Chapter One: Selling: It’s all about the profit!
Let’s start off by acknowledging the universal truth of all truths. Profit makes the world go round. No matter the country or economic system or market or product, if at the end of the day your profit doesn’t outweigh your expenses, you’re dead. Every retailer knows this. Profit good, loss bad. And the more money you charge for your product the more profit you are likely to keep.
That’s the good news. The bad news, however, is that waiting at the other end of that perfect formula is a consumer market that wants to spend as little as possible for your product. In their perfect world, paying less is the ultimate goal. For the better part of two centuries we have grappled with reconciling these two extremes.
The result has been the current and extremely dysfunctional retail world in which retailers lure customers into their stores with advertised low prices on bargain products and then attempt to extract from them the money required to make the profit needed to grow their businesses.
Every retail-based corporation from BMW to Walmart does this. The only way to get customers through your doors is to run sales. Whether it’s a 325i or a cheap flat panel LCD, deals are a part of the game, and the ones who run the most deals attract the most potential customers.
The bulk of these retailers’ budgets are devoted to the marketing departments who run the ads that produce the traffic on the showroom floor and the sales force whose job it is to turn the low-profit transaction into a lucrative one, without of course turning off and driving away the intended customers. It is a delicate and painstaking process. The same technique employed to get a customer to switch from a basic car to one that is fully loaded is the same technique used to switch him from a generic TV to a name-brand deluxe model. No BMW dealer ever wants a 328i to drive off the lot optionless, any more than a retailer wants last year’s Visio LCD to leave without a warranty, cables or surge. In a perfect world neither the customer nor the dealer are well served when this happens.
The trick is how get the customer to fork over the additional cash to purchase the needed options. It is easy to say the 328xi with all-wheel drive, built-in GPS, satellite radio, MP3 player and service support is better than the stripped-down 328i, just as it is easy to say the Panasonic TCP50V10 is far better than the basic TCP50C1. Now try and explain to the customer that the item they thought was going to cost “x” is now going to cost “x plus” without sounding like you work for a bait and switch outfit.
The problem lies both in perception and good old-fashioned consumerism. Few, if any consumer-based outlets lead with top shelf deluxe products. They may feature them occasionally in their weekly ads, but make no mistake about, at the end of the day the loss leaders or entry-level models garner most of the print. A simple look at the receipts from a Black Friday sale day is all one needs do to get a handle on how the public thinks. Consumers are driven by price, and they tend to flock to stores that have the most competitive prices. It’s that simple. For every customer who comes in looking for the very best product available there are more than a dozen who want the most for the least. Translation? Cheap is in and expensive is out. This is not rocket science. Every salesman knows it, as does his boss and his boss’s boss. Bring ‘em in low and get ‘em out high. That’s the game baby! The one’s who play it best survive; the ones who don’t go out of business.
So now that we know that it’s price that motivates the public to purchase, how do these retailers select the products that they advertise to bring in their customers. It’s important to know that virtually every retailer carries a plethora of product lines from entry level to top level. However they purchase products primarily on what they expect to move. Hence a retailer is likely to have in its inventory three to four times as many entry or mid-level product as top level. But as any first-year accounting major will tell you, inventory doesn’t pay bills, cash on hand does. So to move out this low to mid-level product, retailers will often sell them at or just over cost. The idea being that the “experienced” salesmen on the floor can “switch” some of the customers over to higher priced models, or accessorize the sale items sufficiently so as to make it a worth while transaction.
Ads that read “Limited Time Only” and “Lowest Priced Ever” and “While Supplies Last” are carefully placed so as to instill in the target market a sense of urgency. Never mind that the same models seem to be creeping up week after week with the same wording. Retailers know full well that most of the buying public does not carefully scrutinize the models, just the prices. The fact that a Columbus Day ad reads virtually identical to a Labor Day ad is superfluous and irrelevant. The whole idea is to get their attention long enough to bring them in and get them to buy from you and not your competitor.
