... Why NOT to have sales

The reigning theory is that price is the only thing that motivates people to buy – reduce the price and they all flock in, increase the price and they all flock off somewhere else. We take in less to have more!
Before we look at profitable alternatives to sales, let’s see why we really reduce our prices. Let’s get honest.

Get a piece of paper and write down your scariest or most embarrassing moment. Got it? Yes, that was probably easy to remember.

Now, write down the time when you felt the most safe or comfortable. Got it? No? Not so easy is it?

We remember the negative things better than we remember the positive things. You have 200 customers coming in and buying your products/services and they come back again and again, saying, in effect, “we like you, what you sell and your prices”. Then you get Grumpy Joe – who is not grumpy at you but at something that happened hours, weeks or even years before – and he complains about your prices and/or quality. What do you think? That he represents all those 200 happy customers? Yes, insanely, you do, as does every other business owner.

You begin to doubt yourself and your business. None of us like criticism and so we drop our prices, hoping to avoid Grumpy Joe’s (or his sister’s, Moaning Minnie’s) criticism. The moaner is more powerful than the 200 happy customers. Is that insanity or what?

So, start believing in yourself, in your products/services and, most importantly, start believing in the majority of your happily spending, profitable customers. Those customers are never wrong!

A timber/hardware store in Mt Maunganui, NZ, decided to address their huge cash-drop over Christmas. At this time, people preferred to put their money into Christmas gifts, food and holidays. This was 10 years ago when computer games were very new and de rigeur. No, they did not have a sale, they had a competition. They advertised that every customer who had an account with them would be in to win a Gameboy (the perfect family Christmas gift) if their account was paid in full by November 30th. Not only did their existing customers pay up but they got in a lot more new customers and their bank account rose by $380,000. The game cost them $140. Therefore, they got a lot of new customers and they avoided the usual wrestling match with their bank manager over temporarily extending their overdraft limit. In fact, they had plenty of cash to maintain their post-Christmas stocks for all those home handymen (and women) who were on holiday and wanting to improve their properties ... and they were able to get great bargains from their suppliers who gave them discounts for early payments.
They didn’t take anything away (as a sale does) but they added to – added customers, added cash and added something to a customer. They created something where everyone won – them and their customers.

A sale means you lose something and your customers may gain. A sale rarely works if it’s the same old stuff, suddenly cheaper – people think it’s the same older (can’t get rid of) stuff. We are so jaded by the word sale, especially since the credit crunch, that it means little now.

The other problem with a sale is that it slowly erodes your reputation. Today’s sale may bring in more customers and a little more cash but, in the long term, people see that you’re a price discounter – someone who sells cheap stuff. If you’re a constant discounter (saler?) you’ll probably notice that the customers who come in your door are driving cheaper and cheaper cars, their clothes are getting cheaper ... your customer base will slowly evolve into one of cheap customers, people with little to spend.

So, if you must have a sale, the least you can do is call it something different:
Knock 10% off everything and call it a Community Tithing Project.
Or call it a Price Holiday, an Inflation Deflation or a Gratitude Attitude. Go wild (or silly) with your imagination, but if you’re going to have yet another sale, let people know that it’s not just the same older stuff in yet another old sale.

We’ll talk about how to measure sales, customers and the lifetime value of customers in three weeks time and, when you do that, the facts will speak for themselves – sales may (or may not) give you a short-term benefit but, in the long term, you suffer.

PHILIP BRADBURY CPA

NB: Next week we’ll show you how to deal with the Grumpy Joes and Moaning Minnies ... how to deal with unhappy customers and turn them into lifetime advocates.
The following week we’ll give you some ideas on raising sales without having a sale – win/win ideas where no one loses.