Saturday, October 23, 2010

What's the Right Price?

The new economy is here to stay for awhile:

When 50 Percent Off Just Won’t Do

When it comes to wooing wary shoppers, many retailers are playing the percentages.

Campaigns for stores, from giant chains to mom-and-pops, are promoting sales that are frequently expressed in percentages off from regular prices. Twenty or 25 percent off, once considered a hefty discount, is practically nothing nowadays, as most consumers must be enticed further to open their wallets or purses.

How willing shoppers are to shop is important as retailers approach the start of the crucial Christmas season. To prime the pump, ads are routinely proclaiming savings of 50, 60 and even 70 percent off. In some instances, the discounts are going as high as 85 percent.

Some retailers are subtracting atop subtraction by offering an "extra" percentage off merchandise, typically items that had been marked down earlier.

For instance, Bloomingdale's, part of Macy's Inc., promoted in newspaper ads on Sunday "an extra 30 percent-40 percent off" the reduced prices on clothing, handbags, accessories and jewelry for "a total savings of 40 percent-75 percent off original prices."

The Macy's division, not to be outdone, advertised in circulars a "fashion clearance" with "an extra 40 percent off already reduced prices for a total savings of 50 percent-80 percent off original prices." That was along with a clearance on home goods with an additional 30 percent off the previously cut prices "for a total savings of 40 percent-75 percent off original prices."

Although retailers are managing inventories and margins better than during the recession, there are still "a lot of sales and promotions," said Mariana Sanchez, chief strategic officer at Saatchi & Saatchi X in New York, a unit of the Saatchi & Saatchi division of the Publicis Groupe that specializes in shopper marketing.

The purpose of what seem to be "amazing discounts" is to offer "some trip-driving items," Ms. Sanchez said, meaning merchandise that would spur someone to shop a store and, the merchant hopes, also buy some items at full price.

There are shoppers who enjoy "comparing the circulars, clipping the coupons," she added, because they see it "almost like the sport of shopping, the hunt, as they're in the pursuit of what they want for a better value."

When such consumers make their purchase, she said, "they feel like they’ve won."

Despite the prevalence of the tactic, reducing prices by large percentages is still effective, Ms. Sanchez said, particularly as consumers become accustomed to discounts.

Sometimes, retailers vary the sales approaches so as not to wear out their effectiveness. One popular tactic is a "bogo," short for buy one, get one, as in a deal to buy an item -- at regular price or on sale -- and get a second item at, say, 50 percent off the regular or sale price.

There are also percent-off savings that are pegged to spending a minimum amount of money. A recent ad from Bloomingdale's offered an extra 15 percent off to shoppers who bought up to $1,999.99 worth of furniture and mattresses. For those whose purchases totaled $2,000 or more, the discount was 20 percent.

J. C. Penney occasionally offers a twist on the so-called door-buster sale with two tiers of percentage-off discounts based on time of day.

For example, early birds who shopped from 9 a.m. to 1 p.m. on a recent Saturday received 70 percent off gold jewelry, 60 percent off men's outerwear and 50 percent off women's boots. After 1 p.m., the discounts declined to 60 percent off the jewelry, 50 percent off the outerwear, and 30 to 40 percent off the boots.

The risk in cutting prices by percentages is that it could confuse some customers. Penney has adopted what the company calls a "clear pricing" policy.

In stores, signs on displays and tags on merchandise display the prices to be paid after subtracting the discounts. Circulars advertise the policy this way: "The price you see is the price you pay! No math required."

At the same time that retailers are demonstrating how eager they are to discount, many are also trying to burnish their brands with image campaigns that run separately from sale ads.

For instance, Lord & Taylor introduced on Tuesday a campaign to promote the renovation of its flagship Manhattan store, on Fifth Avenue and 39th Street. The campaign describes the overhaul, with a wink, as "The ultimate face-lift."

"Promotional messaging is something we do," said Amy Avitabile, senior vice president for marketing at Lord & Taylor, referring to percentage-off sales, "but our primary communication for this month is this campaign."

"We spent the last year renovating this building, and we’re excited to tell our customers about it," she added.

The goal of the campaign "is to get some attention on the brand" to reach those who do not shop at Lord & Taylor, Ms. Avitabile said, as well as "to validate for existing customers that they knew the secret of Lord & Taylor before it got out to everybody else."

The campaign includes shopping bags along with ads in magazines and atop taxi cabs, and on phone kiosks and buses. The campaign is being created internally and by Lipman, an agency in New York.

For Christmas, Lord & Taylor plans an image campaign centered on the word "share," Ms. Avitabile said, to be expressed in ways that will include "share tradition, share memories, share the warmth of cashmere."

(Source: The New York Times, 10/11/10)

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