Monday, January 16, 2012

Keep Trucking with Transportation Cost Climbs

The National Retail Federation is predicting supplier costs to retailers will increase because of the recently revised Driver’s Hours-of-Service Final Rule issued by the U.S. Department of Transportation. Big rig drivers will be limited to 70 hours per week behind the steering wheel instead of the current limit of 82 hours. NRF says that the result will be a need for more trucks and truckers, thereby raising costs.
     The change from 82 to 70 hours doesn’t occur until 2013, but transportation companies might use news of the rule to raise costs sooner. Therefore, it’s a good time to start preparing your shoppers for price increases:

  • Strengthen store loyalty. Then shoppers are more likely to justify to themselves paying higher prices because of their desire to help you succeed. Social media and distinctive product lines can help build loyalty.
  • Research at Switzerland’s University of St. Gallen suggests that customers are more likely to justify to themselves paying higher prices when the salesperson tells them a story which dramatizes the benefits of the store. Fill the story with as much detail as the shopper’s attention span seems to allow.
  • Explain that you need to increase your prices when your suppliers increase their costs to you. Adapt the following to fit your style: “When our suppliers increase their prices to us, we need to pass those increases on to the customers so that we can stay in business and continue to serve shoppers like you and employ the people like me.” Although the basis for suppliers charging you more might be the rise in transportation and shipping costs, avoid using this as a reason with customers. Research finds that talk of such indirect costs won’t persuade customers.
  • When raising prices on items that many customers will see as necessities, use signage to describe less expensive alternatives. Prepare your sales staff to point out the alternatives if a customer complains about the cost. Researchers at University of Arizona, Arizona State University, and University of Pennsylvania find that this reduces a consumer’s drive—conscious or subconscious—to punish the retailer for the price increase.
  • Consider warning customers of upcoming price increases. There’s certainly the risk they’ll then start looking for other sources for the products they’ve been purchasing from you. But there’s also the opportunity for you to boost sales and book profits sooner if customers decide to stock up before the cost rises.

Click below for more:
Prepare Customers for Price Increases
Be Ready to Explain Price Increases
Tell Stories for Price Increase Acceptance

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