Great strategy? Or sheer folly?
It’s early spring. I’m listening to the radio when I hear an ad for the premier carpet cleaning company in our city. The woman in the ad is telling her friend how dirty her carpets after having dirt, sand, salt and grime tracked in all winter long. Her friend recommends the carpet cleaning company touting all of its benefits.
The ad is clever and well-constructed until the friend says that the company is offering a discount. What? Offering a discount during peak selling season? Why would they do that? Ostensibly, to increase market share, right?
Is that a good strategy? Let’s play this out to its conclusion. First, the company is giving up profit margin with its ideal customers to garner a larger share of the market. It’s peak selling season. They’re already swamped with orders yet they’re pursuing more orders with their discounts. How is the work going to get done? Overtime and temporary help.
Employees that work incredible amounts of overtime are fatigued. They’re going to make more mistakes. That’s going to hurt the company’s reputation. Indeed, given the claims made in their ads, the company has set expectations that they aren’t going to be able to fulfill.
Temporary help is an alternative, but these workers aren’t as knowledgeable about the process. They, too, are going to make mistakes and damage the company’s reputation. Plus it’s going to take them longer to complete the work. Not only does the company incur additional costs, it angers a lot of customers because the temps are consistently behind the schedule that they were given.
Then there’s the strain on equipment. When the company is operating it’s equipment at full tilt 12 to 14 hours a day, six or seven days a week, there’s no time for maintenance. When the equipment breaks down, which it inevitably does in this environment, it throws the entire schedule off; once again, damaging the company’s reputation.
Of course you could add more equipment to handle the increased demand, but then what do you do with this excess capacity in the off season? Offer more discounts?
It’s counter-intuitive, but offering discounts in peak selling season to garner a larger share of the market is one of the costliest strategies this company, or yours, could possibly employ. Don’t fall into this trap. When it’s peak selling season, hold your price. You’ll not only enjoy greater profits, you’ll do so with fewer headaches.
Author: Dale Furtwengler
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