Price Integrity

Customer Servces

Price Integrity
by T. Scott  Gross



I’ll never forget the day it happened. We had just completed a large catering order, 300 pieces of hot, fresh, fried chicken and a mountain of honey butter biscuits, when the after-church crowd hit us with a vengeance. In restaurant talk, we were getting "slammed."

Christian was working the walk-up counter and, because we were running at full tilt due to the catering order, was just a bit behind on filling orders. He had well over a $100 in carry-out orders written on the order board. We all stood waiting, tongs in hand for the cook’s computer to signal that the next batch of bird was ready when an unfamiliar-looking character walked up to the counter and said, "Do y’all have that $4.99 special I seen on TV in San Antonio?"

"Yes. sir! We do. How many would you like?"

The fellow went on a fishing expedition in his jeans’ pocket and hauled out a $10 that was older and dirtier than the jeans.

"One. And a big cup of ice water. Lots of ice. And a straw. And lots of catsup," he said grabbing a handful of napkins large enough to wash his pickup truck.

One-by-one, while the seconds ticked off on the fryer timer, the other waiting customers asked what was that $4.99 special. By the time the chicken was up, over $100 in Sunday morning orders had evaporated, leaving only six $4.99, hardly-any-profit orders on the board.

In a matter of seconds, we had turned a fair profit into a giveaway.

Smart operators stay out of the discount business. Anybody can give it away. It takes brains to sell it! I don’t know who said that but he or she is a retailing genius. Now I’m going to tell you how to do it!

 

The big issue is price integrity. The instant you start giving away your product (and that can include service) you are telling your customers that your regular price is too high. In fact, customers who see you routinely give away your product or offer extremely deep discounts will feel embarrassed to routinely pay full fare while the first time, often just bargain-shopping-bottom-feeders walk off with the best deals.

We had a huge sign posted on our walk up window at the restaurant. It announced a highly discounted lunch special, a whopping $2.22. One of our regular customers was spotted heading our way. We could see the smoke from his bomb of a pickup truck. By the time he made it to the window, we had his "usual" already packaged and ready to go. He always paid with a five dollar bill so we even had the proper change in hand.

Funny thing about regular customers. Quite a few of them order the same thing day in and day out. Even though the order never seems to change, they still feel obligated to look over the menu.

On this particular day, our regular guy did his regular thing. Only this time, he couldn’t quite see the menu due to the huge window banner announcing the el cheapo lunch special. No problem, we knew he would come to his senses and order the "usual" that totaled exactly four dollars and 85 cents. We had the 15 cents change in hand.

"Oh, heck!" he said, a bit frustrated by what he couldn’t see but surely knew by memory. "Just give me one of those."

He was pointing to the $2.22 special.

Now I’m slow. I admit it. But even I knew that there was something wrong with this picture. Let me see. Regular customer, always spends the better part of a five. Now he’s still a regular customer only he wants to spend about half of the usual and we encouraged him to do it! AHHHHHH!

 

POS Point: If the price reflects the value, there is no reason to discount. If it does not, lower it!

We are often approached my meeting planners who apologize for having a limited budget, immediately rushing to tell us that speaking to their group would be a wonderful opportunity for "exposure."

Are you aware that you die from exposure? Here’s the deal: How would you like to be a meeting planner who paid full fee and discover that some other group got the same speaker for half the price?

A friend of mine, Al DiLiberto runs a commercial that asks, "Have you ever been out to dinner and noticed that the couple at the next table are using a coupon to eat for half price? Who do you think is paying for that? You are!"

Al goes on to tell why at his Boccone’s Restaurant you don’t get coupons, just great food where everybody pays the same. Smart guy, that Al!

First point of business: Discount to encourage trial if you must, but do it away from your regular customers.

Discount to encourage trial if you must, but never discount your signature product. Discount to encourage trial if you must, but always have an explanation for your regular customers that is at least plausible.

Discount to encourage trial if you must, but never do it on a predictable basis. Otherwise your customers will learn quickly to wait until the next sale period.

Discount to encourage trial if you must, but never offer a substandard product intended to drive sales as this hurts your reputation for quality far more than it temporarily helps the top line.


-----------------
T. Scott Gross. All right reserved. For information contact Frog Pond at 800.704.FROG(3764) or email susie@frogpond.com.