But retailers are not stupid. They are not, contrary to the printed ad, giving away the store. The models they select to promote in their advertisements are carefully chosen so as to allow their salesforce the opportunity to step up to the higher-priced model. The Panasonic TCP50C1 may be marked at an incredibly low price, but it is not that far removed from, say the TCP50X1. Usually the difference in price is more than affordable to the customer. The same can be said of the TCP50U1. The upgrade, the TCP50S1, is within the financial reach of most customers. And so on and so on. Every loss leader is neatly placed next to its upgrade, which is, surprise, only “slightly” more expensive than the advertised piece. The customer is made to see the value of the “better” model in ways that make him or her seem stupid not to want to take advantage of the opportunity.
Now the sad truth is that in many instances the upgrade does have advantages that the lower-priced item does not have. The problem is that the customer was lured in under the pretenses that the advertised piece was the best value. The correct thing would be for the retailer to advertise the better model, but alas, the public is focused on price. It is a catch 22 situation that many responsible retailers are unable to extricate themselves from. How many potential customers would BMW get if they advertised a fully-loaded 328xi lease for $675 per month for 36 months with no money down and 15,000 miles per year? Not many, I dare say. Now what if you could get a stripped-down version of the 328i for $399 a month for 36 months? What a difference. Left out is the fine print that says that the mileage is 10,000 not 15,000; it’s an “i” instead of an “xi”, which means no all-wheel drive, and you have to pay a cap-cost reduction of $3,000 along with your first and last lease payment upfront. Not as attractive anymore is it?
The industry’s dirty little secret is that truth in advertising is an oxymoron. Nobody wants to say it and certainly nobody wants to hear it. It’s not whether retailers lie, or conveniently leave out “little” details, it’s whether they are successful at it. The painful reality is that all retailers have to live in a world where they must skirt the line between legitimate upselling and flat out bait and switch tactics. To be completely transparent means little or no traffic coming in to the showroom; to go the other way and engage in shameful conduct means earning the wrath of your customers who will inevitably find out what you’re up to and will bring their business elsewhere.
Monday, December 7, 2009
Sunday, July 12, 2009
Sketch:
An Insider’s View Into the World of Retail.
What you don’t know is hurting you!
Introduction
In 1973, one of the best cop movies ever made – Serpico – was released. It told the story of Frank Serpico’s struggle to resist the corruption that was widespread in the New York City police department during the 1960s and early 1970s. Pushed by the distrust and threats of his fellow brethren, Serpico eventually went undercover to expose the corruption. As a result, he was an outcast.
Now before I go any further, I want to coin a phrase by a not so popular president and make one thing perfectly clear, I am no Frank Serpico. I will, thankfully, never know what it is like to be threatened by my fellow brethren. But make no mistake about it, this book will, I hope, shed much light into a series of practices that has brought much shame and disgrace upon the retail industry, and severely damaged its already fragile reputation with the consumer. Furthermore, my writing this book will draw much ire among many sales people who will no doubt see me as a turncoat and ingrate.
I assure you I could care less about their opinion of me. For this book is NOT for them. No doubt many of them may find it a bit harder to make a living after what I hope is a plethora of consumers flocking to read these pages. Good riddance to bad rubbish, I say, and don’t let the door hit you on the way out! But my real aim here is to restore to those who toil in quiet frustration a sense of dignity and recognition for the tremendous obstacles they must overcome to make an honest living, and to both warn the consumer of the tactics being employed and to reassure them that not everyone in retail is a snake oil salesman.
I will also point out, before my detractors do, that I am by no means an angel. I have been guilty of employing some of these tactics myself. I do not walk on water, nor do I claim to, but like Treat Williams in “Prince of the City” I simply got fed up with what was going on and decided to purge my soul. In essence this book is as much about me, as it is about those thousands of brave hearts who not only have to overcome the objections of their customers, but who have to contend with the reprehensible tactics of their fellow associates and the wrath of their employers who could care less about the integrity of the industry they so fervently claim to defend.
