By Rich Lindblom, YSN
Every BrandSource member is faced with the same question day in and day out: Do I match that lowball price from ABC Appliance down the street or let the customer walk?
For me the answer was always the same … take the deal.
I came to that realization a long time ago, and it was always really a pretty simple concept to me. You always take every deal you can get your hands on, regardless of price.
In my store there was one simple rule: No customer ever gets walked out based on price unless I was the one making that decision. And guess what? I can probably count on one hand the number of people I let walk in the past five years.
You may not agree with me right now but hear me out, because I believe my logic is sound. In fact, I will give you seven good reasons why I’m right in my thinking:
- If ABC Appliance can afford to sell whatever they’re selling for that price, you can too. With BrandSource’s nearly $20 billion of buying power backing you, no one is buying for less than you are.
- If someone is only going to make a few bucks on a sale, I’d rather it be me than my competition down the street.
- Every sale adds up when it comes to your volume rebate. Maybe taking one or two of those short deals every month is enough to get you over the hump to a higher VR level. Wouldn’t that make a couple of short deals worth taking?
- What about co-op advertising? You’re earning the same amount of co-op on a short deal as you are on a normal deal.
- Depending on the manufacturer, there could be other back-end money in play as well, such as spiffs or merchandising allowances. When you walk a deal on front-end price you could be leaving as much as 5 percent to 10 percent worth of combined back-end money on the table, which should be factored into your profit margin in the first place. (Don’t get me started on that, that’s an argument for another day.)
- What about inventory turns? An appliance sitting in your warehouse is not earning you any money. I’d rather sell the same SKU twice at a 10- to 15-percent margin than sell it once at a 20- to 25-percent margin. Not only are you turning inventory and dollars, but you are earning twice the back-end money.
- Finally, and perhaps most important, customers tend to have selective memories when it comes to things like this. If you take that short deal today on a refrigerator, the odds are pretty good that two years from now when they need a washer, all they will remember is that you had the lowest price on that fridge. They very likely won’t remember that they had to beat you up on price to get that deal. Conversely, if you walk a deal based on price just one time, I can all but guarantee that that customer will never grace your door again, because all they will remember is that you were priced higher than your competition.
Believe me, I get it; no one can stay in business very long selling every product at low margins every day. That’s not what I’m saying. I’m simply saying that sometimes you have to take the short deal, knowing that it will be worth it in the long run because, in my opinion, it usually is.
As longtime Whirlpool executive Mark Hecht recently told me, “With the cost of bringing in a new customer estimated at $230, I sure wouldn’t alienate one for a few bucks.”
It’s always gratifying when someone reaches out to me after reading one of my articles because it struck a particular chord with them. So if you have a question or comment (good or bad) about something I wrote, please contact me at egvrich@gmail.com. I’d love to hear from you.
