Change can, and often is, beneficial to companies. Change provides companies with efficiencies, growth, innovative products and profits. Examples of change that revolutionized the world include the light bulb, telephone, and computers, the Internet, Google and Facebook. Change is good; unless of course it interrupts companies’ profits.
On January 30, 2012, I posted a blog on Forbes.com entitled “JCPenney’s Consumers Voice Opinions Regarding Sales.” The subject focused on the company’s decision to use an “everyday low pricing” strategy. The change was based on the belief that consumers will respond positively to a consistent pricing strategy. In May 2012, results to the change were revealed; revenue dropped 20%. Ten percent of the company’s customers rejected the retailer.
The following are tips designed to better understand the pricing strategy desired by your consumer.
Tip #1: Understand consumers’ perceptions of the economy
It is essential to understand consumers’ perceptions of the economy. If consumers don’t believe they are better economically, they probably will not be spending more money in your store. I say probably because there is always a small group of consumers who spend beyond their means using credit.
In May 2012, BIGinsight surveyed JCPenney consumers’ regarding chances for a strong economy during the next six month. 65.6% stated they had little or no confidence for a strong economy. JCPenney consumers didn’t want everyday low pricing strategy. They were looking for tangible bargains through coupons and discounts.
Tip #2: Follow national and global trends
Throughout 2011 and 2012, the economy was beaten up by unemployment. Consumers struggled through the past few years of a deep recession. As your organization is tracking customers spending patterns, avoid being myopic. Look at consumers throughout the industry and across a variety of industries. Became an expert at when consumers spend.
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BIGinsight surveyed consumers nationwide to identify shopping patterns. 61.1% of consumers earning less than $50,000 and $64.4% of those earning $50,000 or more usually buy clothing when it is on sale. 24.3% of those earning less than $50,000 and 18.8% earning more than $50,000 or more only buy clothing when it is on sale.
Research revealed consumers respond well to promotions, coupons and discounts. This is solid evidence why so many companies are successful at guerrilla marketing. Heavy promotional efforts during difficult economic times stimulate consumer spending.
Continually examine your consumers’ purchasing patterns, needs and wants. To ignore the importance of this concept is comparable to stating that “you don’t need the consumer.” Never underestimate or take for granted your consumer. They can and will leave you if they feel betrayed or neglected.
I suspect that JCPenney’s “everyday low pricing” resulted in betrayed, confused and concerned consumers. Part of this may be explained by the company not clearly understanding its consumers’ shopping patterns. In January 2012, the month JCPenney’s announced the new strategy, BIGinsight surveyed some of JCPenney shoppers. 62.9% stated that they usually bought clothing when it’s on sale. 25.2% purchased clothing only when it’s on sale. A scant 11.9% of the company’s consumers stated that sales are not important to them. Clearly JCPenney’s everyday pricing strategy went against customers’ perceived needs and purchasing patterns. JCPenney consumers respond well to sales, discounts and coupons.
Always remember – – retail experts run the business; consumers; are responsible for making the company profitable.