Plain Talk

The more miserable the customer thinks the retailer is, the more they will come to the store to buy items on sale. For example, very few people will go into a store if the sale is 5% off. To the customer, the store is doing well in terms of profitability and doesn’t need to lower prices to attract customers. If a store is going out a business and offers a total liquidation sale, customers believe a store is doing poor--or miserably--and they’ll be more likely to shop the store knowing prices are low.

The misery meter is divided into four levels of discounts:

1. 5%-10% off
2. 20-40% off
3. 50-60% off
4. 75% off

Retailers should want to be high on the misery meter, that is they want low enough discounts to communicate that they need more business, which attracts more business.

When placing themselves on the misery meter, retailers should consider two things:

• How often they want the customer to return


• Whether the store is in alignment with the advertising.

How often do you want customers to return?
The rule of thumb is this: the stronger the misery meter, the fewer times a customer will return to the store. If you offer a 10% off coupon, the customer might come in a few times during the season. If you offer 50-60% discounts, the customer might not come back until another season. If you offer total liquidation sales, the customer might not come back for another year.

Why?

Because a specific type of customer is attracted to your high misery meter: the bottom feeder. Bottom feeders come into a store only when the store offers a level 4 sale on the misery meter.

Look at your range of customers:

The Regular Price Customer
These people see something, they like it, and they buy it.

The Incentive Customer
These people need an excuse to come into the store, like a phone call, a coupon, or a free class.

The Insider Customer
This customer is looking for top quality and wants 25% off the newest items. Most customers fit in this category, which is the most challenging.

The Clearance Customer
This customer will come in for clearance events. They’re the best customer because they come in on a regular basis.

The Bottom Feeder
This customer shows up only for major sale events. This customer has never paid full price for anything.

The bottom feeder doesn’t care about your latest products and rarely about what brands you carry. They’re looking for a steal, that’s it. This means all you need to do is send them a cheap postcard or piece of paper advertising the sale.

When you hold these major sale events, have someone register these customers so you can identify who they are. Doing so allows you to create stronger sale events, advertised with very little cost.

Does your advertisement align with the true status of your store?
The sale you advertise has to communicate the truth about your store. If you advertise that you’re having a wall-to-wall sale, customers assume you’re going out of business. If you’re not going out of business, use another sale term that shows you’re high on the misery meter but not shutting your doors. Don’t send mixed messages to customers. Not only does this prove you untrustworthy, it can potentially harm your business.

Remember: retailers should be high on the misery meter because the more miserable or desperate they seem, the more customers will come in to benefit from the sale.

Rick Segel can be reached at:
Rick Segel & Associates
268 Hamrick Drive
Kissimmee, FL 34759
Telephone: 781-272-9995
Toll Free: 800-814-7998
Fax: 800-847-9411
Email: rick@ricksegel.com

www.ricksegel.com