Motivate Customers with 5 Key Pricing Strategies
According to Antony Karabus, President and CEO of Karabus Management these five strategies for retailers are important in order to emerge as a strong retailer.
- Optimize cash and cost management
- Understand what is relevant and motivates your customer
- Use science to improve gross margins and inventory productivity
- Invest in technology correctly and on the right projects
- Get your supply chain right
There is a lot here to do. I want to focus on item number two. This strategy is rapidly gaining attention as a key initiative for 2010. How are you planning to accomplish that?
How do you determine what is relevant and what motivates customers? Your data is rich in insights into these questions. Have you spent the time and resources to mine that data and discover what makes your customers tick? This is equity that you own. Use it.
Determining your Key Value Item list is a critical place to start. It sets the stage for your pricing, promotional, and merchandising strategy. Here are a few tips.
Key Value Item lists should not be defined from:
- A top mover list in units and/or dollars.
- Store can sell a lot of Ramen noodles…….
- Items your competitors have chosen to price at low margins
- You may not be buying right
- Items your competitors promote frequently
- They may be wrong
- Items only your best customers purchase
- You cannot live off of them alone
- What your seasoned executives carry around in their heads
- They may not be there tomorrow
Key Value Items should exhibit several of these criteria:
- Items that exhibit a high penetration rate in the basket
- Key in on key times of the month or week
- Items that drive traffic into the store
- Loyal customers make more trips for what items
- Non loyal customers come into your store for which items?
- Items that create bigger basket purchases
- Key in on important items that require additional products to prepare
- Items that exhibit significant demand shifts when the price is changed
- Both in units and dollars
- Items that are top of mind due to rising costs
- These items can come and go as the market dictates
Develop a list for each of these criteria
It is important to note that these lists do not necessarily contain the same items. If you have only one list you have not done enough homework.The key to improving your customer relevance starts and ends with what they tell you each and every trip they make into the store. Someone once said: “We really don’t know what we don’t know.” Ignorance is not bliss in this competitive world. Get into your customer’s baskets and find out what you don’t know.