Discount Nation and the sucker price

When was the last time you went to Macy’s or Bed, Bath & Beyond or any furniture store and paid full-price?  Did you actually pay for shipping on any e-commerce purchases during the holiday?

At most retailers, regular price is the sucker price. You only pay it out of desperation or ignorance.

Walk through any mall and you are inundated with sales signs, with coupons and with triple rewards points.  Buy one sports coat at regular price and get a second one at half-off?  Yes, please.

One retailer–I’m looking at you Gap–even put their whole store on sales for several hours during the run up to Christmas.

It makes perfect sense that product gets marked down as the season draws to a close.  It makes sense that your best customers get rewarded for concentrating their share of wallet with you. And faced with an intensely competitive market, one must certainly be mindful of maintaining market share.

But at what price comes the glory of same-store sales growth?

For years we have been teaching consumers that there is no integrity in our pricing. We have become a “discount nation”, bribing the promiscuous shopper to choose us over the competition while needlessly giving away margin to potentially loyal and profitable customers.

I don’t believe for a second that we are going to see an end to rampant discounting and blanket promotions any time soon. After all, it was just a few weeks ago that Target announced a new credit card that offers a straight 5% off all purchases.

I do believe that companies that deliver truly compelling value propositions and experiences based on a deep understanding of customers needs, wants and long-term profitability will win over the long-term.   I do believe that the best brands–think Apple, Nordstrom and Coach–know how to drive their business at regular price.

Those brands do the work of customer-centricity.

Those other brands?  We know what you are.  All we are doing is negotiating.

 

 

Defying gravity: The customer isn’t always right

GAP abandoned its new logo after just one week, caving into a sea of complaints on its Facebook page. Whatever you think of the new logo–I think it’s pretty weak–or the way they handled the launch–in a word, poorly–the notion that customers get to vote on key strategy elements is fraught with danger.

gap logos

As someone who preaches about leveraging customer insight to drive growth strategies, I am hardly going to suggest that companies stop listening to consumers. But there is a time and place for voting.  There is a time and place for crowd-sourcing.   Critical strategic branding decisions?  Eh, not so much.

Put to a vote do you think consumers would have chosen Blackberry or Pocket-Link (the original name) as the name for a revolutionary new phone?

How many customers would have thought Google was a compelling name for a web browser?

Most consumers, when given the choice, stick with the familiar.   And in doing so they get it wrong–for themselves and for the companies who seek to bring innovation to the marketplace.

Leaders need to resist the gravitational pull of the status quo.  Leaders need to listen to consumers as part of a set of inputs.  And then they must remember that remarkable trumps the familiar every time.

Prospects, Not Suspects

The notion that a smart sales and marketing strategy distinguishes between suspects–consumers who MIGHT turn out to become profitable customers–and prospects–consumers who are highly likely to turn into valuable clients–is an old idea. Great sales people possess this intuition.  Great marketers use customer insight, robust analytics and customer segmentation to do this more scientifically.

If you are anything like me, you may have noticed a lot of attention being given to companies that are posting seemingly impressive customer statistics.

The hot social media sites–from FourSquare to Yelp to Twitter to Facebook–have signed up millions of users (in the case of Facebook reportedly over 500 million!). But how many of these folks are actually buying anything?

Members-only “flash-sales” sites use free-shipping and high value gift cards to coax existing members to refer a friend.  Are these newly acquired members turning out to be customers with a positive lifetime value, or is this mostly a land-grab to keep private equity money flowing and high-end vendors interested?

Groupon recently executed a promotion with Gap during which a reported 441,000 customers spent $11MM in just one day. That particular promotion offered $50 in merchandise for just $25.  Most press reports deemed it “successful.”  Really?

Successful in generating awareness?  Apparently.  Successful in acquiring a significant number of marketable e-mail addresses?  Most likely.  Successful in driving short-term revenue?  Clearly.  Successful in creating buzz about Groupon? You betcha.

But how many of these consumers were promiscuous shoppers, only enticed by the deep discount?  And let’s face it, just about any reasonably desirable brand could generate an impressive incremental sales lift by cutting their prices in half.

Most of these hot brands are still dealing in the world of suspects.   Only through time and more rigorous customer analysis will they know they are gaining prospects.

In the meantime, I remain suspicious.