While I have primarily worked in the consumer electronics field, selling everything from computers to flat-panel TV’s to home theater systems, this crap is going on in every field out there. The auto industry, I’m sure, is loaded with it, as is the insurance and banking industries. Where ever there is a profit to be made, I can assure you these tactics are being employed in some manner. For our purposes, I will limit the scope of the exposé to my own field, specifically flat-panels and home theaters.
What about the title of the book? What is a sketch? I picked the title carefully because that is what we do in sales: we sketch the customer. We basically smear the product we don’t want to sell and prop up the product we do want to sell. When a salesperson is sketching he or she simply makes up stuff about the various products, hoping the customers are too naïve to know the difference. For the most part, they are. Sadly, the consumer’s ignorance has been the biggest culprit in this scheme. Salespeople are trained to speak in the simplest of ways, avoiding techno-babble and making very generic statements. The hope is that by not getting specific, the customer will be less confused and more apt to buy.
Now some of this is legitimate. Many years ago I was taught that consumers do not buy features they buy benefits. So it is up to a well-trained salesperson to “keep it simple.” But keeping it simple doesn’t mean lying, and that is what so many of these thieves do. When faced with a choice between playing it straight and building a lasting relationship with the customer, they choose the quick strike and defraud them into making a purchase of an item that is not as good as the one they came in for, or an item that might be just as good, but costs more and makes the salesperson a bigger commission. Most of these customers eventually figure out they’ve been taken and the result is a loss of any future business; but the damage is done and the reputation of all is tarnished.
So my response is to say, Enough! Enough sketching, enough deceit! Upselling is a legitimate means of making a living in this country that countless honest salespeople employ on a daily basis. It is the art of taking ten dollars and turning it into twenty by selling value added products like accessories and products with better specs. But that is not what these people are doing. They are taking advantage of the gullible and selling them snake oil and calling it hair tonic. These people and the companies that employ them cannot rot in hell fast enough. And my hope is that this book will accelerate the process a bit. In my religion there is a saying. You reap what you sow. The day of reckoning for these individuals is at hand and I couldn’t be more delighted in helping them along to their final destination.
This book will look at several tactics in depth. First among them will be explaining how retailers lure unsuspecting customers into their stores with ads for loss leaders. These are items with little or no profit value – salespeople refer to them as “Burns” because selling them is like getting burned. Some of these products are truly putrid in that they are not very good at any price; others, however, are viable products whose prices have simply been slashed to attract potential buyers. The only thing wrong with them is that the salesperson gets little or no commission for selling them. Next we will look at how these retailers display and set up these products in a manner so as to convey a false impression in the consumer’s mind. Burns are made to look inferior to the more profitable or “UG” models. So before the salesperson ever says a word, the customer already believes that the “sale” item isn’t very good. This process is truly an art form and it needs to be done just right in order to be effective. Finally, the Pièce de résistance. Having run the mis-leading ads, rigged the products to look worse than they are, the salespeople are now turned loose upon the unsuspecting customer to lie through their teeth to make whatever living they can, all with the knowledge and encouragement of their employers. If they cannot turn the customer away from the burn they will charge exorbitant amounts of money on other items such as extended warranties, cable and stands. There are any number of opportunities to recoup lost profit on loss leaders, some of which are legitimate, but sadly many of which aren’t. I will highlight the illegitimate ones.
But I would be remiss if I did not give the customer his fair share of scorn. The simple and plain truth is that there is an unrealistic expectation within the consumer market that you can get something of value for next to nothing. The opposite is in fact true. More often than not, consumers who shop on the cheap get what they pay for in the end. We, all of us, have enabled a certain segment of this market to go right along believing this lie, in the naïve hope that we can recoup the profit by either “switching” them into a better product or by selling them extended warranties by preying on their worst fears: namely that they cannot afford to replace the product they just purchased. If these customers would simply save a bit more and a bit longer they’d be able to afford to purchase a better product. The old saying “There’s a sucker born every minute” is in deed true and the retail world counts on him passing through its’ doors.
