Amid concerns that this year’s black Friday would be weak, retailers got off to a better-than-expected start. Deep discounts encouraged consumers to spend an additional 7.2% more than they did last year. Momentum ebbed on Saturday however, raising concerns that shoppers were merely exploiting those massive sales discounts.
The question becomes, can retailers survive this economic downturn without resorting to deep discounts? To answer it, we asked our own Justin Downey to give us a few big ideas regarding marketing in a down economy—sans discounts? Here are his thoughts:
Sometimes marketers are under such pressure to offer discounts they fail to realize the unsustainability of those promotional plays. Before you rush to the bottom, consider the following:
One :: Discounts Do Not Equal Value
In uncertain times, people are looking spend less, but that does not necessarily mean paying the absolute lowest price. The perception of “value” or “bang for your buck” becomes the paramount concern. If you are spending more wisely, why waste it on a poor quality product just because it’s “cheap”. Think of Target’s “Expect More, Pay Less” campaign. Simply-put, they increased the quality and selection of their products while keeping the price about the same.
Two :: Security is Important
While we’re talking about “value” and consumer perceptions, security and safety are also important components. Offering longer warranties, promoting the Brand as stable with a long life ahead of it will all help to build a level of comfort in a time when even the largest businesses seem venerable.
Three :: One Size Does Not Fit All
While consumer spending and confidence are down, businesses like to make rash decisions and treat all potential customers as “deal seekers.” Beware, a broad-stroked strategy like this is often a mistake. When times are lean, a deep understanding of the differences in your customer based will have a pronounced effect on your business performance.
Four :: Protect the Brand
If your brand is like Walmart, now is a great time to keep your brand promise. For everyone else who’s brand has rested in areas like innovation, services, selection, quality, etc., switching to a model based solely on discounts may make recovery impossible. Consider showcasing how your attention to innovation has paved the way for your relentless, consistent consumer value.
Don’t believe me? Keep a close eye on Neiman Marcus. They’re making deep discounts into a Brand that has stood for innovation, quality and stature for 100 years, now they’re looking like Macy’s. How could they ever recover in the long-term what they’ve given up to stay afloat in the short-term?
Five :: Find the Mid-Term Opportunity
Speaking of Neiman’s, there is no doubt consumer and business customers will be seeking value in response to the pain and uncertainty in the economy. However smart marketers with the resources and vision to consider alternative strategies in the mid-term are those that will come out on top.
As my dad used to tell me, "Don’t sell your car for gas money."
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1 comments:
Retailers, in general, should not panic and should not respond to end of Q4 results until the end of Q4.
Those are pretty big "shoulds," I know. If they can weather the storm - and let's not fool ourselves into complacency, this is a storm - they should minimize the carry-over inventories to Q1 2009, keep the inventories lean and tight, buckle their seatbelts and ride the next 2 weeks [this is Dec 8]. Then, the following week; the days between the 26th and the 1st are always high-traffic days.
Then count the beans.
The other and more difficult "should" is not reacting to others' panic. I'm specifically referring to shareholders. Manage your inventories and stores as if the shareholder wailing and gnashing of teeth isn't there.
We're writing the obituaries for Mervyn's, Circuit City and Linens 'n' Things. Expect more to fall in Q1. Also, expect a significant activity in M&A and the outright sale of companies by venture capital firms holding controlling majorities.
There are too many stores. The market has to sort itself out. If you can survive a negative 10% or 15% comp store Q4, Mr. and Ms. Retailer, you will re-group in 2009.
BTW, I still maintain that brand doesn't mean very much in this environment and will mean much more than it ever has in the last half of '09.
I was in retail for fifteen years. Good luck and good sales to all and to all a good night.
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