Management Memos

Making Measurably More For You Since 1985

February 2017

Merchandising Makes You Money!

Selling is a precious art. It is also very satisfying. Along with that, it is also fundamental to business success. Fortunately, it's an art whose skills can be learned, and whose practice can be enhanced by merchandising. It can make you real money!

Good merchandising drives visitors to your store or showroom, and when they're there, can significantly increase sales - even in a slow market.

That makes merchandising a key element of almost every business plan.

But what is merchandising, really?

There are two main elements of 'merchandising'. One is the commercial wrap you put around the product lines in question. The other is the visual presentation of those lines in the showroom or store situation.



The Commercial Wrap

Since our goal is to increase sales, the commercial part of our merchandising has to appeal to the customer on a "here and now" basis. It has to instil a sense of urgency that requires action right away!

The easiest, and automatic response is to create a 'price-off' offer. This carries the risk of creating an "always on sale" reputation, or an "I'll wait until it's on sale" customer attitude.

So, what are the options?

Firstly, if you are going the "price off" route, be sure that the offer is time limited - with a short and strict end date.

Secondly, make sure that the merchandising lines on offer make sense in their own right. For instance, there is little point in having a 10% reduction in anything that isn't a house or a boat. For everything else, a "10%" is just a good way to give away your money!

Similarly, there is little point in offering a big discount on lines that have not been popular at full price. Customer reaction will 'burn' you for not offering satisfying discounts on things people actually want!

Make it a solid, very attractive offer, on popular products (after all, we do want actual sales!), and for a short time.

Thirdly, Consider a price point - not a discount - if you're doing the 'price-off thing'. For instance, 35% off an item selling at $350 is a fair bit of money - but offering it for $229 seems like a better deal. Check the arithmetic yourself.

Finally, why 'price off' anyway? Why not make a premium offer?

Making a 'premium offer' work can be challenging. But not if you really do understand pricing!

Using a tool like the 'My Red Zebra' Full Value Pricing Calculator will give you the insight to make a really good package offer. The core product, and the premium bonus, at a price customers will drool over.

Here is an example.

Take that $350 product we looked at for a 'price-off' offer. Now, imagine that you sell it, packaged with its most popular $70 accessory - with the accessory included absolutely free.

When you calculate it, you will make almost three times the gross profit with this offer, compared with the 'price-off' alternative described above.

This offer protects the 'perceived price' of the main item, offers incredible value, and generates strong profit. What's not to love about that?

So that 'wraps up' the 'Commercial Wrap'.

Hey! What about that other facet - visual presentation?

Look here. Next month!

Perhaps something in this article raises a question for you. Perhaps you'd like to discuss something in more detail.  Then phone us or use the contact form here.

There is absolutely no obligation in contacting us for a discussion.


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Any advice, information or comment contained in this document is general in nature, and should not be relied on as the basis for any specific commercial, business, employment, or financial decision. Specific advice should always be obtained for each individual circumstance. Accordingly any advice, information or comment contained herein is for general guidance only.


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