Price discounting in a recession part 2

Price cuts and discounts could be making things worse

A few days ago I was provoked into writing a response to the BBC business news item that highlighted the plight of British businesses in what some argue is a double dip recession and being drawn into the worrying strategy of ever larger discounts and price drops.

On the surface, this type of price-cutting makes sense but it has been going on since 2009 in many sector and hello people it is now August 2011 – guess what..? Demand is still weak…

Sales figures for the UK High Street showed a minor increase (less than 1%) year-on-year last week and amazingly most pundits questioned the figures in disbelief.

Price cuts have had their day and may well only make things worse.

An alternative strategy

It will not surprise you to know I also frequent the occasional shop. I can’t help it if I am a ‘modern man…’ Generally I find I make more of an effort to start a conversation than the shop assistants or counter staff.  As pleasant as most people are in retail outlet – few could be called ‘sales people’ – at best the majority are ‘order takers.’

I was recently hired by a manufacturer to help with the launch of a new concept through a well-known retail chain. My client had secured a trial in 22 stores across the UK. It was an “add-on sale” directly linked to the retail chains main products which nearly always purchased as gifts for other people. All the counter staff had to do was ask a simple question whenever someone came to the till point to buy the main product.  Here is the question I taught them. – “Would you like to make that gift even more special..?”

In those shops where the staff saw themselves as ‘sales people’ and had the confidence to ask the question, extra sales were made and the ‘average order value’ went up. Result.  Unfortunately that was only in about six of the 22 stores…

So what can be done about it?

One answer to the low demand situation is to create demand – to actually stop taking orders and to start selling.

Many organisations have de-skilled the customer assistant role and under invested in their development so it is little surprise we have a majority of order takers in those positions.

Whether your customers call you to place an order or pop into your shop or visit your website – we have to find out more about the customer’s motives behind the initial transaction and use that information to offer an appropriate secondary item for purchase or an upgrade to a high value item.

To make that happen consistently across a business may require the role of the customer facing staff, or system, to be redefined; such that people buy-in to the idea that they are a ‘sales person’ who have the belief, the confidence and the skills to ask productive questions in an effective way and so increase the ‘average order value.’

Such challenges have been our business for many years and some ideas that might help you can be found in our new book ‘The Value House’

If you’d like more information about how we could help you or to order a copy of the book, go to The Value House book.

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