Critics of this book will say I am only an embittered salesman who couldn’t hack it on the sales floor and is just getting back at my comrades because I am jealous of their success. Nothing could be farther from the truth. While I am angry, the cause of my consternation is based solely on the deplorable nature of such conduct combined with a burning desire to rid the retail community of these scourges who are making it more and more difficult for legitimate salespeople to succeed in sales. What these individuals do is no different than an investment banker ripping off his clients in a Ponzi scheme. While ripping someone off for an extra couple hundred dollars may not seem as bad as defrauding an investor of millions of their retirement dollars, it is important to note that these practices are widespread and in all likelihood result in far greater losses to the economy. I fervently believe that the consumer market is losing millions of dollars annually from these deceptive practices.
I also pledge to work with any and all consumer-protection agencies, which should be fully investigating these scandalous retailers and their low-life employees. If this book in any way leads to a general house cleaning that brings about greater regulation and enforcement of unethical practices in this industry, I will be pleased to no end; if even one customer is alerted to such practices and benefits by avoiding such establishments that employ them, I will consider my work done.
Let the bloodletting begin.
An Insider’s View Into the World of Retail.
What you don’t know is hurting you!
Introduction
In 1973, one of the best cop movies ever made – Serpico – was released. It told the story of Frank Serpico’s struggle to resist the corruption that was widespread in the New York City police department during the 1960s and early 1970s. Pushed by the distrust and threats of his fellow brethren, Serpico eventually went undercover to expose the corruption. As a result, he was an outcast.
Now before I go any further, I want to coin a phrase by a not so popular president and make one thing perfectly clear, I am no Frank Serpico. I will, thankfully, never know what it is like to be threatened by my fellow brethren. But make no mistake about it, this book will, I hope, shed much light into a series of practices that has brought much shame and disgrace upon the retail industry, and severely damaged its already fragile reputation with the consumer. Furthermore, my writing this book will draw much ire among many sales people who will no doubt see me as a turncoat and ingrate.
I assure you I could care less about their opinion of me. For this book is NOT for them. No doubt many of them may find it a bit harder to make a living after what I hope is a plethora of consumers flocking to read these pages. Good riddance to bad rubbish, I say, and don’t let the door hit you on the way out! But my real aim here is to restore to those who toil in quiet frustration a sense of dignity and recognition for the tremendous obstacles they must overcome to make an honest living, and to both warn the consumer of the tactics being employed and to reassure them that not everyone in retail is a snake oil salesman.
I will also point out, before my detractors do, that I am by no means an angel. I have been guilty of employing some of these tactics myself. I do not walk on water, nor do I claim to, but like Treat Williams in “Prince of the City” I simply got fed up with what was going on and decided to purge my soul. In essence this book is as much about me, as it is about those thousands of brave hearts who not only have to overcome the objections of their customers, but who have to contend with the reprehensible tactics of their fellow associates and the wrath of their employers who could care less about the integrity of the industry they so fervently claim to defend.
While I have primarily worked in the consumer electronics field, selling everything from computers to flat-panel TV’s to home theater systems, this crap is going on in every field out there. The auto industry, I’m sure, is loaded with it, as is the insurance and banking industries. Where ever there is a profit to be made, I can assure you these tactics are being employed in some manner. For our purposes, I will limit the scope of the exposé to my own field, specifically flat-panels and home theaters.
What about the title of the book? What is a sketch? I picked the title carefully because that is what we do in sales: we sketch the customer. We basically smear the product we don’t want to sell and prop up the product we do want to sell. When a salesperson is sketching he or she simply makes up stuff about the various products, hoping the customers are too naïve to know the difference. For the most part, they are. Sadly, the consumer’s ignorance has been the biggest culprit in this scheme. Salespeople are trained to speak in the simplest of ways, avoiding techno-babble and making very generic statements. The hope is that by not getting specific, the customer will be less confused and more apt to buy.
