Monday, August 15, 2016

Slap the Category for Price Image Effect

During the parent conference, a mother is told by her son’s teacher that the boy, although seeming to be shy, does regularly misbehave in class. “He should be behaving himself,” the mother agrees, “But what you see as shyness is really sensitivity. My son is a highly sensitive boy. I suggest that when he acts up like that, you deliver a sharp slap.” “I should slap your son each time he misbehaves?,” the teacher asks, shocked. “Oh, no, no, no!” corrects the mom. “He’s much too emotionally sensitive for you to do that! I’m saying he’ll shape up fast if you slap whatever kid is sitting next to him at the time.”
     Okay, it’s an old joke. Which explains why I thought of it when considering how slapping prices on psychologically adjacent item categories influences your store’s 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.
     Studies at New York University, Tel Aviv University, and IDC Herzliya conclude that shoppers usually choose a retailer they believe is less expensive more often on the items that interest them than a retailer they believe is consistently cheapest on average over all items carried. 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.
     Yet, what of the situation where it would eat into your profitability excessively to consistently discount a particular item category which attracts your shoppers? Here’s where my slap joke comes into play. A set of studies at University of Auckland and Unitec Institute of Technology showed how consumers tend to group their impressions of item categories in certain ways. Most of the groupings in those studies seemed perfectly obvious: Consumer electronics with computer hardware/software and electronic games/consoles, for example. The reason for other groupings took more thought: Sports equipment with toys, vehicle accessories, and collectibles.
     Once you’ve figured out how your store shoppers group their impressions of products and where deep discounts would do less damage to your bottom line, discount a category associated with the category that’s popular, but where regularly discounting that one would eat away excessively at profits. Keep your business in shape by slapping down prices on the category next to the troublemaker.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Promote Promotional Pricing over EDLP
Discount Lighthouse Items for Low Price Image

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