Reasons why you should advertise and market to the higher end customer

If you advertise “savings” on lower priced products, the only way to compete is to lower your prices even more. Stressing “low price” in your marketing appeals to a large segment of the market, but it’s the least profitable segment. And if you have to lower your prices, to remain competitive, your costs are staying the same. Lowering your prices by 10% could lower your net profits by 30-50%. Your overhead & product costs stay the same.

At the higher end prices, you can always add to the package you sell, and raise your prices. This way, you make more money.

I have a local “vac shop” competitor that is now closing his doors after at least 30 years in business. Sad.

His prices are lower than mine by at least 20% on most everything. He sells vacuum cleaners like me, but his average vacuum cleaner sale is about (educated guess) $150. My average sale is better than 3 times that. I’m not saying that to brag, I’m trying to make a point.

He once had a “Sale” over a weekend and called me to tell me the results (we were friendly competitors). He said “after the smoke cleared we sold 35 vacuum cleaners” I was impressed! Then he continued…”Yup, I’d say we grossed a little over $1,200”. Yikes! After his ad cost, I’ll bet he didn’t net $300.

Why did he have to close his store?

Because he advertised to the “lowest price” customer.

All his ads were about “we have the lowest price”. And he sold low priced vacuum cleaners to begin with.

He competed with Wal-Mart.

When Wal-Mart moved into town (about 7 years ago) he was hurt badly. He sold what they sold, and he couldn’t match their price.

For some reason it never occurred to him that he could sell higher priced & more profitable vacuum cleaners. He was convinced that nobody would pay more than $250 for a vacuum cleaner. And despite seeing my ads every month for 5 years, he was convinced that my ads didn’t work.

In the last month, I’ve had maybe 12 of his former customers come in my store to buy vacuum cleaner bags. Every time, they say something like “These bags were $3 less per pack at Anderson’s”.

I say “Yes. I’m sure that’s true. But he had to close his store. If we decide later that we want to have to close our store, we’ll match his price. Fair enough?” Frankly, I don’t match competitor’s prices.

Anyway….

When the economy hits a snag, who stops buying? Not the rich. Not the higher end buyer. Who? The people with no savings. The people with no credit cards. The people who have to buy during Sales. If you sell the lowest priced products at the lowest price, you’re hit first.

In any economic scenario, there are always people making money. Market to them.