Article

Breaking retail's addiction to discounting

When retailers emphasize price above all else, everybody loses. Author Kate Newlin offers some alternatives to "okay, available and cheap."

August 13, 2009

A colleague of mine from P&G said it best several years ago: "One generation of marketers has addicted three generations of consumers to the heroin of price promotion."

That addiction has never been more obvious than now as we sit in the calm eye of the recessionary storm and watch our mail boxes (virtual and physical) fill up with 40 percent-, 50 percent-, 60 percent-off offers from nearly every name still in the game. The short-term spin is obvious: Retailers need to show comp store sales growth — and profit, margin and salesperson and staff sanity be damned. The longer-term implications? The retail universe will continue to devolve to "okay, available and cheap."

So, a woman walks into a retailer. She wants a designer dress for a major cocktail party her husband hosts every year in Las Vegas. She's offered up an Anna Sui and a Calvin Klein - both of which she loves. The salesperson goes to another part of the store and finds her the perfect accessories: shoes, stockings, even the right evening bag. Perfection.

The woman sits in the well-lit dressing room and passes over her credit card. The salesperson leaves and comes back in a bit with the receipt to sign. The woman is aghast. It's half as much as she expected to spend — and here's the punchline — half as much as she wanted to spend. The saleswoman had clipped some coupons from the store circular, opened a store charge account for her and pulled some other sleight of hand in order to bring the bill into (her perception of) submission. But it was a false economy. The customer was shocked and upset that the salesperson had "lied" to get her the discounts — lied to the store, that is. She kept the merchandise but it ruined the experience and the dress for her.

This is not a made-up story. It really happened and the woman really told me about it.

The salesperson sliced herself out of her own commission and cut the muscle of profit from the retailer. By making assumptions about the customer, indeed, she reduced what was a nascent relationship to an embarrassing and purely financial transaction.

This denigration of the shopping experience is happening every day of the week now — and not just for designer goods. The wholesale wholesaling of retail of all kinds is the marker of an engine running on empty. We're taking shopping out of the process — and seeking to go straight to buying — and quite frankly real physical retailers can't compete with the ease and efficiency of the Internet when it comes to buying.

So how do we dig ourselves out of this pit? How do we kick our own addiction to price promotion? We have to return our focus to the shopping (not buying) process, enhancing, entrancing, and engaging the customer and the salesperson in the dance.

1. If we're a clothing retailer, we have to hire fashionista/passionistas. I've watched oodles of training videos showing salespeople how to upsell customers who came in for a skirt to buy the blouse as well. That's not what we need to do: A genuine passionista (of whatever retail genre) is excited about the merchandise not because they're told to be, but because they are excited by it. How can you tell? One of the aspects of finding passionistas is that their avocation is also their vocation. Are we hiring people based on their affordability, viewing them as interchangeable cogs in our retail machine? Or because they read Vogue and Glamour, are obsessed by Project Runway and come to us with a million ideas for how to do in-store fashion make-overs and fashion shows? Genuinely fashion-involved people are creative — let them be. If our potential sales associate is debating between an apparel or a wait staff position, we should encourage them to go to the food court.

2. We have to brand the experience, differentiating on elements of style and design. The most salient emotional benefit of shopping is to feel "lucky," as women describe it over and over. (There's a Condé Nast magazine that's claimed this excitement as its own, to great economic and cultural advantage, of course.) Knowing that feeling lucky is the emotion women desire from a great shopping experience, we can empathize with retailers who try resort to the short cut of price promotion, which surely can elicit the "lucky" response. However, it's those folks who work harder and more creatively to prompt the "I'm lucky I found it" reaction through enhanced shopping experiences who win social as well as financial capital. A lot has been written — and debunked — about the value of the experience economy and "retailtainment." But when improved margins, share gain and loyalty are the metrics that matter, both retailer and shopper forge winning strategies through which each feels lucky.

And yes, of course, every so often a genuine sale can generate genuine luck. One of the best examples of this I've seen is the semi-annual sale at Pink. Suddenly you see well-dressed people all over the city carrying Pink Sale bags. No other advertising is really required. You're aware in the most aspirational way possible that this savvy store is having a sale. This is not at all the same as dumping unwanted and more than a little desperate circulars and emails in mailboxes.

3. We have to change the tone, acknowledging that the customer knows the economy is in free-fall. So much of what we see is old-world marketing about "buyers' days" and "white sales" — just like nothing was going on in the universe that has every retailer, and many customers, panicked. That's plain goofy.

As I tell my clients, there is no unfocused group person left in the world. As Stephen Brown (University of Ulster) says it, "Marketers know about consumers, consumers know about marketers, marketers know consumers know about marketers, consumers know marketers know consumers know about marketers." If that's the case (and it is), then why aren't we stepping up and acknowledging it? Customers are not idiots and they don't want to pay more for something than someone else does. Why not just have an "end of the quarter, we have to make our numbers and you have to do your part" sale? Make it fun, festive and a bit fearless in its trust of the customer. Have it after normal business hours, serve snacks and loopy umbrella drinks and have a sense of real engagement with your best customers.

What customers want is to have a unique proposition. When we bother to do that through service and support or any of a hundred valid means, we automatically de-average price. Then the challenge is simply to authentically explain why we're doing what we're doing — and "Today only! Free shipping!" ceases to be the only mantra possible.