Discount Retail Pricing in a (Really) Down Economy

Posted by in Retail


As a retail manager in these tough economic times, you have to address many key issues of your business. Not the least of these are the price point adjustments you’ll need for the holidays. But there is a right way and a wrong way to offer discount pricing.

 

Consider coupon codes. These can be more effective than simply running a sale, because consumers feel like they’re getting an advantage over other shoppers. “They feel like an insider, knowing that other visitors to the site without a coupon code would pay a higher price,” says Julie Vlahon, PR guru for TechBargains.

 

“Merchants don't want to discount their products and services because it reduces their profits. That being said, the reality is the vast majority of consumers expect some discounting given the recession and the Amazon and Wal-Mart effect,” says Vlahon.

 

Customers are hungry for real bargains and can spot a phony gimmick faster than you can say “discount.” In this economy, people price compare (online and store-to-store ads). So it’s not surprising that doing what J.C. Penney did earlier this year went over like a lead balloon. They eliminated sales and promos altogether, touting "everyday low prices.” Their “Fair and Square Pricing” campaign assumed that customers don’t like to use coupons for discounts. Result: a 20 percent drop in first quarter sales.

 

A survey conducted by Michelle Clark, an analyst for Morgan Stanley, found that consumers noticed higher prices at J.C. Penney after the store’s Fair and Square Pricing went into effect. In fact, only 16 percent of shoppers found the best prices at J.C. Penney, with many admitting that the store's messaging confused them.

 

For maximum impact, discounts should be product specific and for a limited time. Persistenly long discounts can produce a negative effect. Consumers will think that your products may suffer in quality or that your store’s service is below par. “It is not recommended as a long-term strategy as it only serves to cannibalize sales that would otherwise have been made at full price,” says Lori Karpman, president and CEO of Lori Karpman & Associates.

 

Another thing to be mindful of are the specific guidelines for the discount offer. These should be clear and as simple as possible. And be sure employees have access to the discount details. Nothing infuriates customers more than an employee who doesn’t know about the discount, is confused about it, or has to first “check with the manager.”  It not only wastes time but makes customers feel “cheap.”

 

In helping to arrive at a discount pricing strategy, you’ll need to consider your USP (Unique Selling Proposition). For online retailers, your USP might be excellent customer service (i.e. Zappos), free or timely S&H (i.e. Amazon Prime), or a totally unique product (DODOcase).

 

There are also many ways to offer incentives. The Shopify App Product Discount will let you run sales in your ecommerce store based on product brand, type, collection, and more--so "buy one get one free", "buy 2 get one 75% off" and similar sale offers are easy.

 

The holiday season is fast approaching. Are you ready for today’s value-conscious consumers? They want to buy.  The pent up demand is there—if you have the right price.

 

Image courtesy of photostock / freedigitalphotos.net

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  • Alex Kecskes
    Alex Kecskes
    Thanks, Michele.
  • Michele E
    Michele E
    Excellent article.  I am going to apply the do's and donts'.
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