Gain returning customers… or not

In this blog I’ve talked many times about the importance of using segmentation and up-selling to gain increased revenue - but there has to be some rhyme or reason to what you don’t get without paying extra. What I’m trying to say is -- don’t do what this man did to me yesterday.

On a short trip with out-of-towners in the hills above Malibu, we stopped at what looked like a small 19th century village: a very pretty and very quaint area of town. The 1850s “general store” turned out to be a wine store with tastings of local (mainly) Malibu wines. We were all in a good mood, finding this old village was a nice surprise and finding a place to taste local, and unusual, wine was too. But as we sat down in the very nicely decorated tasting room I asked the server (was it just a server or the owner?) to light the candles in the imposing candelabra just in front of the table. It would have further added to the ambiance and our good mood. Not an unusual request - just about every restaurant has candles or these little oil lamps because it adds to the ambiance, makes people happier with the experience and thus increases their likelihood to return. Pretty simple. And the guy said: “NO. We only light the candles for private parties as part of the “special lighting package”. What?!?! Here we are four people paying $15 each to get a few sips of wine and maybe buy a few bottles and the guy refused to light the candles because we did not pay for it! And as other parties sat down for tasting we heard the same question every time - and the same answer! Unbelievable!

This guy had it all wrong. He was trying to “add value” to the “special lighting package” by disallowing the lighting of candles unless you pay extra for it. But since the lit candles are “expected”, what he managed to do was to turn off customers. His “no” was such a snub that I will not go back and I could hear how other quite animated parties were subdued by the same “no” to them.

So as you are looking for ways to up-sell don’t remove from the minimum experience customers expect to receive from you when it comes to service or product functionality. It can backfire badly….

Salut!

Per Sjofors

Don’t overestimate your customers!

In retail sales, it’s a well-known fact that consumers don’t know what things “should” cost, and apart from the products they buy every day, they don’t have a reference point for pricing and they don’t shop around. Think about this for a second. Do you know what a head of cauliflower “should” cost?

For those of us involved in the pricing industry, it is therefore interesting to be on the receiving end of grocery stores’ price manipulations. I do most of the cooking and thus most of the grocery shopping in my family, so let me give you two personal examples.

I don’t eat red meat, so I use ground turkey for burgers and any other meals where you would normally use beef. My local Albertson’s sells two brands of ground turkey; one of the brands is a 1 pound package at $4.99 and the other is a 1.25 pound package at $5.49.

Last week they had stacked the 1 pound package up to the ceiling (literally!), allocating almost the whole turkey section of the counter for the promotion, and surrounded it with big “buy 2 for $9.99” signs. A whopping one cent discount! I returned to the store about 3 hours later to pick up something I forgot - and they where sold out of the “discounted” turkey.

It is obvious that many shoppers thought the promotion was a bargain. They shop for ground turkey seldom enough that they don’t have a reference point and they don’t know what a pound of ground turkey “should” cost. Thus, they can be easily manipulated.

When you set your prices do you take this into consideration? You probably know what you are selling should cost - because it is your business. But do your customers?

The second example is from the same Albertson’s. Here in southern California, grocery stores always have a section devoted to Hispanic shoppers. In some cases, you can actually find exactly the same products in the Hispanic section - just much cheaper! Obviously there’s an assumed difference in buying power between the average Hispanic shopper and the rest of the shopping population and thus a different willingness to pay.

So do you consider differences in your marketplace’s willingness to pay? Do you segment the market? Do you provide versions of your products for the various segments you sell to, or are you trying with a “one size fits all approach”? If you do, do you know how much business goes to somebody else who has the same products and prices to capture a larger portion of the marketplace? If you are looking for a quick fix to your bottom line, considering pricing for uneducated customers could really make a difference.

With warm summer regards,

Per Sjofors

per@atenga.com

818 887 4970