The Most Alarming Sales Strategy Suffocating Profits
“At the end of the day we are not selling, we are serving.”
Dave Ramsay
Would you say alcohol is a stimulant or a depressant?
If you visit a bar on a Friday evening the noise and laughter can be deafening – strong evidence that alcohol is a stimulant (beer goggles anyone?)
But fast-forward to 3 a.m. and the same raucous behavior has dwindled to people slumped on bar-stools, asleep in the corner – or on a park bench somewhere.
Scientifically speaking, alcohol is a powerful depressant, but its short-term effects are the exact opposite.
The same can be said of the marketing effects caused by the wrong kind of marketing strategy.
Take a company’s sales strategy, for example.
When a company holds a sale, does it increase their business or decrease it? Obviously in the short term it increases business – people want to buy at a discount, so it stimulates demand.
But it can be catastrophic for the long-term health of a company because it’s teaching customers not to buy at regular prices.
After a sale is over, customers tend not to go back to re-buy what they bought on sale at regular price. They hold out for the next sale.
Businesses with weak branding and marketing – who don’t know how to stimulate demand any other way – are forced to hold sales. It’s a slippery slope.
Look at the retail market, for instance.
The department store Kohls holds a perpetual sale – offering customers coupon upon coupon so they never have to pay “regular prices”, ever.
In other words, there is no such thing as a regular price, only a sales price.
In November 2020 Kohl’s reported a 13.3% decline in net sales and same-store sales at Kohl’s also fell 13.3%, despite robust growth online.
There is no evidence that couponing increases sales in the long run.
Just ask the hundreds of thousands of small businesses who have tried the “Groupon phenomenon” – getting new customers by advertising deep discounts on the Groupon website.
From my observation and research, coupon hunters are usually the “bottom of the barrel type” of customer – by that, I mean they are incredibly price sensitive, high maintenance, and high headache. Unless you have a pretty sophisticated marketing system to upsell them into higher products and services, that initial heavily discounted sale is all you’re likely to get.
I got to experience the results of this kind of default marketing strategy while working with a client who starred in one of the Real Housewives franchises.
She had built her medical spas primarily using Groupon. From the outside, her medspa business looked like it was incredibly successful as it was always very busy. Unfortunately, their Groupon strategy meant profits were razor thin and they had to crank through a large volume of new clients everyday just to stay afloat.
The business model, and our client, were at breaking point.
The best solution was to do a business transformation in order to attract better quality customers who recognized the value and happily paid higher prices. This meant creating a new brand, new value proposition, new packages, new pricing, new website, new medspa experience, etc. It was pretty much new everything, the entire Client Stampede formula on her business.
It felt like doing one of those extreme makeovers where the awkward, ugly duckling girl is reintroduced as a jaw-dropping, super-model.
The results were swift (discussed more in my book The Client Stampede). The upshot is that the coupon crowd which made up more than half of her client base, thankfully moved elsewhere because there were no more coupons. Volume decreased, quality increased, profits increased by 400+% - and our client was back in love with her business.
The key lesson in all of this is to ask what your short-term sales strategies are. Are they stimulating, or depressing your long-term business growth?
