by Juliette Enfield, Extension
Educator, Warren County
Businesses
that sell perishable items such as baked goods, vegetables, fruits, or plants often
feel that they want to get rid of their product at the end of the day and so
they discount it in order to “get rid of it”. While discounting your products
will temporarily boost sales and bring in customers who may otherwise not buy
your product, discounting too frequently will not help your profit or your
product image. Some farmers markets do not allow end of day discounts, and
there is a very good reason for this.
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| Discounting too frequently will not help your profit or your image. |
Grocery
stores used to offer day old bread at a discounted price but they stopped this
practice when they realized that they were losing money from their fresh bread
sales. Their customers would continually purchase the day old bread at the
discounted price instead of spending more for fresh bread. These stores
eventually stopped selling day old bread because they found it was more
profitable for them to donate old bread to food pantries than to sell it at a
discount.
Niche
marketing, or focusing marketing efforts on a specific segment of the
population, is a recommended practice for small food businesses who sell
directly to the customer. Small food businesses produce high quality food items
with attributes that mass produced foods do not such as handmade or locally
grown. Higher quality demands a higher price, and price is linked with product
image. For example, when you buy an everyday item that is priced very low, you
may think that something is wrong with the product. When an item is priced
higher than normal, there is a perceived higher value in that product.
There are
different types of customers in the market. In a previous blog post “Do YourProducts Meet Your Customers’ Values?”, we learned that not all customers are
looking for the same product attributes. Some customers consider price more
than other product qualities such as whether it is locally produced or not. Other
customers consider the intrinsic value of the product, including where and how
it was made and with what ingredients, before price.
Most food
businesses know that when a price is too high, the product will not sell. When
the price is too low too frequently, the business image and profits will
suffer. Even with bargain shoppers, there is a point at which price will no
longer influence demand. There are critical limits for pricing. For example,
when the cost of a pint of heavy cream drops from $2 to $1, demand increases.
But when the cost drops below $1, demand no longer increases (Perner, 2008).
Pricing is
just one of many factors which influence a sale. Mark Hunter, the author of High-Profit Selling: Win the Sale Without Compromising
on Price says, “Stop thinking the conversation is about price. It’s about
the customer and the solution you know you can provide to them”(Hunter, 2013).
When the customer’s needs are addressed, the issue of price doesn’t come up as
quickly. This statement also reminds business owners to listen to the customer
and find out what their needs and wants are.
Keep the
integrity of your high quality product. If you are concerned about wasting your
products, find a food bank that will accept your old products, or find a way to
turn the excess into compost. Today’s customers want to know the story behind
your business and they want to know about causes that your business supports (ConAgra Foods, 2014). Making food bank donations or making compost could be a behind the scenes story
that you are proud to share with your customers without hurting your profits.
