Controlling Margins

Each of us in the flooring business realize that customers today are used to seeing pricing promotions – many which often stretch credibility to the limit. If you are to compete in this market, you too will need to have promotionally priced products, special purchases, etc. to entice customers into your showroom.  The emphasis for some customers seems to have shifted to bragging more about how much money that they saved rather than on how much they actually spent.

To compete, and thrive, in the current environment it is critical that we understand the difference between promotional pricing and discounting. Observe how the large players in the furniture and home improvement business operate. They are very proactive in their offers. They highlight special features that may carry eye-popping prices – but are only available in limited styles, quantities or colors. They will offer promotionally priced products that often have reduced features (warranty terms, color availability, etc.). These are products that are intentionally lacking in some areas so that they can easily be “traded up “to another more desirable offering. They may have a promotion that includes a certain collection of merchandise that is being promoted – but only for a limited time.

What all of these merchants have in common is that they are controlling the margins – not the customer. They know how to sell a mix of product that will produce sufficient margin to allow their businesses to be sustainable. They proactively change their pricing promotions on a scheduled basis rather than simply reacting by allowing customers to dictate margins to them. You’ll wait a long time for a “make us an offer” sale in their stores. They are too savvy to allow that to occur.

Too often I find that this is not the case with many flooring dealers. To be competitive in today’s market, you must have a compelling offer for the customer to consider. Just don’t lose sight of the fact that you are responsible for your pricing strategy – not your customer.

Tom Jennings

Monday, June 3, 2013