Common Sense Blog #5: The Price is Right ... Maybe

This blog deals with things that we routinely experience in our dealings with businesses, governments and institutions that make absolutely no sense as seen through the eyes of consumers. I will focus on the consumer’s point of view and although I will be reasonable with the instigators, I won’t hesitate to tell it the way it is. All of the events are factual. It would do well for these organizations to correct the problem and not dwell on policies or practices that make no sense to consumers. 

I went shopping recently to buy a birthday present for my wife. She likes Liz Claiborne so I went to her favorite department store to check the selection. Like most men I’m not too comfortable in a women’s apparel department so I sought out a friendly sales associate.

The department was preparing for a “One Day Sale” and almost everything was already reduced 30 to 40 %. I was there on “Preview Day” and learned to my delight that I qualified for an additional 10 % savings since I was a preferred card-carrying customer.  And, since I was shopping in the morning, I got another 10% off because they had an early shopper special and another 10% because I was a “senior.” Just when I thought I had exhausted all discount options, the sales associate asked if I had cut out the coupons in the newspaper that entitled me to another 15% on select items.

By now I was convinced that the store would probably pay me to take the merchandise off their hands! I eventually saved about 70%. It would have been 85% if I had returned home to get the coupon. I’m sure my wife would have remembered to clip the coupon and probably would have bought another outfit with the money she saved buying the first one!

The reality is that retail price promotions have gotten out of hand. Most consumers have lost all confidence in pricing because prices fluctuate up and down and we never know when to time our purchase because we don’t know if the price will go down next week.

Much of traditional retailing is caught in a vicious “Catch 22.” On one hand, retailers are hooked on sales events as their primary strategy to drive sales. On the other hand, the price-driven sales strategy results in reduced margins, increased promotion expense, confused customers and frazzled sales associates. There is no longer any price integrity.

But most customers see through the sales and pricing gimmicks. Our buying habits tend to be driven by a set of personal and internalized decision criteria that combine to form a value proposition that in turn is used to make a purchase decision.

The time it takes to make a decision is relative to the cost and significance of the purchase. Value is the relationship between price, quality and all decision criteria that are relative to a particular purchase.  Value does not necessarily imply the lowest price, in spite of the proliferation of sales. For instance, we might spend $1 more for a gallon of milk at a convenience store rather than drive the extra mile to a supermarket but then turn around and shop all over town to find the best value on a new TV.

Our sense of value is influenced by a set of personal value criteria that retailers would be wise to incorporate into their promotional and sales strategies. These criteria include: quality, durability, selection, in-stock position, knowledgeable and friendly sales associates, availability of product information, fast checkout, empathetic customer service, safe parking, clean restrooms, on time delivery, honesty and integrity, shopper perks, return policies, post-sale service and an informed, visible store management team.

It makes sense, common sense to remember that price is but one component in the value proposition.