Know-How Exchange : Advertising/PR

Depends on what you are selling, but on the whole most companies I have seen do not raise prices before offering a discount. Those that do, if they are caught by customers doing so, get a bad reputation.

If you are selling products that are branded by someone else, then there likely will be a manufacturer's suggested retail price. It is very difficult to sell anything for higher than this price, as many customers will know what the MSRP for the product is and see that you are charging more.

Also it usually not legal to raise prices and then give the appearance of offering a discount. If you have a store where items are regularly displayed with prices on them, people that watch prices will notice that you raised your prices right before putting them on sale. In addition, it certainly isn't an ethical way to do business and as Peter said, if caught by your customers, the damage to your reputation could be irreparable.

I hope this helps,

Andy Fracica

Right on with all of these professionals. Please don''t be duplicitous; ''marketing'' gets enough bad raps!

The others are right. You aren't being honest bumping prices up and down to pretend a sale. I remember Dillards getting busted on this lonnnng along.

Keep any discounts legal and maintain and promote them as just what they appear to be: discounts.

In the United States, to do anything else is illegal. Read this FTC article on deceptive pricing for more information:

https://www.ftc.gov/bcp/guides/decptprc.htm

In the UK, it’s not illegal to bump up the price in order to discount it, but it is against the advertising code of practice and you are very likely to get found out from existing customers and the army of people who monitor adverts and promotions for bargains. From your previous question, you mentioned home furnishings and home improvements. Do you remember the dodgy promotions from MFI a few years back? The offer was 20% off a range of products but it turned out to be 20 % off a price which had been advertised in only one store, and then for a week. The resulting bad publicity cost them in excess of 20% of the company’s entire turnover as shoppers turned away in droves.

If you want to lead on a price reduction to attract turnover at the expense of margin, it is best to be very calculating and specific about it to ensure that you can bear the reduction against your margins. Choose products that have a higher than usual margin and include them. Exclude products which have a low margin, where the increase in demand required to make the same net profit would be unrealistically high.

Outside of the net profit calculation, you need to be able to assume that the good will from a satisfied customer will generate further sales, preferably at your full margin. That’s not easy unless you can ensure that you have an ongoing relationship with that customer, find out what they are looking for and be able to provide it, when they want to buy it. That’s a bigger picture than the scope of this question allows.

Steve Alker
Xspirt CRM