Now some of this is legitimate. Many years ago I was taught that consumers do not buy features they buy benefits. So it is up to a well-trained salesperson to “keep it simple.” But keeping it simple doesn’t mean lying, and that is what so many of these thieves do. When faced with a choice between playing it straight and building a lasting relationship with the customer, they choose the quick strike and defraud them into making a purchase of an item that is not as good as the one they came in for, or an item that might be just as good, but costs more and makes the salesperson a bigger commission. Most of these customers eventually figure out they’ve been taken and the result is a loss of any future business; but the damage is done and the reputation of all is tarnished.
So my response is to say, Enough! Enough sketching, enough deceit! Upselling is a legitimate means of making a living in this country that countless honest salespeople employ on a daily basis. It is the art of taking ten dollars and turning it into twenty by selling value added products like accessories and products with better specs. But that is not what these people are doing. They are taking advantage of the gullible and selling them snake oil and calling it hair tonic. These people and the companies that employ them cannot rot in hell fast enough. And my hope is that this book will accelerate the process a bit. In my religion there is a saying. You reap what you sow. The day of reckoning for these individuals is at hand and I couldn’t be more delighted in helping them along to their final destination.
This book will look at several tactics in depth. First among them will be explaining how retailers lure unsuspecting customers into their stores with ads for loss leaders. These are items with little or no profit value – salespeople refer to them as “Burns” because selling them is like getting burned. Some of these products are truly putrid in that they are not very good at any price; others, however, are viable products whose prices have simply been slashed to attract potential buyers. The only thing wrong with them is that the salesperson gets little or no commission for selling them. Next we will look at how these retailers display and set up these products in a manner so as to convey a false impression in the consumer’s mind. Burns are made to look inferior to the more profitable or “UG” models. So before the salesperson ever says a word, the customer already believes that the “sale” item isn’t very good. This process is truly an art form and it needs to be done just right in order to be effective. Finally, the Pièce de résistance. Having run the mis-leading ads, rigged the products to look worse than they are, the salespeople are now turned loose upon the unsuspecting customer to lie through their teeth to make whatever living they can, all with the knowledge and encouragement of their employers. If they cannot turn the customer away from the burn they will charge exorbitant amounts of money on other items such as extended warranties, cable and stands. There are any number of opportunities to recoup lost profit on loss leaders, some of which are legitimate, but sadly many of which aren’t. I will highlight the illegitimate ones.
But I would be remiss if I did not give the customer his fair share of scorn. The simple and plain truth is that there is an unrealistic expectation within the consumer market that you can get something of value for next to nothing. The opposite is in fact true. More often than not, consumers who shop on the cheap get what they pay for in the end. We, all of us, have enabled a certain segment of this market to go right along believing this lie, in the naïve hope that we can recoup the profit by either “switching” them into a better product or by selling them extended warranties by preying on their worst fears: namely that they cannot afford to replace the product they just purchased. If these customers would simply save a bit more and a bit longer they’d be able to afford to purchase a better product. The old saying “There’s a sucker born every minute” is in deed true and the retail world counts on him passing through its’ doors.
Critics of this book will say I am only an embittered salesman who couldn’t hack it on the sales floor and is just getting back at my comrades because I am jealous of their success. Nothing could be farther from the truth. While I am angry, the cause of my consternation is based solely on the deplorable nature of such conduct combined with a burning desire to rid the retail community of these scourges who are making it more and more difficult for legitimate salespeople to succeed in sales. What these individuals do is no different than an investment banker ripping off his clients in a Ponzi scheme. While ripping someone off for an extra couple hundred dollars may not seem as bad as defrauding an investor of millions of their retirement dollars, it is important to note that these practices are widespread and in all likelihood result in far greater losses to the economy. I fervently believe that the consumer market is losing millions of dollars annually from these deceptive practices.
I also pledge to work with any and all consumer-protection agencies, which should be fully investigating these scandalous retailers and their low-life employees. If this book in any way leads to a general house cleaning that brings about greater regulation and enforcement of unethical practices in this industry, I will be pleased to no end; if even one customer is alerted to such practices and benefits by avoiding such establishments that employ them, I will consider my work done.
Let the bloodletting begin.
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