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Death Spiral: Trying to buy customers

NEW YORK, NY - FEBRUARY 08: 11 Times Square is viewed on February 8, 2012 in New York City. More than a year after opening in the heart of Manhattan the building remains 60% unoccupied. The skyscraper, which is part of the renovation of the once gritty Times Square, has 1.1 million square feet of office space and cost $950 million to build. (Photo by Spencer Platt/Getty Images)

I subscribe to a service that reporters, who write for national newspapers and magazines use, to find quotable sources for stories. One such inquiry was the genesis for this article. The reporter was looking for stories on how the economic climate was forcing businesses to alter their business models. How were businesses reducing prices and using other profit cutting measures to bring in the customers? I thought it was important to hit this erroneous way of doing business head on before businesses begin to accept it as a normal recession marketing tactic.

The Customers Are There

The first point I want to cover is the myth that the customer is cowering in a corner of their basement, terrified to emerge and spend any money. If that were even remotely true, campaign contributions would be non-existent.

So the only way to nudge them out into the purchasing sunlight is to entice them with bargains and giveaways. A bargain is only a bargain when it’s a bargain for everyone involved in the sale. A retailer gets a good buy on widgets and passes it on to his customers. But, as he is passing those savings on, the customer is informed that this is the exception not the rule.

Sticky Pricing

You may have heard the term in the news recently. It means that higher prices “stick” around to help the business owner recoup some of the losses from things like higher gas prices which inflated prices to a higher level than he or she could pass on to their customers. As the price of gas comes down, the shelf prices at your local store will come down more slowly than they went up.

What happened to quality and service?

Owenhouse Ace Hardware has been in business in my hometown of Bozeman, Montana for 128 years. They started before electricity, before the automobile, telephone and air travel was even imagined. They have survived a depression, 9.5 recessions, 10 wars, plus countless employees and managers over the years. Yet if you ask almost any local citizen, “Who has the best customer service in Bozeman?” more than likely you will hear the Owenhouse name.

So I guess after all their hard work of providing, not only quality service, but quality products as well, they should just put the whole store on sale and dilute both their brand name and their products. Why not change the name to “Owenhouse Discount Hardware?”

It’s Easy To Do It the Lazy Way

When times are good, and the cash is rolling in, business owners just let the economic current carry them along. But sooner or later, rapids appear, and you have to do some actual rowing and maneuvering around the rocks and hazards that are fast approaching.

It would have helped if you had paddled all along. Gained some experience in how the boat handles in all types of water. Businesses should always be operating as if the doors where ready to close and the “For Lease” signs were going up.

The time to learn marketing and advertising is when you don’t have to. Those are the tactics that will see you through the tough times, not buying the business with sales and gimmicks.

Some Final Thoughts

How long are you planning to operate that way? There is a term in business called “positioning.” It means that if I mention a type of product, or a company name, a brand name will pop into your head. For example, if I said soup, you might say Campbell’s. If I said computer, you might say IBM. The customers of a business have a perception in their mind as to what your business is and how it operates.

If you suddenly change messages in midstream, it sends a confusing message to your customers. Now, they have no idea what you are. When times improve are you going to change back to the old way of doing business? Now what are they supposed to think? “What happened to all the low prices?”

Every minute of every day someone needs your products or services. And the price of that product or service is way down the list of concerns they have. They are more interested in, “How soon can you heal my pain?” “Solve my problem?” “Make things right again?” Those are the customers you should be cultivating and nurturing in your business. Why not make it a point to “NOT” participate, if and when, another recession arrives?

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