FLASHBACK: 1988 LOWEST PRICE GUARANTEES

THIRTY-FIVE YEARS ago, ads touting retailers would beat any price were everywhere. Merchant Magazine columnist Wally Lynch was not a fan, and argued against the policy in our May 1988 issue:

“The other day, the conversation turned to our industry’s currently in-vogue ‘Lowest price guarantees.’ Anyone who is anybody seems to have such an underwriting.

One recently published guarantee reads as follows:

Guaranteed Lowest Prices!

If any identical advertised item in any current legitimate ad is lower than our advertised price, we’ll slash 10% off their price; rain checks are not used.

Advertisements must state current retail price, specific manufacturer, and model number. Sorry, closeouts and clearances do not qualify.

Obviously the implementor of this policy is admitting and announcing that others might have lower prices. ‘Don’t worry, however, because our customers are always protected. Just be sure that the simple rules are obeyed and you’ll be better off with us.’

Can you imagine retailers like Sears, General Motors or McDonald’s jumping into this price demonstration gutter and the “me-tooism” depicted?

Let’s look at a customer wanting to believe and participate in such nonsense. The purchase considered is a $39.95 chrome, single-handle faucet. The first thing he has to do is to check everyone’s rules before deciding where to buy.

Next, he buys the faucet at the store offering the second lowest price; let’s say $39.95. He drives 20 miles to get the price, but nails the store for $4. If every retailer had the same price the same weekend, the customer could nail every merchandising operation in town.

With such guarantees you don’t necessarily have to catch someone higher priced that weekend. You can spend each weekend forevermore searching the newspapers for a legitimate lower price. Then you can drive 20 miles to get your $4 if you can locate someone to approve your claim and you happened to pick the right item to begin with. Just make sure that the manufacturer’s name and stock number are in the ad you are using to prove your point.

A full-page ad costs about $25,000 in the Los Angeles Times and it takes advertising in 28 newspapers to cover the

New York trading area. Can you imagine a retailer accommodating a competitor’s ‘lowest price guarantee’ at such costs?

The dealer contemplating this King-of-the-Price-Hill arena should be aware that no one, absolutely no one, can get all the business. Such policies demand challenging, no matter how ludicrous or costly they are, for no other reason than nuisance value by competing retailers.

There are positive ways to deal with competition. In the days before the computer did everything, the first thing you learned in retailing was to have a stack of pre-printed “as advertised” show cards on hand. Your assignment was to read competing ads daily and then, before the boss got in the next morning, mark the price for every identical or similar item in the store on a card and place it by the item. The customer and the store benefited in part from everyone’s ad.

A second way is to be sure that your staff takes money from each customer and lets him know he is appreciated in the process. Nothing will open your eyes to the significance of this more than testing it at your store and/or at a competitor’s.

Go into any department and stand there until a store employee comes up to try to get some money by selling you something. Get a stranger to do it in your store and you do it in someone else’s operation. You ‘II both spend lots of down time wondering.

Finally, value demonstrations to get people into the store go on daily and, on occasion, are loss leaders. But for the most part, one formula is to drop the price of the top of line to just above the best selling price point in the assortment. The value is obvious to the customer and leaves the merchant with some margin dollars when the sale is made.

Another method is to pass on the cost savings that suppliers intermittently provide to retailers on well-known best-selling items.

The trick is to keep your eye on the customer first and then your competitors.”