Problem #9 = Discounts Drive Down Price Of Existing Winners
This problem comes up in nearly every single project.
Think about it this way. You have an item at $29.99, and that item is a winner. Then business is bad for any of a number of merchandising reasons. Some/Many items just aren't working. So Management instructs Marketing to take 30% off all orders.
What happens to the $29.99 item that would have sold at $29.99 (and generated $15 of gross margin)?
- The item now sells for an effective price of $20.99 (and generates $6 of gross margin).
What happens next year when the customer is presented with the $29.99 item?
- "I'm not buying it unless it is offered at 30% off."
We are nuking the good half of the merchandise assortment because the bad half of the assortment won't sell.
Don't do this!!
Offer 30% off on items that aren't selling ... maintain pricing integrity on your winning items.
I know, I know, your in-house systems won't allow you to do this.
Please find a way to do this.