Consider two scenarios. In the first a customer strolls into your shop. After having looked around she walks up to the most appealing product in the store, has a quick look over it and then picks up the price tag. She drops it like it was on fire and moves along. In the second scenario things are different. Instead of dropping the tag she holds on to it for a moment continuing to look over the product. A few minutes later you or your sales staff are working with a new customer discussing the products features and benefits and are on your way to a possible sale.
As store owners we all wish for the second scenario, but can we really do anything to control this response? After all we have costs for our goods and our supplier won’t negotiate. Add this to operating costs and apply a fair margin and there you have it. But in fact, you almost certainly have some control over how the customer feels about the price of your product.
The answer lies in understanding the relationship between Anticipated Value and Actual Value. Anticipated Value is the value expected by the customer whether consciously or unconsciously. As it implies the Actual Value is just that. The price they see when they look at the tag. Taking steps to keep Anticipated Value lower than Actual Value is the goal of the manager or store owner.
A great deal of it has to do with the context within which you place your product. Let’s say the product is a beautiful, large, cut crystal bowl. You place it in an enclosed showcase built into the wall with a small, brushed steel spotlight shining on it. A tag of superior design stands beside it in a small, steel frame, which matches the finish of the lighting. It explains the origin of the bowl, how it was made and the name of the person who did the cutting. As the customer approaches it they begin to anticipate what price it will be. Given the setting, the security which it is afforded and the effect the lighting has in bringing out its best features the customers Anticipated Value is likely to be greater than the Actual Value.
In the second scenario the bowl has been placed on top of the counter near some other items of lower value, without accent lighting and is, perhaps gathering a little dust. In this scenario the Anticipated Value is almost guaranteed to be less than the Actual Value. Yet it is exactly the same bowl.
You want customers have a perception of your store having “great” prices. What can be done? How are you able to have an effect on your customers’ perception of price?
One way to do this is to set a standard for the quality of your goods. Don’t surround a product with other items of inferior quality or appeal nor, in fact products of a superior quality. This doesn’t mean you have to be Tiffany’s but, rather that you must have a consistency within your product standards. Don’t mix goods of a wide variety of qualities or some of it is bound to come out looking bad. Let each product complement its neighbors.
As you’ve seen in the two scenarios merchandising the product effectively is one of the keys to higher anticipated price. Give the product some room. Keep it clean and present it as an item of value. If necessary, hire a merchandiser to come into your shop on a regular basis. Good merchandisers pay for themselves.
Naturally it’s not just the products relationship to other products but the store environment itself. Are the fixtures professionally built or something homemade or well used? Are they consistent with the level of value you want to convey, neither overdone nor underdone? How about signage? Is it professionally designed, manufactured and installed or is designed by an amateur, part-time graphic artist painted on plywood?
Next don’t forget the most important element. The people. Are you and your staff well groomed, polite and articulate? Above all are they highly knowledgeable about the product you carry?
Another critical factor is location. Too often when shopping for lease space the focus revolves too much around what a new business owner perceives they can afford. Instead they should consider a premium location, which will bring in a quality and quantity of customers that will lead to high sales and business success. Choose a location with an attractive frontage in an area that will lend credibility to your business. The interior should be well finished and the fixtures fresh and clean rather than well used.
An old sales adage says, “Price first. Product second.” This means you don’t offer up the price before you have fully informed the customer of what they will receive for their money. You would never call up a car dealer and say, “I need a car. How much are they?” First you need adequate information to make a value decision. This concept should also be applied to your price signs and tags. When designing price tags make the price secondary. The price should be in a smaller font than the text. The text should be very concise, easy to read and contain the key benefits of the product. If it is difficult to read, they will simple jump ahead to find the price. Each listed benefit will help to push up the anticipated price.
Look at each of these factors when developing a business plan. Examine each detail keeping in mind how it will reflect on your product and how it will affect your customers Anticipated Value. Keep in mind that moment when the guest in your store turns over that tag. How can you push up the Anticipated Value? Adequate time and effort on this key aspect of business will take you a long way towards strong sales and a healthy, profitable enterprise.
Will Wage Subsidies Help Retail Businesses?
The Inevitable Second Wave – How to Prepare your Business
New Practices you Should Adopt Before Re-opening your Business
Four Steps to Finding New Clients for your Home Business
Things you Should Know about Starting a Business in Canada
Tried and True Ways to get your Small Business Organized
Does Your Small Business Need a Consultant?
Why Older Workers can be a Valuable Asset to Your Business