to wait even longer.
You’ll lose multiple item sales when the discounts aren’t fully marked.
While many of you have downloaded and follow my three rules on Pricing for Profit, here are two more rules to add to your pricing philosophy:
- Price your goods based on their Perceived Worth (not on their cost). If it looks like a Fifty Dollar Item, price it at $49.99 and watch it fly off the shelves.
- Make sure all your items are clearly marked with their current price. You’re losing sales if you don’t.
Pricing is the one mistake no retailer can afford to make. Fortunately, the pricing rules that increase your sales are easy to follow.
PS I had two experiences this past weekend where these rules came into play. The first was a pair of shorts. I found the ones I liked and was ready to buy until I saw the price. It was much, much higher than I was willing to spend, so I put them back. The second was an air conditioner unit. I walked into the store with no intention of buying a new AC window unit. Oh, I had the thought of wanting to replace my older, energy-INefficient model eventually. But that wasn’t my purpose of this trip. Yet there was a stack of them right in the middle of the aisle—with NO PRICES! After wandering around the pallet twice, I gave up. If I hadn’t walked past the section of the store with more AC units—this time priced—I would not have made a purchase.