Sunday, October 25, 2015

Take a Tip from the Grocery Store

Every week, thousands of grocery stores across the country send out their store flyers with some unbelievable deals. Toothpaste for $.99. Cleaning supplies for a fraction of their value. Tuna for pennies. When you see these unbelievable sales, you may be asking yourself, “How do they make money selling at these prices?”

The answer is, they don’t. These items are called “loss leaders.” The store actually loses money on the sale of these particular items. They sell them at these ridiculous prices as a lure to pull shoppers into the store, knowing that once they’re there, they won’t just buy four cans of tuna for $1; they’ll pick up mayonnaise, pickles, relish, and a dozen other items that will allow the store to more than make up for the deficit from the tuna. 
As mentioned earlier, the first “yes” is the toughest. Once someone’s going through the hassle of driving to the store, standing in line, and paying, they may as well pick up a few more things to make the trip worthwhile. The same is true for your business. If you can get a customer to open his or her wallet with an unbelievable deal, you have a good chance of expanding the order.

This is different from an add-on sale, because you’re using a really low price initially to get the customer into your “store.” So the related products you present don’t need to follow the same guidelines they would for an add-on sale. Instead, keep these hints in mind:

  1. The initial “loss leader” needs to be jaw-droppingly great. 10% or even 25% off is not going to cut it, unless the total cost reduction is huge, or it’s on an item that NEVER goes on sale. Reductions of at least 50% are usually the strongest lure.
  2. Choose an item that might be better used in conjunction with something else. For instance, reduce the price of a particular shade of foundation to 50%, and then encourage the purchase of a set of brushes or the compact to hold it in.
  3. Use add-on sales for loss-leaders. The principles you learned in the previous section on add-on sales can be used for loss leaders, too! The hot dogs are half off, but of course you need buns to go with them…
  4. Select a loss leader that ensures you repeat business. Refillable items are great because once the customer has invested in the original package, they’ve got it sitting their in their garage, bathroom, or kitchen counter, just begging to be refilled.
  5. Don’t do it too often. A monthly special is great, as are seasonal items. But if you offer too many loss leaders, or put things on sale too often, people will just wait for it to go to half off before they buy.
Grocery stores spend millions on analyzing customer behavior. Piggy-back on their research and use some of their hard-won strategies for your own.


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