R.I.P. RRP

Rest in Peace, Recommended Retail Pricing

Part 1

We often get asked how we price our products?  Like everything in life, it comes down to the equation between quality and price giving the customer the best possible value.  Too often, especially with internet shopping, price has become the deciding factor.  Shoppers now make decisions on price, mainly because it is much harder when looking at a small screen to really see the difference in quality.  So much furniture buying has moved from the high street to online that all the benefits of seeing something in the flesh are lost.  What happens then is a race to the bottom, selling as cheaply as possible.  But that only works when quality is compromised.  It is obvious if you know the starting point, i.e. that the fabric used is £20 per square metre rather than a poor-quality alternative at £2 per metre.

But shoppers often aren’t aware of the difference in product attributes, it is very difficult to get this across without turning the customer off, or for that matter convincing them it matters.  Trying to get across the attributes of one type of polyester over another and why it’s not only significant to the product’s lifespan but also a factor in the price, is very difficult without a live dialogue. OK you can try and do this with sales videos but often these are too one dimensional and no substitute for touch and feel.

Promoting the smaller versions of the same product gives the illusion of a lower priced product, in our case making the product smaller saves on filling and fabric and time so clearly can be sold at a lower price, often the shopper then finds out when they open the box.

Constant discounting also serves to further confuse the buyer giving the impression or rather illusion of great value or a good deal.  Unless the product is on sale at the full price and bought at that price, this is simply a rouse and the actual price is the discounted one.  But we are all suckers for this, we can’t help ourselves as no matter we still think we are getting a bargain.   Quite often when price is the deciding factor, what the customer ends up with is a cheap product that doesn’t last and a reluctance to buy again in the future.   So, who’s fault is this?  Duping customers with what appears to be a bargain or simply looking at the discount and thinking you’re getting a bargain.  All businesses work on margin.  If you don’t deliver a margin you go out of business – so either all these companies are going out of business or the discounting/pricing is false.

And what of the effect on trying to build a brand when the only sales happen when discounts are given.  You just need to read this article to see the damage. Bloomberg  With massive online discount businesses which dominate sales on the internet, is then met by store being forced to do the same.  As this article says – to wean shoppers off discounts isn’t going to be easy. Once you lose control of your brands pricing is very difficult to both convince future retailers in stocking your product, but the customer will be programmed to wait for the next sale.  You have no control of margin; your product is not bought for any other reason than price and that is not a brand.

We have used reader offers in print in  the past and this no doubt stimulates sales but inevitably these offers find their way onto the internet and onto discount websites and that is what shoppers see first and that is damaging.

We removed our brand from a well-known site who discounted our product having made no request, which they claimed was based on an algorithm for the price of our product in that category – proving the point that it’s price and not quality the driver.  When looking at the other product on that site we could see why.

As a result, we are expanding our retail network through traditional stores, such as garden centres where customers can see the product and talk to someone who can inform the customer.  Then hopefully the customer is considering the product because of its attributes, not just price.  (I will expand on our interactive POS solution shortly).

As Oscar Wilde said, knowing the price of everything and the value of nothing.  Interesting that the expectation now is getting a deal, money off…I don’t think we would be too happy with the shoe on the other foot and employers demanded a discount for work.

In the next part we discuss how we arrive at our pricing, our policy and the importance of regulated pricing on the internet giving retails and customers the reassurance of equal pricing across the board