Prepare for the new wave of SAVE in retail sales
For many small businesses, the four P’s represent the product, place, price and promotion.
In other words: preparation prevents poor performance.
These concepts have served retailers well in their pursuit of selling more to the same or new customers.
Norman Thurecht, from Pitcher Partners, believes the four P’s are morphing into a concept known as SAVE.
He said modern retail thought leadership suggests that the focus should change from products to Solutions, place to Access, price to Value and promotion to Education.
An article published in the Harvard Business Review (1) discussed this concept with reference to business to business transactions.
“However, in my view, the concept of SAVE has specific relevance to specialty retail,” Mr Thurecht said.
“Specialty retail is about creating solutions for customer and promoting the solutions to the customer so that they may well travel past other retailers to access your products/solutions.
“The opposing views would be to create a convenience offer for customers based on general merchandise which they can get in other locations or entering the deep discount model to attract customers.
“It is important to remember that there is nothing you sell in a retail environment that cannot be bought somewhere else.”
Therefore, what drives the customer to choose your location over others?
Mr Thurecht said to create a solutions business, the culture must change from a transactional business where staff merely complete customer orders to one that focuses on the customers mission (what are they coming to you for), product bundle and customer outcome.
“Many forward thinking owners are already well on the way to creating this,” he said.
“The largest hurdle is the need to understand how the customer shops and their abilities or willingness to spend more with you. The second part is imperative because of the pressure on margins in highly competitive environments.
“Providing the customer access to the solutions means management must develop an integrated cross-channel presence that considers the customer’s entire purchase journey.
“This would also include the layout and design of the store. Retail from a customer’s point of view is often about speed and ease. Your opportunity is to create that environment to increase customer visits and average spend per customer.”
Mr Thurecht said the more important facet of the SAVE concept – but the most difficult for many businesses to embrace – is that instead of price, the retailer must focus on the value to the customer.
“To do this, the staff must be able to articulate the benefits of a product relative to the price,” he said.
“The next time your staff engage with a customer, listen to the conversation. Do they mirror this product knowledge approach or is more of a transactional (completing the transaction at the till) discussion?
"With constant pressure on retail margins, the value approach is the only way to maintain or grow retail margins.
“Education is the last piece of the detailed transition to solutions based specialty retail.
“Often too many promotional dollars are spent on catalogues without enough thought on the brand proposition they are putting to the customer and not specifically focussed on growing more profitable customer visits – only promoting the price.
“Therefore, promotion must transition to education – providing customers information to their specific needs at each point of the purchase cycle (remember the integrated cross-channel approach mentioned before).”
Mr Thurecht said with heightened competition in every industry sector, retailers only choice to remain profitable with a positive cashflow is to gain more customers, trafficking more of the retail floor space and therefore spending more in-store.
“As an accountant and consultant to retail clients, we understand cashflow is important.
“Generating more cashflow will only come from what many retailers know as the four P’s (product, place, price and promotion).
“ The question is how many retailers will get caught in the ‘repetitive and relatively unproductive’ product push environment (buying stock they think the customer wants) versus customer pull (holding stock they know the customer wants) environment which continues to put pressure on margins and undermine the specialty retail space that many retail formats must own.
“The result will be that slow moving stock will eventually suffocate cashflow if the old model is not changed.”
Pitcher Partners and CCIQ will be presenting a webinar and workshop for retailers in the coming months which will cover some of the above points. Keep an eye out for the links to register your business, including on CCIQ’s Events page.
About the author
Norman Thurecht, from Pitcher Partners, works closely with his clients, focusing on managing and driving their business to improve profit results by staying in touch with the latest industry trends, government regulations and consumer demands.
He brings together wide ranging knowledge of accounting and taxation for small to medium businesses as well as strong commercial experience to provide excellent advice and recommendations. He ensures his clients receive the best return possible.
Clients benefit from Norman's holistic approach to business and financial management where he acts as wise counsel on all matters dealing with taxation, financial management, succession, wealth and estate planning.
1. Rethinking the 4 P’s HBR Jan 2013 by Richard Ettenson, Eduardo Conrado and Jonathon Knowles which was published in the HBR in January 2013.