Thursday, September 24, 2015

Discount Lighthouse Items for Low Price Image

Store Price Image (SPI) is the general belief your target markets hold about the level of prices your store charges compared to what other stores charge for similar items. Some stores have a set of product line SPIs. “They’re high if you’re looking for meat or fish, but I find unusual bargains in the bakery in the early afternoon.”
     Some consumers seek the exclusivity of stores with an image of premium prices. But people generally shop more often, buy a larger range of items, and buy larger quantities of each item at retailers with lower price images.
     The price points of certain items in the store assortment play a larger part than others in determining the SPI. Consumer behavior researchers have referred to these as Known Value Items or as Signpost Items. In a set of studies at Erasmus University Rotterdam, the researchers narrowed the classification further to what they named “Lighthouse Items.” These are ones that signal a low SPI but constitute a relatively small portion of customers’ purchase totals. Therefore, keeping the everyday prices of these items low or, better yet for most small to midsize retailers, regularly discounting them will have a minimal impact on your store profitability.
     Analyze purchase and revenue patterns in your store to spot the Lighthouse Items. The Erasmus study results suggest retailers are most likely to find them in two places:
  • High-priced categories in which the store carries a narrow assortment or there is a narrow price range 
  • Items that are usually bought in large quantities and then stored, and for which consumers believe higher product or service quality requires a higher regular price 
     Research at Emory University and Northwestern University indicates Lighthouse Items operate in the context of other SPI signals:
  • Range of prices. The frequency with which the shopper sees low prices influences price image more than does the amounts by which prices are lower 
  • Price-match guarantees. These cause an image of lower prices, even though few customers ever make use of the guarantees. 
  • Claims about price image. These claims could be in advertising or word-of-mouth. WOM claims by friends, family, and acknowledged experts do have greater influence than advertising 
  • Store location and d├ęcor. Many consumers are happy to pay somewhat higher prices to guarantee a pleasant physical environment. 
  • Customer service quality. This includes factors such as the degree of promptness, courtesy, and accuracy in receiving assistance with purchases. 
For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Sharpen Your Price Image
Set Price Anchors with Price Adjacencies
Bundle Expensive & Cheap Synergistically

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