Shoes under your favorite brand are discounted…

I asked a couple of my friends where they buy new shoes and clothes now – at the time when talks about recession have replaced talks about weather by frequency. All of them mentioned they visit Winners for clothes and shoes, Wal-Mart for personal care stuff, liquidation warehouse for shoes and coats (some thanked God they needed no shoes or winter clothes as the last-year ones are still good!) or they go for discounted goods in well-reputed stores. The spending spree is now over as cash-strapped people save brutally and, if need comes in, look for discounted and cheap products. Following this stream in consumers’ behavior, stores, full of inventory, red-tag products with attractive discounts (30% off the regular price, buy 1 and take the 2nd for half the price, etc.). As a shopper, I would be beyond myself with joy and look deeply in my wallet (no, my credit card limit) and shop around like crazy. As a marketer I would think a little about the margin for these discounted products. I have no care for Wal-Mart, Winners, or suchlike, which bring suppliers’ prices down by aggressively attacking and imposing all its market weight on them, or buying out old collections or expiration-nearing products. These are now thriving. But I really care for the others, who also discount willingly in hope of selling more and cross-selling non-discount products. These are running the risk of destroy their brands and image by dumping high-level products into the pit with low-cost worth-for-nothings.

A couple of months I saw Nike shoes on sale in a Sports Expert store in Montreal. The tag price was 40 bucks (CAD). Although I wanted to buy some sports shoes, I didn’t go for those with the simple thought “under CAD50 shoes cannot last longer than a month”. Later I found it was a huge sale and all shoes were offered at the third of the regular price. Sale or not…I have some price vs. quality standards in my mind, which I cannot cross while shopping. Such standards are hard to overcome…

Discounting works well for the purpose of widening the target public, acquainting them with the product, letting taste it and feel it. But regular discounting policies may trap the brand into the lower product category. Imagine sales of Dolce&Gabbana purses for 50 dollars or less. Even if they’re genuine, the first thought is “fakes”. Or high-end Lindt chocolate for 0.75 dollar – not good for eating? or expired?

Getting discounted (read: cheap) is not a good market strategy (unless your volumes are like Wal-mart’s). Discounting is an instrument to be handled carefully:

It is done to boost cross-sales. Take Yves Rocher strategy of lowering prices (only to coupon holders) and giving away free gifts when you purchase a full-price product. No one cares that the gifts, evaluated at 5-10-15 dollars in the bill, are bought in China for cents per unit. Here the core idea is to load shoppers with plenty of things and show how much they get for buying one single product (the regular prices are not that low, though – a bottle of liquid soap (200g) is around 10 CAD).

It is done to stir some interest within the target public. See the ailing games business where by buying a popular game you can get one for a fraction of the regular price under the brandishing message “Buy 1, get 2”. Let the fact that the second game is not quite popular and is even boring leave in the shadow.

It is done to widen the target public. Recession is like trouble waters: bright and grey fish mix up and you never know if your bright fish (rich shoppers) will retrograde to some grey fish category. Just give other targets bite a bit of the impossible-to-taste-before product and win them. For instance, the high-end leather goods maker Coach slightly diminished prices for its leather handbags to reachable 200-250 dollars instead of too-expensive 400-dollar ones. Not too cheap now, nor too expensive.

In one word, discounting is a tool to be used wisely and to be kept under control. Otherwise, it will turn into a drug the company ends up being hooked on.

So, let’s go shopping [on a limited budget]: discounts are out there!

Recession creates new job markets

Image source: www.biojobblog.com

No matter how strange it may sound, but this recession is giving birth to new markets and new jobs, which would have never come into being before.

Take Japan as an example. This country is known for greatly dedicated employees, who do overtime chronically, which is taken for granted by them and their employers. But the recession causing shutdowns and hour cuts has given Japanese workers more time off. The government also strongly recommends that companies insist that employees take their full-time vacations. As mentioned by the travel website Expedia, almost every Japanese takes only half of their two-week vacations allotted by the law. Now that they will be made to take their full two weeks, that may boost spending on vacations, which will create over 1 million jobs in the country.

In France, for instance, recession has caused a lot of upheaval with unionized workers. This country known for its regular strikes organized by unions all over the place. With recession at the doorstep, international companies attempt to close up factories and reduce working hours. So, as a reply to it, French workers take their bosses hostage. Usually, that means that top managers are isolated in their offices for a number of days without being able to go home. The army of local consultants saw an opportunity in this conflict. Now the most popular consulting service consists of offering expert advice of how to avoid boss-napping. The consulting includes courses of how to initiate a slowdown of production and how to avoid physical interference.

