It’s official – consumers have gone frugal.
Just hours after new data showed consumer sentiment has slumped, RBA Governor Glenn Stevens said in a speech yesterday that the bank has seen “certain caution in [consumer] behaviour” in recent months, and raised the question whether the shift may represent a “fundamental” change in the level of concern consumers have about debt levels.
It’s worrying news for businesses, and particularly retailers, who are struggling to deal with the fact consumers seem to have gone on strike.
So how can companies drag customers out of their shells? We asked retail expert Brian Walker of The Retail Doctor and sales expert Sue Barrett of Barrett Group for their advice, and have compiled a list of their top 10 tips.
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The key message? Companies need to start thinking differently.
Make yourself essential
Barrett says that when customers turn frugal, they tend only to spend on items they consider to be absolutely needed and will particularly think twice about bigger purchases. Time for a review of your product line-up.
“What are your essential products?” Barrett asks. “Is what you’ve got basically just frivolous and superfluous?”
If you can get the message through to your customers that your products are essential to them and their business, you’re in a much better starting position.
Brian Walker says it’s crucial for companies to think about ways of bringing in repeat business from loyal customers and suggest the implementation of a loyalty program in businesses that do not already have one. Simply collecting customer data at the point of sale can help you build a database to target special offers to.
Just make sure you actually put the database to work. “It’s one thing to take the details, you’ve got to use them,” Walker says.
Remember the paradox of choice
Barrett says there is a strong argument that customers can become paralysed and confused when they have too much choice. That could open up an opportunity for companies that can really focus their offering around the strongest products. “Businesses are trying to be things to all people, that can create problems. Find out what you are good at, and stick to it. There are too many businesses that produce crap.”
Walker says discounting can be a good strategy, but retailers need to be smart. If you are going to use loss leading products to bring customers in, make sure your complementary products you sell along with the loss leaders have good margins. Also, move your discounts around – both in terms of which products you put on sale, and the in-store location of those discounted products. This helps prevent customers from starting to think certain items are always on sale.
Remember that value isn’t always just in the product
Barrett says companies need to think beyond the product when they are think about winning customers over with the “value” of their offer and work to build sustainable and strong selling relationships that are based on more than just price.
“You need to make sure what you are selling is of value to people. The value doesn’t necessarily reside in the product, the value can reside in your advice or guidance.”
Segment your customer base
Walker says companies need to think about breaking their customer base into smaller groups that can be hit with special offers, such as your Facebook fans or Twitter followers.
“Offer them discounts that are rewarding their loyalty,” he says. Walker suggests deals where discounts kick in after a certain number of store visits or over a certain spending threshold.
Barrett says the sales model in the car industry or the whitegoods sector, whereby customers have to haggle to work out the “real” price, are outdated and do nothing to install trust and confidence.
“Don’t use any of these shenanigans to hoodwink people,” she says.
Barrett says retailers increasingly have to add an experience to the shopping visit, through store design, services levels and selling style. Give people a reason to come into your store and you’ve got a much better chance to sell to them, he says.
Build authentic relationships
Barrett says it’s crucial that those in sales positions take a long-term approach to selling and remember that it’s impossible to “make” people buy.
“Even if they are not spending as much, think about how can you retain them so that when they are ready to spend, they spend with us and not someone else.”
Do your bit to build confidence
Consumers might not be confident about the economy a whole, but Walker says companies can do their bit to build confidence in their brands and products. “Offer extended warranties and emphasise the quality of your products – help instil some confidence in the customer.”