The last year has been filled with breathless stories - like this BusinessWeek one - describing how consumers have responded to the rapid economic downturn of 2008. Namely, they’re going frugal. They’re spending less and saving more.
Many businesses have been bitten by this so-called “paradox of thrift.” frugality might be a great idea for the individual, but for the businesses that rely on the spending of that customer, it can really ding the bottom bottom line.
There are a lot of tried-and-true responses to this. Offer big discounts! Cut back offerings to the essentials! These are textbook things that most small businesses do to deal with such a tightening of customer pocketbooks.
Yet, when I look at how I’ve spent my own money as a consumer in this downturn, I find that those aren’t the tactics that have convinced me to open my wallet. Instead, I’ve found that something else works much better.
Let me tell you a little story about a coffee pot.
At a local gift shop, I saw an interesting tactic being used to sell one of those coffee pots that brew individual cups of coffee - and require special packets to brew each cup. Obviously, those pots weren’t selling very well - and neither were the packets.
So, next to the pot, the shopkeeper had set up an array of ordinary ground coffee, coffee filters, and leaflets. The leaflet demonstrated an effective way to fold a small amount of coffee into a coffee filter in a certain way that allowed the coffee pot to work seamlessly with the homemade coffee packs. With each purchase, the shop owner was throwing in a packet of filters and a small amount of ground coffee.
The leaflet made the argument that the pot would save money over the long haul because less coffee would go to waste.
What was interesting about all of this is that the shopkeeper was greatly reducing the changes that they would sell any of the individual coffee packets. In exchange, though, they were increasing their sales of the individual pots - and gaining customer trust as well.
The secret is great advice. By telling the customer how to squeeze every last dime out of that pot, the shop owner was harnessing the frugal instincts of the customers. People that would have ordinarily ignored the pots were now paying attention to them. In fact, during the fifteen minutes I was in the shop, I saw one of the three remaining pots sell.
If people are seeking value, give them value. Tell them exactly how to get every last penny out of any product that they buy from you, even if it might mean fewer follow-up sales. Not only are they more likely to walk out the door with a product (leaving some money in your cash register), they’re also more likely to trust you in the future.
And if any of those coffee pot buyers do decide that they want some of those pre-made individual packets, where will they go first to fill their needs?
Give the best advice you have. It adds an enormous bonus to any purchase and turns an ordinary buy for the customer into a real bargain.