Orlando Business Insurance: Lowest Price Isn’t Always Best
J.C. Penney ousted it’s chief executive Ron Johnson last week. The move comes amidst the retailers woes as they struggle to counter sinking profits and a shrinking customer base. The New York Times had a counter-intuitive hypothesis as to why this might be happening: J.C. Penney’s low prices.
It was the way they approached the problem. Previously, Penney’s had frequent sales and discounts available to shoppers. In a series of company overhauls, the retail giant stopped promoting sales and placed heavy advertising dollars talking about their “everyday” low prices. The strategy didn’t work and Penney’s dropped it.
It isn’t the low prices that is the problem, but the customer’s perception of them. Part of the lure of “getting a good deal” isn’t just the price, but the knowledge of how much they are saving. That is the reasoning behind why many retailers raise the prices only to lower them soon after, so customers can see the difference and visualize the deal they are getting. The retailers who do operate on “everyday low prices” such as Wal-Mart, rely on large volumes of repeat customers. They also provide data on competitor prices so shoppers can see the savings they are getting.
It’s a delicate balance between a retailer and consumer. It makes economic sense for a retailer to set and maintain one price. It costs time, money and manual labor to promote sales and change prices. It also keeps a more stable inventory. But customers’ idea of a great deal is based on a reference point. Known as anchoring, without a higher, initial price to compare it too, a customer can’t see the “deal” they are getting.
At Newman Crane, we have Orlando business insurance policies to protect your orlando retail operation from a number of potential losses, including liability and property damage. Contact us today for more information about our Orlando Retail Insurance programs. (407) 859-3691