Article Number : 1878 |
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| Date | 4/5/2007 9:18:15 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=1878 |
| Abstract | At last year’s FCA Network meeting, Bob Hill, CEO of parent company Floor Covering Associates, was discussing pricing strategies. Hill, with 40-plus years in the industry, should be considered an expert on the subject... |
| Article | At last year’s FCA Network meeting, Bob Hill, CEO of parent company Floor Covering Associates, was discussing pricing strategies. Hill, with 40-plus years in the industry, should be considered an expert on the subject. It’s a topic that from which all dealers can benefit, not just those who belong to a retail group. Hill noted that pricing is among the most important facets of retail, since the last thing a dealer wants is to leave money on the table. In many cases they simply do not sell smart. To that end, Hill mentioned five pricing strategies: No price tags at all. Hill is not in favor of this strategy because the customer is completely dependent on the salesperson for price. It can undermine believability, can cause mistakes and result in lower margins. “If the price tag is not on the sample, you have to go somewhere and look up the price,” he said. “You have broken rapport with the customer.” Lowball. This strategy employs low price tags to drive volume on recognizable products. It’s something the home centers often employ. In order to do a lowball pricing strategy, you must have low overhead, tight inventory control and high volume. “At one point you could buy VCT from Home Depot cheaper than you could from your local distributor,” he said. “This is when Home Depot was breaking into the industry and made a deal with Armstrong.” With this method, the customer concludes all your prices are low and does not have high expectations on service. All extras are stripped out. Highball. All the extras are included in the tag price. It makes for an easy sale, Hill said. “You can use this strategy when you have the jump on your competitors with a captive product or service—if you have the best installer in town, for example.” Private brands help create this strategy. He noted that high prices can be perceived as desirable; they are used to send a message about your quality and value. “Starbucks is a perfect example. They charge more for their product than their competitors, using pricing to position themselves as selling quality and value.” Lowball the material, highball the labor. Most retailers compete with a Home Depot around the corner or down the block. It can offer the same product at a lower price. So what does the specialty retailer do? He can lower the price but make it up on the installation. Hill noted this strategy is useful when you have an edge with great installers. The customer gets the best of both worlds: She is buying at the Home Depot price and is also getting the best installation. Fairball. This strategy enables the salesperson to minimize price as an issue. The tag price is set not too high, not too low. Standard extras can be built in. Private brands create this opportunity. The bottom line is that you must know who your customer is, why she shops your store (service, trust, price) and whether the reasons are consistent with your pricing philosophy. |