Month: May 2020

Is the Price ever Right ?

Posted on by markybrett

For me, Yes ! Just the once . I married one . A Price that is .Julia’s maiden name is Price.

For the rest of the commercial world ‘Pricing’, is probably the simplest, yet pardoxically the most complex part of the equation. You buy something for X and sell it for Y. But how do you know if X or Y are the correct value. From the manufacture of the product right through to the consumer, we are never really sure if it is the right price.

Vast tomes have been written about Pricing Strategies. To illustrate I thought a really confusing diagram would help.

Found on Linkedin, not sure of the exact source

I think the complexity can be better shown with the example of a Watch. For fifty quid (for non UK readers that is £50) you can buy a reasonable watch which will tell you the time , date if you want and might even be waterproof. For £50,000 you can buy a watch which will tell you the time , date if you want and might even be waterproof. So why spend £50,000. There is an argument for jewellery, ascetics and of course vanity . Yet in Northern Europe, we spend most of our times with our arms covered up, so nobody sees it, seems a bit pointless. When they are uncovered you are in danger of having your arm chopped off , if you are mugged . The other arguments are ???

Bizarrely, there is only a multiple of approximately 10 when considering a Ford Focus against a Rolls Royce( £15,000 vs £150,000) where the differences are some what more obvious. What it illustrates is that the process of pricing is not that straightforward. If the Ford Focus had exactly the same spec as the Rolls, and was 20% cheaper, the price would still not be right. But that doesn’t work for a watch for most onlookers a £50,000 watch may look and function in exactly same way as a £50 watch.

There will be many of us who have entered into successful negotations for a siginificant contract, being content with the price achieved, only to be find later on that it does not stop there. Please note I have not said buying or selling . With selling , post negotiations, you can be faced with retrospective discount requests, marketing contributions , advertising allowances, special promotional prices for a period. Making your original Right Price seem rather less Right. If you are buying, you can suddenly be faced with oh that wont actually work without that …you will also need contractual support …. the running costs for this model are actually a lot higher for this cheaper model….

Whatever level in the chain(product or services) you are, the decision making process in reaching a selling price is very similar. How much does it cost me? How much does it cost me to sell it? What margin would I like to make and what is achievable ? The first two processes are fairly straight forward . The Third is where the real complexities lie.

I am no longer surprised when a retailer says to me

They walk into my shop , look around ask for the price, then go onto their phone and walk out saying ….Thanks I will go home and think about it…That means they immediately buy it on the internet….I am fed up being a shop window for the Internet

What they don’t do is engage. They dont enter into a conversation like asking what price have you seen ? Is there a half way compromise ? Can we offer an additonal complementary product ? By not engaging and seeking a compromise you have not only lost a sale but more importantly you will have lost customer for ever. Your compromise which would undoubtedly mean a loss in margin, by not achieving the right price but you have retained a customer who has achieved their right price and will probably come back again. If they don’t, you will have at least made some contribution to your overheads and put cash through the till.

Simple Customer Engagement Diagram (author – Simple Me)

When buying , I think the process is altogether more complex. Most of your thought process will be about quantifying the value of the product or service to your needs . These are some of the many possible considerations….

Even though this price is more than I wanted to pay , I cannot get it elsewhere and I need it now

This supplier is charging more but they provide a much better service

Can I be sure this lower price is exactly the same item

There is not the time to seek other prices

Whether buying or selling, I think the only indication for the price being right is…

Does the sale/purchase of this product/service meet my current values and expectations ?

If the answer is a clear Yes, then perhaps the Price is Right..(for you,at this moment in time)

Or alternatively find a partner for life with the name Price.

The Question is not ‘Will Retail Change?’….The Question is ‘How will it Change ?’

Posted on by markybrett

A new Fashion concept store in China

Crystal Balls….the next panic buy .Toilet rolls, Pasta then Crystal Balls. Our fellow Europeans must be somewhat perplexed when reading that the first food us Brits, who elected to leave the EU , decided to stuff our cupboards with, was pasta. What’s that all about? What happened to Chicken Tikka Masala, Roast Beef and fish and chips. Since when have we become a nation that relies upon pasta to keep us going ?

None of us knows what retail will look like PC(post covid). However, there are some certainties (as much as there ever can be ) in some of the changes that are inevitable

Department Stores

Why talk about this type of retailer? Unfortunately these have been on the decline for at least three years. Because for a long time they have been the cornestones of major shopping and town centres. Both Debenhams and the House of Fraser are financially on the brink. The latter is , of course, part of the Sports Direct Empire, but I can’t see them hanging onto them for long unless there are some major changes. John Lewis has already announced they will close some stores. None of this is news nor is it constrained to the UK (Nieman Marcus the oldest department store group in the USA has just filed Chapter 11). They are losing their USP, and they are also loosing many of the concesssion brands they all use to fill the stores. Warehouse and Oasis, Cath Kidson and Laura Ashley in the UK , J.Crew in the US (inc 500 stores), to name but a few, are the latest.

Major Shopping Centres

The likes of Westfield, Hammerson,Intu and others are facing the perfect storm (always find that slightly contradictory, perfect for who?). Huge downward pressure on rents, multiple retail failures, and now the complete closure due toCovid. It is likely they will not be allowed to open for some time owing to the large number of visitors they attract, and going forward I can see many consumers avoiding them quite literally like the plague. To survive in the long term, they really need to find their Mojo. They will have to reinvent or die.

Independant High Street Retailer

During the crisis, unfortunately the shopping that has occured has been online (apart from food,where independents in the main have done well) . Consequently more consumers have got used to going online. However, the consumer has missed going to a ‘shop’. But that feeling wont last long. For those retailers that went into lockdown in a reasonably healthy position there will be the opportunity to regrow and take advantage of the weaknesses left by failing multiples . But that will need innovation, creativity and the development of their own web presence. Those retailers that were struggling , will continue to struggle if they survive at all. Even within my own industry (party) there have been casualties who have closed down already. There will, undoubtedly, be more.

Online

I know that a number of online operations who have been active from the beginning have had a great time. Stretched and stressed because they were working with a much reduced work force but successful nevertheless. For right or wrong , depending where you sit, their futures, especially in the short to medium term, look bright. They have been ably served by Amazon, in that Amazon were focusing on the essentials market for the first few weeks, and were for a time longer there as a competitor. On the other side of the coin , those Amazon resellers that only sold on Amazon, were scuppered. Ebay, on the other hand , I suspect, enjoyed a resurgence, that may or may not continue depending upon the consumer’s experience.

The Consumer

The biggest unkown in all this. How will they behave ? Whilst a lot of High Street retailers will wish their shop manners will improve, they maybe whistling in the wind. As to how they will spend their disposable income, is a far more serious question and a really difficult condundrum. Those still in a job, will probably have temporary additional spending power as it is likely they have been spending little whilst locked away. There is a strong possibility that they may rethink about how they spend their money. I have not bought this for some time, I have not missed it, do I need it? The response will probably be one of the most important factors for the Retailer in modern consumer behavioural activity. Those who will have lost their jobs will not be spending.

The only defintive is that there will be change. And it will be pretty major. What that change will be take some time even when ‘normality’ is resumed. The only action that can be taken in the immediate future , is looking at one’s own operation, look at the changes you think it needs, then be very aware of what is happening around you and adapt to meet those changes. So very easy to say……Just dont think that things will go back to normal.