These are just two examples. I guess there will be more…

Buyers’ attention is costlier than gold

Source: dericbownds.net

Anyone of us has been or is a buyer and a seller at the same time. Even if you are not part of a private business, you are still a buyer and seller. We buy food, clothes, cars, travel, homes and sell homes, cars, unnecessary things. Being a buyer and a seller makes us involved in this interactive process, whose first utmost step is to grasp somebody’s attention (if selling) or be attracted by a product or service (if buying). It is all about attention.

For sellers it is important to find ways to get through various shields to get to the potential buyers’ eye, mind and, finally, heart. Not that easy in the present-day ocean of terrorizingly omnipresent messages sent through all possibly imaginable media channels. Going a couple of decades back, this task would have been easier as businesses were practicing the push method of getting the message across to the customer’s eye or ear. Now the times have drastically changed: buyers are immune up to 99% of all messages sent to them. They have adopted the pull strategy in opposition to the push one. Now it’s them who sieve through the information flows.

Companies and not only need to reitinerate their communication strategies through a set of steps, which are really down-to-earth and do not require much investment.

Know your buyer

There is no wonder that even now there are plenty of companies who simply squander their marketing budgets out in vain hope of getting to customers through wrong channels or, which is worse, getting to an inexistent audience. Why, for instance, deliver millions of printed catalogues to every single household in the city if it gives an increase of 1% in sales? See what Yves Rocher (they are in cosmetics) does: sales assistants always ask if buyers want to sign up for promotions and newsletters. By collecting this information they will not send coupons and promo information to Dick, Tom and Harry. They’d rather direct it to ladies who shop with them frequently: my wife, for example

Deliver quality

Quality of the offer product should not be doubtful and should be in line with the promises. Back to Yves Rocher (I will refer to them at least once more here): the quality of their cosmetics is higher than medium, but not outstanding. But their key advantage is that their product is of the same good quality every time you buy it.

Offer consistency

The message delivered to potential buyers need to be consistent. If the information comes from different channels the customer needs to be able to recognize it. The wording of the ads and promos as well as design and styling differing from each other every week may create confusion with customers. To me if it’s red today, it should be red tomorrow to think its features has not changed.

Be regular

Regularity is also an important point to consider to attract attention. But the touchy thing here is not to overdo it. I got subscribed to a business magazine last year and got bombarded with renewal notes every second week after the first subscription month. Come on, guys, I have 4 more months to go… Sorry for them I discontinued my subscription, asking myself why they sent me 6 reminders (0.50 cent postage every time) for the subscription of 25 dollars year – 12% of the total cost of the subscription?

Be accurate

Accurate data collection is not to be disregarded. Data processing people are not too much motivated by the monotonous job they are doing. As a result, errors come in place. Getting back to the magazine subscription topic, my friend refused a subscription after waiting for 3 months for the first magazine to come. After calling them 3 times and asking to correct the address (change the unit number) his patience was lost as well as the subscription for the publishing house, which had to send him the refund check.

Customize

I hate receiving generic message starting with Dear Sir/Madame (you cannot determine whether I am a Sir or a Madame – a bad beginning!). But I pleasantly read messages addressed to me by, at least, my first name.

By the way, the already-mentioned Yves Rocher, uses these ways of attracting potential buyers’ attention quite well. My wife buys way too often from them

How did we get there?

All that glitters is not gold. Proverb

The new 2009 is already here, but the mood is somewhat gloomy. Instead of asking family and friends where they are heading this summer for vacations, the question goes “How did/does the crisis affect you?” or “Are you ok?” sounding “did you have time to stash some money away?” or “is your 401 sound enough?” or even more bitterly “yep, I know your pension flew away as mine did so”.

Once this year set in, I keep asking myself how on earth we got in this terrible state.

There are plenty of details making up a fully-fledged answer explaining the situation. To me, growth would be the dominant factor here.

Growth in its perverse interpretation.

A couple of years ago while organizing a marketing event, which turned out to be smaller by size than the one previously organized, I was told by a company rep, there should be a positive dynamics – every new year should show better results, which would be more visitors and participants. My reply was: it’s true, but if we keep on growing every year there would be no room for growth in 5 years. To console him, I explained how we were planning to diversify and change the format.

But this idea of constantly growing is stuck in so many minds. Business needs to grow to show better results for stock holders, investors, etc. etc. customers come last in this list Growth must be in place no matter if it is controlled or not. Portfolio of customers, turnover, balance sheet need to be reflecting “how well the business does”,

Stop…Here comes the problem. One cannot grow forever – there will be a critical moment when the growth is stopped just because the pick was reached. The key word here is “stop” or “when to stop”.

