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Bully Purchasers
Marketers today at many companies are trying to take the focus off price and put it on value or customer experience or uniqueness or, well, just about anything else. The problem many of those same marketers then face are dealers or retailers who only want to focus on price. They don’t care about marketers efforts to connect with end customers by differentiating themselves in a way that ultimately should grow sales and margins. These “partners” only want to boost their own sales or traffic by discounting.
What’s a marketer to do?
Last week I attended CASCON, CAS America’s customer conference. One of the speakers talked about how a retailer his company sells through decided to put one of its products on special to draw traffic into the store. The sale went so well the retailer wanted to deepen the discount – but, unfortunately yet not surprisingly, pass the cost of doing so on to the manufacturer. When the company balked, the retailer’s response was something along the lines of: Well, if you want us to continue to stock your products you’ll support the discount price on this item while we have it on sale.
Ouch.
The manufacturer had no choice but to comply; that retailer is one of its largest customers. When that’s the approach of an organization that’s supposed to be a “partner,” everybody loses in the long-term. Yes, short-term earnings are a requisite of staying in business. But when those sales come at the cost of long-term profits, executives need to rethink their approach.
I’m all for getting my favorite products at a discount. But because they’re my favorite products, I’ll buy them whether they’re on sale or not – and I won’t purchase a competitor that is on sale. Instead of training consumers to focus so heavily on sale prices, perhaps it’s time that retailers work with manufacturers on calling attention to the differentiators that prompt people to pay a premium.
I know that approach doesn’t work for every product and every customer, but there are consumers willing to pay extra for softer toilet paper and cartoon character tooth brushes and fully equipped cars and sleek cell phones. Focusing on “value beyond price” mixed with the occasional value of a special price is perhaps a better approach to driving both short- and long-term gains.
Apples V. Oranges
I don't know if the product cited is a premium, in demand, product - 50 inch flat screen or a 2 Gig memory card - nor what other product lines the manufacturer produces, but these are extremely important marketing metrics for the manufacturer rep to use to defend pricing and product placement. Pricing, product placement and promotion sound familiar... Anyway, if the promotion was as successful for the retailer as you suggest, then the retailer should be pressed for what, if any, additional gain would come from the price reduction? Further, the manufacturer would be better served to add co-op dollars (investing in the manufacturer's brand)and negotiating additional floor space and the 100 other relationship terms available. The experience that needs focus here is the B2B experience which impacts the retailer's consumer experience - They should have a common goal with shared benefits. It is fair to ask how much additional revenue the store is generating per customer and what incremental/add-on lift the store is getting. The manugfacturer may have an opportunity for creating an add-on product combination as an alternative.
Great topic - I think the possibility of bully purchasing only lasts for a short time. In the UK the farmers have complained for years about the supermarkets dictating the prices they will pay and as a result they are unable to economically produce good food. As long as consumers are undiscerning (and if you can do it with food you can do it with anything), the bully purchasers can ply their trade. Thankfully the growth in concern about health and interest in good food is turning the tide and a fast-growing number of consumers are willing to pay a premium for a better product. I think Ginger's right - Price is only one of the Ps and if the marketeers do their job well they will succeed in the long run. The retailers can't afford not to stock some products and one challenge must be either to make your product one of those or find a route to market which works more effectively. A second challenge is funding the learning curve!