I was recently asked to write an article in response to a recent CNN article on discounting in order to sell luxury goods. Cutting price is never a long time survival for any company, it’s just a lazy way to do business. First, it doesn’t make up for loss volumes, and secondly, it can actually unnecessarily depreciate the value of your product. Even cost cutting can’t keep up with cutting price and volumes, the math just doesn’t work!
All companies, especially luxury product companies must now move from being market driven to management/sales driven. The internet and mass market advertising is not the only way to move products and in fact both are dependent upon price not service. Market driven approaches like advertising the lowest price is a passive wait and see approach. Remember the lowest price does not get the luxury buyer from their home or office into your store. Lowest price does not ensure confidence in the consumer’s mind as they wonder about color choices, sizes or other considerations that have nothing to do with money. Cutting price rather than increasing service is management trying to get what worked in a great economy to work today- it won’t! Today, service is survival not some nice thing you talk about. I am not talking about service after the sale, I am talking about service in order to get a sale. Bringing the product or products is the essential type of ‘service-think’ that is required in this market.
Cutting price in an environment of reduced volumes will negatively impact gross income and net profits. Price cuts become a solution in order to move old inventories but should not be considered by management as a long term solution to selling products. Some say that the days of conspicuous consumption are over but I don’t believe that is the case, I just think people will do less of it!
People that buy luxury goods want service and convenience in addition to great value. Price is the least effective of all ways to substantiate value! Price is not the luxury customer’s biggest issue, time is. Just getting Mr. Big Bucks into his car, leave his office, wait in traffic and try to find a place to park could be the deal killer! Management and sales people you must understand that the only thing standing in between you and a customer is getting in front of that customer in the first place.
Companies must now shift from market driven where the company advertises and then passively waits for traffic to a management/sales driven approach (active) where the company utilizes their database, internet leads and advertising and gets their sales team and their products in front of potential owners.
I recently was trying to buy a Cartier watch for my wife and emailed 14 stores around the country. All of them emailed me back with a price. Some discounted, some did not, yet no one made the sale. Why? Because no one got in front of me to determine that I was on the wrong watch!
These companies all used market driven approaches and have yet to make the transition to management/sales driven approaches. They are using the same actions that worked years ago when the market allowed for a more passive approach.
Today companies must be willing to, even insist on going to the customer to make the sale. No longer depend on the market for your production management must demand a new level of production from the sales department.
The economy is not the problem, becoming management/sales driven is. Waiting for the luxury client to come into your store (market driven) is a suicidal and outdated mode of doing business today. Relying on the internet is only a new version of waiting. Become management/sales driven and do what your competitors refuse to do in order to make the sale! Don’t use price to sell your products, increase the level of service you think and act with in order to make the sale. Milton Pedraza, CEO of the Luxury Institute, a market research firm in New York City, also thinks discounting should be a last-ditch effort. By the way I still have not bought that watch for my wife while Cartier stores around the country wait in their fancy showrooms complaining about the economy.