The secret of success in sales
I have started reading 'Made in America' the autobiography of Sam Walton (The person who started Wal-mart and became the richest man in America). Three members from his family are now in the top ten billionaires list of the world, if one combines the fortunes of the three Wal-mart family members it's much higher than Bill Gates.
Right when Sam begins to talk about retail he reveals his secret.
"I bought an item for 80 cents. I found that by pricing it at $1.00 I could sell three times more of it then by pricing it at $1.20. I might make only half the profit per item, but because I was selling three times as much, the overall profit was much greater. Simple enough. But this is really the essence of discounting: by cutting your price, you can boost your sales to a point where you can earn far more at the cheaper retail price than you would have by selling the item at the higher price."
That set me thinking. This really is the secret of success in sales. Price before anything. My dad realized that when he introduced his astrology software at one-third the price of the cheapest one which was available then and then sold ten times as much as the competition. Even now all our software are the lowest-priced in the market though they are of same, or better quality than competition. No wonder our volumes are probably higher than all of the competition combined. (It helps to have a product that has evolved to become the hugest in the market).
Check out Big Bazar. Biyani is emulating Wal-mart to the 'z' (but not with so much success). Even their slogan is 'Isse Sasta aur accha kahi nahi' (You won't get anything cheaper or better than here). Big Bazar is a doing reasonably well, but why isn't it a spectacular success like Wal-Mart? Because he didn't check out the competition. Biyani's prices may seem low to him, but he'd deadset wrong. I have been to big bazar and I can find lower prices than that damn anywhere on the streets of India and with reasonably close quality. He gives you a good deal only on the bottled/packed foodstuff which have a MRP. On almost everything else his prices are high. That's why I don't think Big Bazar is going to be the Indian Wal-Mart anytime soon.
There's another example: the Westside chain of clothing stores from Tata. When the Tatas started Westside their prices were on the premium side. They stocked premium clothing which wasn't cheap. People like Vishal's Mega Mart and all those small time retailers washed them out with prices that were much lower. I believe that Westside has now re-invented the prices and the sales have grown.
Price means a lot to the buyer, and Sam Walton is right. It is the key to success in sales. What does Ebay do? The same thing. Give customers access to the lowest prices anywhere, direct from sellers. People want the best prices on all their purchases. It's not about how MUCH they pay, they just want good bargains. This is an important business lesson that I will remember forever.
"By cutting your price, you can boost your sales to a point where you can earn far more at the cheaper retail price than you would have by selling the item at the higher price." I think Sam Walton means more than cutting prices. I think he's talking about a special price-point. A place where the profit is price is so calibrated that the volume generated will yield the maximum profit.
(Read comments)
|
