... with your pricing.
If I’m right, then a discount frenzy is about to hit us square in the face.
For the majority of NZ businesses, come Tuesday 28 April, the doors will have been closed for 34 days. For many, they will remain closed for another 14 days at best unless they have the capability of trading online or via apps.
In the meantime, overhead costs haven’t gone away. Rent, utilities, wages still have to be paid.
The challenge is cash flow.
For many the answer will be to drop prices, probably drastically, with the hope of generating some fast revenue.
But there will be implications in terms of profit impact and potential forward inventory issues with global supply chains all caught up in regional lock downs.
And this scares me.
Why? Because so many businesses don’t do pricing well. For these businesses pricing evokes a sense fear and the unknown. They fear taking prices up in case they lose customers, sales and market share. And because they don’t fully understand what customers, or shoppers, value in terms of emotional currency. So, they trade on function and price. After all, that is what everyone else is doing.
We only just need to open our emails or walk through your local supermarket aisles or any big box retailer to see discounting in play. In fact, New Zealand retailers are so reliant on discounting that we are one of the heaviest promotionally-driven economies in the developed world.
While I appreciate there is an immediate, and real, need for cash flow, the question you need to ask is this, how much profit can we afford to give away in order to generate cash flow?
For a lot of businesses this question will draw blank faces. Because the reality is, businesses are in the business of making money. We all have profit projections we are obliged to meet. And when you discount a price point - it is profit you are giving away.
It doesn’t matter how much revenue you generate if there is no profit attached to it. Or as I see day in and day out, promotions generating negative margin because their pricing never accommodated aggressive discounting strategies in the first place. And this just leads to marketing budgets being slashed, bonuses left unattainable, hiring freezes and job cuts.
So, what is the answer?
Get intimate with your pricing. Know your costs, build in discounting margin if that’s the game you’re in, set promotional objectives so you don’t fall into a discounting trap, and understand your shoppers and your value to them.
It is claimed over 80% of buying decisions are based on emotional triggers. Applying logic is what we do to rationalise our decisions.
How well do you know your shoppers and what they value and care about?
How are you different to your competitors?
How are you leveraging your differences?
Over the next couple of weeks I will share some resources which you can use to explore and dive into these questions so you can start to re-frame your conversations, both internally and externally with customers, to leverage the unique value you bring that deprioritises the role of price.
Viv Kohlenbach-Wilson is a pricing strategist and leadership coach and is passionate about helping grow businesses and leaders people love.
With a life-long curiosity for understanding human behaviour and skill in data analysis, Viv is a master of game-changing insights. If you’re keen to know more about winning both head AND heart of customers and employees, connect with Viv on Facebook or LinkedIn.