The other day, I met a friend for lunch at a local Chinese restaurant. The restaurant (based on appearances) was a cut above the typical tiny pad nestled amongst larger boxed retailers. Strangely, there was a banner draped on the storefront announcing: “we’ve lowered our prices”. I was curious to find out how this restaurant had executed their price lowering strategy. So, I went in to find out. Once we were seated,we went through the typical menu-order-eat-pay cycle.
Some of the things I noticed at this restaurant caused me to write this blog entry. Here is how they implemented price lowering:
- As already mentioned, a loosely draped banner was hung over the storefront
- Throughout the menu, almost every menu item had a piece of tape placed over the old price and a new price handwritten in
- A couple of handwritten signs were taped in the interior
They implemented price lowering all wrong. They should have followed the below 5 steps.
Step 1: Don’t lower prices Ha! I bet that was ironic! Of course, people like prices to go down. However, subconsciously, we know when prices are lowering merchants are in (or near) trouble. Instead of using phrases like ‘lower prices’ use phrases like ’specials’ ‘discounts’ or ‘promotions’. These words accomplish the same task of lowering prices but don’t smack of desperation.
Step 2: Do some competitive analysis When having a promotion, make sure your pricing is competitive. You won’t want to lower prices too much, you also don’t want to lower them too little. Do some undercover work. What pricing are your competitors offering? Can you beat them? If not, can you at least beat them on a couple of teaser products? Are your competitors in the same boat as you?
Step 3: Limit the promotion You want people to take action. You want people to take action NOW. You also want to be able to increase prices in the future. To accomplish all these goals you need to place a time limit on the promotion and make that time limit apparent.
Step 4: Get the word out Merely putting up a banner in front of your store barely lets anyone know about your promotion. You need to take advantage of what is available on the internet (like StoreCatch’s free sale listing service) to get the word out. If you have massive funds, you can advertise in local newspapers and magazines.
Step 5: Don’t look desperate Common signs of desperation are: handwritten signs, tape over prices, no customers during typical busy times and many others. Stay away from these tell-tale signs. Take the time and effort to at least pretend this sale was just a normal course of business. Signs should look professional, order forms unified and they all should tie together.
The Chinese restaurant went about their price lowering strategy all wrong. I felt like I was in a place which wouldn’t be around in three months. If they had completed the above steps, it would have felt like a normal course of business instead of gasps of air from the dying.
Got any other strategies? Let us know!
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