Blog: Retailer Pain Offers B2B Pricing Lessons | Strategic Pricing Solutions
A recent article in Business Insider, No one pays full price anymore – and it’s terrifying companies, highlighted the perils of discounting. The conclusion of the article was “Consumers just don’t want to pay full price for anything anymore.” While the pricing strategies of most retailers rarely start with discounting, they have trained their customers to wait for discounts, and then buy what they want on sale. The results are lower margins and shrinking profitability. There are pricing lessons to be learned from the pain retailers are experiencing; manufacturers and distributors in B2B markets should heed those lessons. It is dangerous to train your customers to wait for discounts.
Retail markets are very competitive and profit margins are generally low. Some luxury goods companies are exceptions to that generalization, because their pricing strategies revolve around selling the value of exclusiveness, very high quality, and excellent service. Their brand loyalty is very high. On the other end of the spectrum, retailers who rely extensively on discounting find their customers just will not buy without a discount. As a result they are experiencing significantly lower or negative profitability, store closures and in some cases bankruptcy filings.
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