There’s Room for Profit Even in a Recession

Like all of you, I’m familiar with the word “recession”.  My community hasn’t been hit as hard as some others but even here, jobs have been lost and budgets torn asunder.  There’s no question that it’s going to take time to recoup and recover from the pillage of those in power within the financial and housing markets.  Greed, an unsatible desire for profits, and a total lack of caring for those who may be hurt are, unfortunately, part of the American way

As a result, Americans have become more conservative in their spending — which is not a bad thing.  Those of us, who are old enough to remember the days when your every whim and desire couldn’t be added to a credit card or purchased for nothing down, are shaking our heads as we say “we told you so.”

But all these changes–which any intelligent person could have seen coming–don’t mean that every business is in a “hide the cash under the mattress and wait it out” mode.  As a matter of fact, the great depression, as well as other times of recession, have proven that companies which are proactive during a recession come out far ahead of those companies that adopt a “hold it steady and wait and see” attitude. 

We have to remember that a recession doesn’t mean that people stop buying.  It means that the blinders of “easy credit” have been removed from their eyes and they are more cautious about what they buy.  Value for their dollar is suddenly important to them.  But what is value?

Value is diferent things to different people.  It could be a purchase with a discount.  For another person, it could mean buying a product or gift basket that is easy to order, looks like it’s worth what they paid for it, and is delivered promptly with no hassles.  What we, as business owners, have to determine is what our customers see as “real value” and then give it to them.

Customers will continue buying gifts even in a down economy.  They still like to say Thank You, Welcome to that new baby, Get Well, Happy Birthday, and even I Miss You.  But they look more carefully at what they buy and they look for a gift that gives them the biggest bang for their buck while being able to keep some of those bucks in their wallet.

“Ah,” you may be thinking, “I’ll just cut prices and downsize my profits.”  But cheap isn’t the answer.  Value is the answer.  Even in a down economy, people are still buying expensive gifts when it is important to them and when they feel the value is there.  These people may be using coupons at the grocery store for the first time, cutting back on going to the movies or out to dinner, but they are willing to pay more for a gift that makes them look good or feel appreciated.  Consumers don’t stop buying in a recession.  They just need to know that what they are receiving for their money is going to be worth it to them.

In order to provide this “value”, we have to look at our own businesses and see what we can do differently.  Trimming our inventory levels and buying products that enable us to create baskets that offer value is necessary.  Looking at our expenses and determining how we can control them while still offering high levels of service is important.  Thinking more about your customer’s needs and desires should be at the fore front of your marketing.

Your job as a smart business owner is to provide value and convince your customers that it exists.  If you can do that, profits are still here to be had.

Your comments to any of these posts are always welcomed.

Do you sell based on price?

moneyIn today’s economy, price is important.  But even more important is value.

If all you talk about when marketing your gifts and gift baskets is price (whether on the internet or in person), that’s what your customers will base their buying decisions on.

If what you feature is the needs and benefits to your customers, they  will base their decisions on how well you meet those needs and desires with your product or service.

What do you talk about?

How much is a dollar worth?

We’ve recently seen our financial world crumble as it became all too easy to trade intregrity and honesty for millions of dollars in the banking and housing industries.  Unfortunately, as the economy has tightened and times have become tougher, I’ve also seen this happen in my own industry.

dollar-bill

Of course, it’s not millions of dollars but that makes it even more disturbing.  Once the intregrity is gone and the bucks have been spent, what do you have left?

It’s the American Way

But it’s the American way.  We’ve become used to it.  And accept it as normal.  Trading intregrity and even a reputation for money has been a part of our media culture for years as athletes, actors, and even politicians hawk everything from refrigerators to insurance on the screen that fills most living rooms.  Newspapers and magazines fill their pages with ads from companies whose policies they don’t agree with.  Likewise, advertisers trade exposure and possible sales for their endorsement of publications and events that  they may not agree with.

It may be the American way, or even the normal way to do business, but it is not MY way.  When I first started my business seventeen years ago, I knew that the most important asset I would ever have was my intregrity and my reputation.  Since then, I’ve been outspoken.  I’ve been honest.  And I’ve lost some so-called business opportunities as a result of it.  But my reputation and my intregrity are still intact.  To me, that is worth more than any amount of money I could have made on those lost opportunities. 

The American way is not always the best way.  There are always trade offs when you start and grow your own business.  You trade time doing all the necessary chores required to grow your business for time for pleasure.  You trade money that you could perhaps have spent on that cruise, you always wanted to go on, for seed money to buy inventory and market your dream.  These trade offs are ones that you can be proud of when your business is sucessful.

But how much is the dollar really worth to you?  Is it worth your reputation, your honesty, and your intregrity?  My response to that question is “NO WAY!”

I welcome your comments about How much the dollar is worth to you.

Using Psychology to Guide Customer Choices

giftbasketdecoyHave you ever had trouble trying to decide between two different products?   Your customers may be having the same problem.  Using a bit of psychology can help them make up their mind.

Researchers at the University of Minnesota have used brain scans to prove that adding another product, that is very similar but less attractive and priced about the same, will increase the orders for the more attractive of the three products.  A choice between three products seems to increase sales figures more than a choice between two products.  The less appealing product works as a “decoy” makes the choice easier.

In a Journal of Marketing Research article “Trade-off Aversion as an Explanation for the Attraction Effect: A functional Magnetic Resonance Imaging Study,” Rao (University of Minesota) and co-author William Hedgcock (University of Iowa) explain the reasons for this decoy effect. Volunteers had their brains scanned while they made choices between several sets of equally appealing options as well as choice sets that included a third, somewhat less attractive option. Overall, the presence of the extra, “just okay” possibility systematically increased preference for the better options. The fMRI scans showed that when making a choice between only two, equally preferred options; subjects tended to display irritation because of the difficulty of the choice process. The presence of the third option made the choice process easier and relatively more pleasurable.

How can we use this information in our sales and marketing?

If you have a retail store and want to increase sales for a particular product, you can always offer the product “as is”, offer it beautifully wrapped, and perhaps offer it wrapped along with an add-on.  For example, you have a tea cup.  Display the tea cup alone.   Add a few teabags and wrap in cello with a beautiful bow as a second choice.  Then add tea cookies to the mix for a little higher price.

You can use the same techniques with product offerings on your website as well.

How have you used decoys to increase sales of a higher priced product or gift basket?  If you are receiving this post via email, you can click on the title and go directly to our blog to share your comments.