There are so many ways to improve your profitability as a retailer. You almost certainly don’t have the resources to implement them all at the same time. And on the basis of costs and benefits, you probably won’t want to implement all of them anyway. Select the tactics that give you the best return on your expenditures of resources. Then prioritize among those, and recognize that more is not always better.
- Researchers at University of Mannheim in Germany and University of Texas-Austin found that customers who are adequately satisfied are willing to pay higher prices than are customers who are barely satisfied. But the researchers also found that developing customer willingness to pay even higher prices generally requires ensuring those customers are consistently very highly satisfied. The costs of doing that might make it not profitable. If so, why not be satisfied with adequate customer satisfaction?
- Researchers at Duke University and University of California-Berkeley find that advertising a warranty has no effect on consumer perceptions of retailer and product quality unless both retailer reputation and manufacturer reputation are in other ways clearly positive. So until you’re confident that your shoppers are confident about your reputation, why offer warranties?
- A traditional rule of thumb in retailing has been that a promotional discount must be at least 20% to produce enough increases in purchases to offset the decreased profit margin. But with shoppers having lately become highly price sensitive, retailers are reporting success with promotional discounts of less than 10%. So why discount your profits unnecessarily in those cases where shoppers are attracted by promotional discounts of 10%?
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