The financial crisis comes from the assumption that growth/positive dynamics can last forever. Or the self-lying thought “we will know when to stop”.

Crave and hunger for better results/more earnings/positive dynamics triggered uncontrolled growth in volume in any sphere: oil, computers, etc. Banking and finance people do or, better to say, did need growth, too. So, they gave money all around without thorough analysis of how the money will come back…

The bubble was blown up actively with huge pumps until 2007, then it burst…

Welcome now to new economic conditions, when people save and do not squander, when unreal-planned demand vanishes and companies disappear, when having a job is a privilege.

Direct Sales Techniques

Having had some experience in direct sales and having observed a number of people showing up at my door to sell a product, here are some techniques used to promoted the product and make the prospect want to buy the product:

SMILE:
Smile is the door-opener and ice-breaker. An honest smile is what make people continue speaking with the sales rep.

PASSION:
Passion about the product, that’s what a rep is to show. Being passionate about the job makes us believe the salesman is good. We, as buyers, do not focus on a pimple on the rep’s face or on any other part of the person, which sticks out (I usually do when I see no passion in the salesman’s eyes).

EYE-CONTACT:
Eye contact is very important as it shows confidence and allows to observe the prospect’s behaviour.

Good salesmen master these techniques to perfection. Prospective buyers (the majority of us) should be also aware of these as it’s them who pay for falling for it.

Lying is Not a Good Sales Technique

Yesterday I went to a local ML store to buy a washer. The idea was not to buy but to compare prices and see how it works with washers here. At the same time I wanted to have a look at how they sell and what techniques are used to make the customer want to buy an expensive product (a set of a washer and a drier is over $1000, which is still expensive for me ).

So I got to the store and started looking for my dream washer. From the very beginning I was outraged of too much attention to me from the salesmen. At the very entry one came up to me and said: Hey, I am X, call me when you want to buy something here.

Ooppss, I know these guys get a percent of the sales they accomplish, but should I care about it? There are at least 5 other people I can ask should there be a need.

Good, I had a nice look at all the washers there and stopped at a nice small machine to fit my apartment. I asked the salesman how I can get it and what the conditions were in case the price looked ok to me.

So, what I got:
For one: the price announced was just for the washer when taken with the drier together. Otherwise the price was by $200 higher. That was not written anywhere.

For two: If I wanted to take that washer I needed to consult another machine in the backyard as the first washer for just for demonstration purposes.

For three: They told me I could buy the same set for the price of just the washer. How come? I grew interested to get two for the price of one. They took me to the warehouse and should an all dented washer and dusty drier returned some years ago to go for the same price. Ouch! That was rude…

I went away enraged and very disappointed by the service after the 30-minute stay in the store. I do not want to believe other people’s time is wasted like mine.

From this all I can draw a simple conclusion:

– Salesmen are ready to lie to customers in order to keep them interested.

– Lying does not work as customers are no blind sheep.

– Once lied to the customer is lost forever for the business.

Spoiled Customer or How Discounts Change the Market

Going to WalMart I am eagerly looking for red labels with discounts and comparing the discounted price with the regular one. Once the price seems low enough I decide to buy the product. When I come home I understand I do not need the product and I go back to WalMart and return it. I got my money back. I go back home… I am a really spoiled customer like many of us.

Today’s retailers are involved in such ferocious competition that they agree to go lower the bottom line in profit and be in loss just to keep the customer coming and buying. Once the customer is accustomed to regular discounts and returns plus refunds, it’s extremely difficult to do otherwise. If a retailer stops its return program, customers will be outraged and they may simply turn their heads away and switch to competition. So, retailers are facing a spoiled customer willing to have lower prices, to use the product up to 30 days (in Canada) and return it back with the pretext s/he does not like it. Not quite easy to make profit in such a situation…

Still, retailers manage to survive and have good profit. How come? The answer is more than simple: everything is due to the volume of sales and flexible pricing.

First, around 0,02% or less of all buys made at WalMart are returned. This figure is so insignificant and it does not reflect on the benefit at all. Second, the volume is the word: the more you sell with a very small margin on each product, the more you get in profit. That’s why big retailers afford having return-and-refund services and regular discounts…The discounted product sells fast, thus freeing valuable place and storage for other product to come and generate more volume in sales.

Unfortunately, what is good for big retailers is death for small shops, which have to go into niches to be able to survive. Competition with retailers in doomed to loss.