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The Eight Percent Factor
Which customer are you targeting?
An issue of Parade that this writer recently read shared an interesting statistic; it mentioned nearly twenty million people in the United States as being users of illegal drugs or individuals using drugs illegally. This group would include those people that are using marijuana, cocaine, heroine, and the other various similar drugs.
This group also includes those individuals that have been misusing the drugs that have been prescribed legally by a doctor, as well as cases such as those we have all read about in which drug have visited several doctors and received multiple prescriptions.
Overall, some twenty million people walking the streets of the United States are breaking laws that if the person were found guilty in a court of law, that person would likely be sent to prison. The interesting statistic according to the article in Parade is that the near twenty million people represent approximately eight percent of our population.
If you were walking down the street of your community, would you be able to recognize these people? Some of them that you know through mutual friends may have a reputation in your community as being drug users. And if you were face to face with one of the drug users, you might suspect them to be a drug user if they were ‘high’, but other than that there is likely to be nothing that is going to tell you that the person is a drug user. And you likely do not do anything to attract them to yourself. If you knew who they were, you might even make an effort to avoid them. They are however, just the eight percent walking among us.
As I read this article, I thought about how that figure of eight percent stuck in my mind. As a fourth generation merchant, having grown up in the family business I remember hearing another statistic that dealt with eight percent. While I have never found anything to substantiate the percentage, it has continued to show up in various reports, magazine articles and seminars over the years.
According to the statistic, eight percent of the people in the United States make their choice of where to do business based upon price. Perhaps they do so because they see it as a sport; they may shop according to price because they have to because of their economic situation. Or, they may be among those that shop according to price because they do not see anything in their experience of doing business with a shop that they can justify spending any extra money for.
If you again walking down the street of your community, would you be able to recognize these people? Some of them you know through mutual friends or because they have shopped in your business may have a reputation in your community as being ‘price shoppers’. Of course, as owners of the business we do have other nicknames for these people. ‘Cheap skates’ and ‘bottom feeders’ are the first two nicknames that come to mind.
If you were to watch one of the price shoppers in action in another business in another business, you might suspect them to be one of this group if you were to observe how they were selecting items or by way of their verbal interaction with the sales staff. Like when you hear the customer saying, “Don’t you have something that costs a little less?”
Other than that there is likely to be nothing that is going to tell you that the person is a price shopper. Just like the drug user, the price shopper does not go about wearing a sign that identifies them as being a member of that group.
With the drug user, we said that you likely do not do anything to attract them to yourself. Earlier we also said that if you knew who they were, you might even make an effort to avoid them. The comments on drug users was closed by saying they are just the eight percent walking among us.
But it is in this last comparison that the statements of this writer are not true. As merchants we do not make efforts to avoid them, and we do make efforts to attract them to our business. Let’s examine both of these statements.
In the challenging economy we are currently facing, there are many of us that have decided to use a philosophy of “anything to make a sale”. We justify doing so as we hear the reports of all kinds of retailers suffering and closing during the downturn, but the report often turns to making a point about Wal-Mart and McDonalds doing well. The justification is that these two are examples of how people have decided to pull back on their spending.
The person that might have previously shopped anything from a Crate and Barrel to a Dillard’s is now paring back their spending and becoming more frequent customers of Wal-Mart.
From the food side, a similar situation happens as customers pass up an Outback Steak House for a McDonalds value meal. Of course, with both of these reports what we are hearing is a reporter’s interpretation of the sales increase by two businesses.
Many small businesses then take that interpretation and apply it to their business. The logic is that if customers are taking their general shopping and dining experiences to lower costs, then the same is probably happening to our own business. However, unlike the drug user that we want to avoid, as business owners we often decide that we need to attract the price shopper since that is what the mass media is talking about.
Take a look at your advertising; what does it most frequently say? If your advertising is filled with items and sale prices, you are, in effect, making an effort to draw yourself near to these price shopping people.
There are several errors with that thinking. The first is that while you are now paying attention to the eight percent, you are also giving less attention to the ninety-two percent of consumers that do not have price as their main driving force. It is not that you are ignoring the ninety-two percent, but the message that is now coming across is, ‘come do business with us because we have low prices’.
A second concern with a business that is making this effort is the change that is now happening within the business. Perhaps you have been in business for a number of years. As this writer speaks at trade shows and conferences, I am always impressed with the answer as I ask how long audience members have been in business. Frequently the answer is in excess of twenty years and it is not surprising to have participants whose answer is in excess of forty years.
Think about how long you have been in business; how many recessions have you and your business experienced? Did you know that of all the recessions since the late 1930’s, the longest lasted only 16 months? Look at when this one started, and measure how close we are to the point that could match the 16 months.
As you have been in business for many years, you have worked hard to attract a particular type of customer. You have based the design of your business on this customer; who they are, when they shop, and what they spend their money on. By changing to this Wal-Mart/McDonalds philosophy, you are in effect throwing away the years of effort that you have put forth because the decision has been made to change so that the business attracts the customer who has changed their buying habits.
The concern with this change of philosophy is to ask how long it took your business to create the image it has with the customers. If the answer is given in terms of years, then the question would be to ask how a business could possibly change to a new customer model for the length of a recession and then potentially change back when the recession ends.
Either way you resolve the answers to these questions, let’s go back and look at the price shopper and the drug user. Could you instead make efforts to avoid the price shoppers? And with your advertising, could you reconsider your efforts to attract them to your business?
The price shopper, like the drug user, constitutes the distinct minority of the public. Do they really deserve that much of your attention?
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This article is copyrighted by Tom Shay and Profits Plus Solutions, who can be reached at: PO Box 1577, St. Petersburg, Fl. 33731. Phone 727-464-2182. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.
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