An article by Ely Portillo in the indicates that Lowe’s is the latest company to try everyday low prices.  This comes on the heels of ‘failed’ attempts by Macy’s a few years back and, more recently, JCPenney’s.  The obvious question is “Why the sudden interest in everyday low prices?”

I’ll be the first to admit that what I’m about to suggest is what I surmise rather than the result of scientific study.  I believe that retailers have, finally, come to understand two things:

  1. Creating and marketing ‘sales’ is expensive.
  2. ‘Sales’ focus customers’ attention on price.

Marketing costs

Imagine for a moment that you’re the chief marketing officer of your company and you’ve been tasked with coming up with two ‘sales’ a month for the next year, 24 in all.  These sales are expected to:

  • Bring additional traffic to the store.
  • Increase the number of ‘non-sale’ items purchased.
  • Increase the frequency of existing customer visits.

Here are a few of the decisions you’d have to make:

  • How many items do I put on sale?
  • Which items should I put on sale?
  • How much do I discount them?
  • How much traffic do I expect from each ‘sale’ item?
  • How often do my customers buy the ‘sale’ item?
  • What’s the likelihood that, if I make the discount too high, they’ll hoard this product and return less frequently?
  • Will these ‘sale’ items bring in only price buyers or will I attract people who’ll pay full price for non-sale items?
  • What non-sale items do I expect to sell in conjunction with the ‘sale’ items and in what quantity?
  • Is the profit margin on the non-sale items to allow me to maintain, if not enhance, my overall profit margin?
  • How will my competitors respond to my ‘sales’?
  • What media will I use to communicate the ‘sale’?
  • To whom will I communicate the ‘sale’?  To existing customers only or to others as well?
  • Which ‘sale’ items will I feature?  Which will be secondary?
  • How will I know which items are bringing in the traffic?

Enough!  I’ve belabored the point, haven’t I?  The cost of your staff’s time, effort and energy in answering these questions (which are only a sample of what needs to be considered) as well as the cost of printing and mailing ads, coupons or the cost of TV or radio ads are enormous.

And you’re doing all this work, incurring all these costs while accepting lower prices on these ‘sale’ items.  Ouch!

That’s not the whole picture, is it?  We still haven’t talked about the effect these ‘sales’ have on your customers.

Focus on price

These ‘sales’ focus your customers attention so completely on price that they often aren’t aware of the other things you’ve done to enhance their experience with you.  The look and feel of your store, the quality of your merchandise, the friendliness and helpfulness of your sales staff, the visual appeal of your displays all get lost because you’ve focused your customers’ attention on price.  In other words, you’ve wasted these investments as well.

Now that we have a sense for the ‘sudden’ interest, let’ find out why it’s not working.

Wrong approach

The reason why Macy’s, JCPenney’s and, now, Lowe’s everyday low price strategies aren’t working isn’t, as the leaders of all three of these companies suggest, that customers have gotten used to ‘sales,’ it’s because they’re continuing to focus their customers’ attention on price.

When you hear the phrase ‘everyday low prices’ your mind immediately goes to price.  As discussed earlier in this post, that means that most other aspects of your offering are overshadowed by price.

The second thing that’s wrong is the word, low.  It’s not only a non-specific term that is subject to interpretation by the consumer, it links your company to others that use that phrase.  When Macy’s talks about everyday low prices, doesn’t your mind want to shift to Walmart?  They’re not even targeting the same markets, yet they’re using the same language.  That confuses buyers.

The third thing that’s wrong with these everyday low prices strategies is that these companies aren’t replacing their ‘sale’ ads with other marketing messages.  Out of sight, out of mind.  Or, if they are offering replacement ads, they’re not focusing on what’s important to their customers – image, innovation or time savings.  As I’ve discussed in earlier posts and in my book, those are the only three things any business sells.

Finally, I haven’t seen any evidence that Macy’s, JCPenney’s or Lowe’s made any significant changes in their offerings (read customer experience) for their customers to get a sense for why the prices changed.

Here are typical customer reactions when, in their minds, nothing changes but the price:

  • The price has gone up even though they say it hasn’t.
  • Maybe the price didn’t go up, but I know I’m going to give up something in quality or service that I used to get.
  • I’m glad I stocked up on the last sale so I don’t have to pay these higher prices.

Given these reactions is it any wonder that, absent a reason for the change in pricing, customers are going to resist?

Here’s the morale of the story.  Customers, consumers and B2B, would love everyday pricing if they could feel that their experience with the seller was enhanced in ways that are meaningful to them.  Given the huge sums spent on creating ‘sales’ don’t you think you could allocate a small part of that budget to enhancing the customer experience while banking the rest of the savings for future growth?