Lower prices = more sales?

November 15, 2011

Running sales can be financially counterproductive if they do not bring in new customers and only reduce the price that existing customers pay for products they buy.

At the end of the day, in the hope of increasing sales a store will give discounts to all the buyers of a particular product, even those who would have paid the full price. A simple table should help make the point.

Price, value link

Most dispensaries lower prices because there is the belief that customers will respond to the lower prices. This can only be true if customers are concerned with price and recognize that the lower price actually represents a good value. Both of these premises are questionable. Let's look at why.

Nearly every survey I've ever read does not list price as the most important motive to buy. Yet, nearly every retailer I know falls into the trap of "lower prices = more sales." The truth is that customers are less concerned about price than are retailers. To prove the point, let's look at a recent study.

A pricing survey was conducted by a grocery store chain. Grocery stores are wonderful things to study because the purchasing decision is made solely by the buyer with little or no assistance from a salesperson. Nearly all of the buyer's cues are from looking at the product's packaging, the signage, and the product's placement in the store.

The survey was conducted in this manner. An employee of the marketing firm stood in an aisle of the grocery store with a clipboard. When the surveyor saw a customer put any item in a shopping cart, he or she would ask the customer for the price of the item. No peeking allowed. In the majority of cases, the customer priced the item incorrectly. In some cases, the pricing error was dramatic.

The upshot of the survey is that customers are not as influenced by price as most retailers, opticians included, would think. In fact, in the study, the store increased sales of some items by increasing prices. This supports the theory that customers are motivated by other things: needs, wants, and desires. Only after those needs, wants, and desires have been met will price come into play; that is, unless the customer has a very strong will.

If it is true that customers do not know the price of an item, perpetually putting various items on sale will prove to be a questionable practice. The sale will only resonate with those customers who purchase the item often enough to know its price; that is, assuming the customer is paying attention at all.

Application to dispensing world

Let's apply this study to the dispensing ophthalmology world. In our world, it is uncommon for patients to purchase glasses more often than every 2 years.

This is a relatively long time between purchases, certainly by grocery store standards. It means that ophthalmic consumers will have little or no knowledge of the prices of frames, lenses, and add-ons. Instead of putting merchandise on sale it may be more productive to focus on the selling process.

One part of that process is the optician's sales presentation. When making sales presentations it will be more important for the optician to focus on establishing value rather than worrying about the ultimate purchase price. Value is established when a seller offers a buyer a product that provides the buyer with benefits he or she needs, wants, or desires. When the buyer believes that the value of the benefits offered is great enough, the buyer will make the decision to make the purchase.

Author info

Arthur De Gennaro is president of Arthur De Gennaro & Associates LLC, an ophthalmic practice management firm that specializes in optical dispensary issues. De Gennaro is the author of the book The Dispensing Ophthalmologist. He can be reached at 803/359-7887, arthur@adegennaro.com
, or through the company's Web site, http://www.adegennaro.com/. He maintains a blog at http://www.adgablog.wordpress.com/.

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