25 Pricing 4: Keep a bargain basement

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PRICING 4: KEEP A BARGAIN BASEMENT

Between never discounting and offering the lowest prices in the market, there’s a good balance for brands which want to build a reputation for offering good value, without the risk of slicing margins too thinly.

Retailers, both real shops and online, can attract customers who are searching for a bargain but keep their discounted area separate from their new, full price stock.

The idea These days there are whole shops, and even entire shopping malls, devoted to bargain basement style retailing. TK Maxx (and in the US TJ Maxx) take stock from previous seasons and the overstocks from the current season, pack them closely together on basic displays and serve as the discount department for some very well-known manufacturers, and the less famous ones too. Manufacturers who don’t have their own stores can use these outlets to shift their end of season stock, without damaging their own brand positioning. Because everyone who goes there knows that this is a compromise. You get good quality, but not at the same time as the fashionistas.

Out of town retail parks have popped up, from the basic to the super deluxe. This is where you will fi nd high street stores, from Cadbury and the Body Shop to Smythson and Paul Smith, with branches which only sell sale goods and seconds.

Web shops are ideal places to keep virtual bargain basements. Customers click on one button to take them into separate department, which web designers can brand differently with a bargain look and feel, inviting bargain hunters in to clear out the back of the warehouses.

In practice • People love bargains, and if your brand has a reputation for being high quality, it’ll make your customers very happy to get their hands on one of your products at a discount. It won’t damage your brand and it will help to build brand loyalty. • Online, it’s simple to create a bargain basement as part of your website. You can bring it to the front page during the sale seasons of January and July, and relegate it to a less prominent place for the rest of the year. • In terms of your overall branding, keep your emphasis on your current lines and full price stock. Unless you run a 100% discount store, your bargain basement shouldn’t take over your pricing strategy.