With the holiday season upon us, many retailers are wondering what pricing strategies they should implement to price for profit and growth.
This year, more than ever, the U.S. is a “have” and “have not” economy. On the negative side, consumer sentiment remains low and the unemployment rate continues to sit at 9.6%. However, there is positive news: Personal expenditures were up by 2.6% in the third quarter, the Dow Jones Index is over 11000, corporate profits are on the upswing and unemployment has stabilized (albeit at an unacceptably high level).
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Bottom Line: A new opportunity exists this holiday season to serve cautiously confident consumers who, due to pent up demand and an interest in treating themselves, are willing to open their wallets.
Trend 1: Tailor your pricing strategy to your customer:
•In economically-depressed areas, continue the status quo pricing strategy of recent holiday seasons: focus on staple products, offer financing and layaway plans.
•In cautiously-confident markets, there is an opportunity to sell higher margin luxury products and services.
Trend 2: Show customers why they should purchase your product:
Trend 3: Feature upscale “reach” products to cautiously-confident consumers:
Trend 4: Welcome cautiously-confident consumers back with new pricing plans:
•Offer generous financing and layaway plans.
•Minimize risk with “satisfaction guaranteed” pledges.
•Offer lower cost options such as “basic” versions, rentals, and leases.
Trend 5: Offer experiences to cautiously-confident consumers.
Rafi Mohammed, Ph.D. is the author of the pricing strategy book, The 1% Windfall: How Successful Companies Use Price to Profit and Grow (HarperBusiness).