WYN Factory

How in the sell did we get here?

To sell or not to sell?

That is the question every business should consider: Whether it is better to suffer the loss of a sale than defend against a sea of diminished revenue?

It seems now days most businesses have forgotten to ask or ignored this question entirely in their sales process. The history of when this happened is really unimportant, a far more productive approach is to look at what the situation is, understand why it occurred and how it can be changed in the present to create a more profitable future.

So where the bloody sell are we?

The answer is simple. We sell on price and now we buy on price, value and quality are a secondary notion. The situation is that discounting is the easy sell and so in turn it becomes the easy buy. Businesses have survived for too long on this factor, there is no such thing as a free lunch and it is the margins that pick up the tab. This is evident in the astounding success of so many group-buying sites such as Groupon, Cudo and Spreets. Even more astounding is that businesses have fallen for the trap and actually paid to devalue their offering, worryingly some are even happy about it.

Discounting indiscriminately for no reason allows regular customers to pay virtually nothing for the services they were previously happy to pay for and new clients to exploit the offers, often unwilling to return when faced with the going rate. How a business hopes to sustain its future by replacing good (paying) customers with bad (discount loving) clients is a mystery. An unjustified discount becomes the normal price, this makes it infinitely more difficult to reward loyalty or provide buying incentive without damaging the profits.

The spiraling decline in pricing, quality and brand value was fast enough in the face of competitive pricing but the immensely popular group-buying model has alarmingly exacerbated this into a shear drop. The good news is we’re selling more; the bad news is that we’re making less!

Why are we in this mess?

Because those that can, sell and those that can’t, discount. Unfortunately those that can are now a rare breed. The fact is cheap is the easy sell, not the good sell and businesses have tended to follow their competition rather than be bold and stand for something unique. Part of the problem is that once you discount you have little or nothing to reward loyalty with and so the land grab becomes more important than the existing relationship. This progresses the spiral ever downward as new customers have no loyalty and compare the rates of competitors forcing the hand of the business to better the pricing of a rival, further reducing the value of the products, brand, margins and profits. But the blame cannot lie on the business alone, we all complain about the state of the world, uneasy with the thought of sweatshops and child labour, the reality is that buying cheap is supporting the problem. Changing the world is easy, pay more and demand more, after all the greatest dictator is the dollar and the strength in every negotiation.

The sad fact is we got here by being easy and selling ourselves short, by being cheap and putting up with less.

So what’s the trick to the fix?

The solution is a basic one. Companies need to train their sales staff on the art negotiation. Placing a greater emphasis on value than price, thus setting the tone of the ongoing relationship and benefits of doing business together. Sales targets need to be set and rewarded with the focus on quality of sale instead of quantity. New selling techniques need to be explored, challenged and perfected based on added value not reduced price in order to move away from the current discount culture.

Put simply businesses need to pay closer attention to the quality of the sales and sales staff rather than the quantity of sales and sales staff. The market share and growth of a company is better captured & maintained with value than price.

A great example of this is Apple; their policy of maintaining product value has afforded them the innovation and quality of manufacturing to become an iconic consumer brand and sustain continual growth.

Consumers need to be made aware that paying more gets more, that loyalty is rewarded with benefits unavailable to the new customer. That quality and value comes at a price…

In the words of Warren Buffet. “Price is what you pay. Value is what you get”.

Is cheap really that neat?

Why is it neat to be cheap? Is cheap really that neat?

This may be a little Dr. Seuss, but the fundamental question is a good one. It is a topic that was brought to my attention the other day during a discussion about the state of the current market and if this current trend of discounting is sustainable. It has been a hot topic lately in the media with an influx of websites offering new ways to purchase and save online the most recent of which is the group-buying model made popular with the success of Groupon from Chicago, USA.

Is it the experience we are all striving for or is it the bargain?

Studying activity in the media and discussion forums paints a surprising picture. It’s true, we all love a great deal and a cheap price gives us a sense of satisfaction as we walk away with our newly acquired purchase. The price brings an immediate sense of pleasure, knowing we can afford our high spec desktop PC or that new holiday flight and accommodation package. The fact is we love cheap because it allows us to stretch our money further and feel richer in filling our worlds with creature comforts to relax in at the end of the day confident and proud that it was money well spent.

Truth is, this is all a little Disneyland. Reality as we all know it is that a true bargain is hard to find, nowadays the pleasure of a good deal seems a little short lived as we realize the need to upgrade our new PC in a week to use the latest software or as we sit ourselves down into a seat made for someone with no legs. Are we really getting a good deal these days or has our constant obsession with discounting resulted in us getting less for less? Product and service quality has been sacrificed to meet price and warranties are now reduced or riddled with clauses avoiding coverage, it is clear that paying less is no longer a bargain but a surety to paying twice or perhaps even thrice.

So why do retailers do it and what’s in it for them?

The pros are obvious, retailers are in competition and strive to gain market share, being the cheapest or discounting is just another tool the retailers use to attract new customers, generate an influx of sales and capture market share. It couldn’t be simpler; all the retailer has to do is be the cheapest… After all it’s all about the numbers game, right???

Just as all consumers love to walk away happy with a good deal, retailers equally love to see you walk out their premises, online or not, with products in hand. The result is additional units and revenue through the books that gives the impression the business is going strong while keeping the sales staff motivated and happy. The added sales can be used to leverage supplier relationships and as such the retailer in turn can get a better deal reconstituting their margin for the next year…

As the consumer’s satisfaction fades due to the realization of the declining value for money, so too the retailer reaps the reward of dwindling margins and profits. Although revenue and sales forecasts look good the profit sheets are often not as inspiring, this squeeze puts strain on the smaller retailers who more often than not fall victim to the giants who can handle the volume to sustain business. It seems being cheap or discounting has become more of a necessity for lack of a better option, done simply to scramble for leads, sales and market share.

What does this all mean and what’s the big picture?

Simply put, cheap prices lead to cheap products, cheap service and lack of options. The squeeze on price has to be accounted for somewhere, as in life all energy has to balance. This squeeze is the driver for cheap manufacturing, reduced quality of components and shelf life products. This is compounded with retailers cutting costs to maintain margins by shifting service and support overseas to the frustration of customers (now wishing they’d paid that little extra) who are faced with poorly managed idiotic or automated call centers (we all know Vodafone’s Lara).

Ultimately the competitive reduction of price means devaluing not only the product but also the brand. This is a situation that cannot easily be recovered because the moment the price reverts to a sustainable level customer loyalty is lost.

Perhaps it is for these reasons that I’m seeing more and more articles and discussions talking about change, it appears that consumers and retailers have begun to realize that cheap is not so neat after all. It has been reported that the majority of online consumers are now actively looking for a new experience in their purchase, rather than just a cheap price, and that retailers are consequently desperate to jump on the bandwagon of new sensations such as the group buying sites.

From isolated points of view, cheap is neat, the bigger picture though is one of spiraling decline and recession. With reduced profits comes reduction in costs, R&D funding is cut, jobs are lost to overseas centers or automated services, and everyone suffers in the long run.

Is it time retailers looked toward a new way to promote and sell, focusing more on value for money rather than price?

Personally I’d rather pay that little bit extra for something of quality. For me cheap is cheap and not so neat, for neat is neat and that’s not so cheap.