Volume 27/Number 23; March 17/24, 2014
By Jim Augustus Armstrong
Years ago I owned a carpet cleaning company. During that time, there was a local charity selling coupon books with deep discounts to neighborhood businesses such as restaurants, lube shops, and—you guessed it—carpet cleaning companies. One carpet cleaner participated by including a coupon for “one room free, up to 200 SF.” He nearly went broke from all the bargain hunters who hired him to clean only a single room but no other areas of their homes. He showed up at one customer’s home and found she had used masking tape to mark off the 200 square feet so there would be no chance of having to pay him anything.
And that’s the problem with daily deal-type advertising in a nutshell; it attracts price shoppers like a magnet attracts paper clips. Customers will show up to take advantage of the deep discounts, never to return and purchase at regular prices.
Hordes of dealers pump out “deep discount” advertising messages; I Googled “flooring Los Angeles” and sites at the top of the page had “cheap price” offers like “buy 1, get 2 free.”
And let’s not forget about Home Depot’s infamous “$39 Installation” offer. (Actually, it’s not an offer, it’s a lie; no installer will work for this amount. It also devalues the critical importance of quality installation by a skilled technician. When a customer tells a dealer, “Home Depot will install it for $39,” I teach the dealer to say, “Great! You’ve come to the right place. We fix $39 installations.”)
During a recent Marketing Mastery webinar that Dustin Aaronson, associate publisher of FCNews, and I were conducting, I polled the attendees and asked how many of them were using “cheap price” language on their websites, such as, “our prices won’t be beat,” or “highest quality at the lowest prices.” A number of them said they did, including a dealer who said he “had to” in order to compete. Unfortunately, many dealers feel this way, which is tragic because it’s simply not true. But, lacking good marketing and sales training, these dealers don’t know what else to do, so out of desperation they copy the “low-ball” strategies they see their competitors using.
If you promote on cheap price, you create problems for yourself:
• You magnetically attract price shoppers. You’re scraping the bottom of the barrel.
• Not only are you making less (going broke), but price shoppers are genetically programmed to complain and cause problems.
• When your margins are too thin, you simply cannot afford to provide the kind of world-class service that generates quality referrals.
• If your market advantage is selling at the lowest price and someone offers an even lower price, you’ve instantly lost your advantage. Live by price, die by price.
• Very few dealers prosper using a “discount” business model. By doing so, you stack the odds that you’ll 1) go out of business, or 2) toil away for decades dealing with the worst-of-the-worst customers, always struggling financially.
And that’s just the tip of the problems-caused-by-cheap-price iceberg. I’ve seen retailers desperately trying to figure out how to sell their products for the least money. This is 180 degrees out of whack. You should devote your time, energy and money to figuring out how to sell your products for the most money. And that’s the topic of my next column.