marketing

Trust Me

Walmart is the largest company on Earth. It has a brilliant strategy in terms of its distribution model, placement of stores, data analysis, and, above all else, making absolutely sure it is the low-price retail leader. I believe it was Walmart that coined the acronym “EDLP” – or “Every Day Low Price.”

So why has Walmart chosen to go with everyday low prices when most of its competitors focus on big sales events? Companies like JCPenney and Sears try to drive traffic by using strong advertising for big sales under every banner they can think of: Presidents’ Day, Memorial Day, Labor Day, you name it. They all compete against each other on the same platform and philosophy of being on sale pretty much year-round. I understand why they do this. If you read some of the research out there and simply observe consumer behavior in terms of how people react to sales, it is easy to understand the approach. How has Walmart been successful flying in the face of this tactic? I don’t pretend to be an expert on the topic but I do have a few thoughts.

Marketing: Walmart has done an excellent job convincing the consumer that it is absolutely the low-price leader. It uses its own people to tell that story as well as that all-too-familiar smiley face that wreaks havoc on high prices.

I bet if you were to ask 10 Walmart shoppers why they shop there, the majority would tell you that low price is at least somewhere on their list. It’s true that while they have very low prices, they are not the lowest on every item – but they tell the story well!

Trust: When people go to Walmart, they really believe that the prices are good. If someone wanted to buy a new 50-inch television, they wouldn’t be able to haggle it down from $999 to, say, $600. (Well, most people wouldn’t be able to, anyway.) If they were able to do that, do you think that consumers would actually buy into Walmart’s EDLP philosophy? I say no because the pricing would then have no integrity, therefore breaking the trust with the consumer. When you go to buy a car and the guy selling it to you drops the price at the first mention of resistance, do you actually trust them to get you the best deal, even after you have worked your way down a price point or two?

Why do we in the mattress industry believe this will work for us? If we are on sale pretty much all the time, do we think that the consumer actually believes they are getting a deal? I am not saying there isn’t a percentage of buyers that will buy into that, but I suggest to you that many DO NOT. If we don’t have trust with the consumer when it comes to our prices, what kind of impact does that have in creating some kind of long-term relationship with them – a relationship that will create an opportunity for future business? How many consumers walk into a store, see a bed that is priced too high compared to one in the store down the street, and walk away, never even voicing their concern about bad value?

Now before you retailers start blasting me because you don’t think I understand retail and the need to bring people in the door, I really do get that. I am just saying there are people out there that are successful doing it a different way while maintaining a good relationship with the customer so I ask, “Is there a better way?”

Do your customers TRUST you to deliver the best product at the price?

What am I missing? What are you thinking?

DISCLAIMER: The views and opinions expressed in this blog are mine and mine alone. They do not represent the thinking of the company I work for, or anyone else with whom I am affiliated. Except my wife of course, who is good at telling me what not to say.

4 thoughts on “Trust Me

  1. Your story illustrates exactly why, when you do hold a “sale,” it must be for a specified period of time, at the end of which it must actually end. It’s also why a retailer must not negotiate prices each time there’s a sign of resistance. If you can’t defend your everyday price, get yourself an understanding of the reasons the price is right so you can defend it — or you’ve got to reduce it.

    The single exception to holding the price is triggered by the terms of a low price guarantee. You naturally watch the competition’s prices as closely as you can, but because prices are moving targets, you can’t know every price offered out there in wonderland at any given time. You can, however, give your customer assurance that your price is right by offering a low price guarantee posted prominently in your store and in your marketing literature.

    It goes like this: ““If, within 30 days of your purchase, you find the identical product offered by a nearby authorized dealer under the same terms and conditions and at a similar level of service and warranty at a lower price, we’ll confirm the price, terms and conditions and service level and happily refund the difference.”

    This gives the customer confidence to go ahead with the purchase even if she continues to shop the price. In most cases customers will stop shopping once they’ve made the purchase, but if they continue to shop they know the door is open to come back to you to be made whole. You must do the confirming, however, by making a phone call to the dealer ostensibly offering a lower price on equal goods and service levels. If the deal is not equal, hold your price and explain why the difference is worth paying. If you do find that the offer is equal and you make good on your promise, a story will go out that you can be trusted. That story is so much better for future business than the opposite story.

    1. I like what you are saying John. My point is that there are retailers out there that are not the low price leader, and drop price like the used car salesman does. All that does is to reduce the trust level. That is completely different if you are very close to the low price and make a small adjustment to get them whole. Thanks for the comment.

      MQ

  2. I understand where you’re going with this in terms of the “constant state of sale”, but I think that it actually starts with how the mattress industry has positioned themselves.

    The main difference between a mattress retailers model and the Walmart model is that mattress retailers attempt to de-commoditize their products so that price shopping is difficult for the consumer. Someone can easily buy a stick of their deodorant, a box of their favorite cereal or that new 50-inch television from a retailer based on price alone, because they are commodities with fixed product attributes.

    To consumers, most mattresses are a big white box (unless you’re a giant air mattress brand successfully pulling away from the traditional model). People may have heard of different brands and product lines, but generally have no loyalty to them due to the long product lifecycle and limited experience with multiple brands (inability to compare).

    The average consumer doesn’t know the difference between a $500 Sealy mattress or a $10,000 Kluft, but they do know that the generic cereal in a bag tastes like cardboard and Sure keeps them dryer than the store brand antiperspirant.

    Mattress retailers and manufacturers alike should be thinking about what you’ve brought up in your last few posts. To me, the answers seem simple, but require a paradigm shift:

    How do you move away from being grouped with used car dealers?
    – Remove haggling from the sales process/model.
    – Stop being in a perpetual state of promotion.
    – Start educating and building relationships from broadcast messaging through to the sales floor.

    All of these things mean changing the way the industry works from the manufacturer down to the retail level.

    1. Great comments William. I would imagine that people move away from the used car approach to the degree that they think it is hurting their business and leaving it will actually drive them forward. We will see what happens!

      MQ

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