“I need to make a 24% margin to fund of all this we have created for the customer.”
I suspect this is a conversation being had currently by those music retail businesses that have a higher fixed cost base, such as bricks and mortar retailers.
The bigger airlines have finally gotten wise to the fact that customers are fixated on the ticket price. Seasoned business travellers have an appreciation for the added value service an airline might bring, but most leisure flyers want the best price only.
For years big airlines watched helplessly as the budget airlines eroded their market share. “We cannot compete with these airlines, with our high quality service and higher overheads”.
Services that added to the overall cost of a flight included headphones, in flight magazines, blankets, complimentary tea and coffee and in flight meals. These all add to the cost of a flight, but represented tangible value to only ‘some’ of the passengers.
Everything that we do in our businesses, is added to the cost price of the product, in theory. This means you can ask yourself…
- Are customers willing to pay more to have a nicely decorated and lit store?
- Are customers willing to pay more to have £500,000 worth of stock in store today?
- Are customers willing to pay more to have 500x guitars on this wall they can try?
- Are customers willing to pay more to have trained staff they can call when they have a problem?
- Are customers willing to pay more to have a local depo/branch they can visit?
My hypothesis is that many customers would pay for these aspects of the offer, if legitimised and not presented at the start of the transaction.
I was discussing airlines’ pricing model at an event in Milan this week with a friend Eduardo. “I got tickets to New York for me and my wife for €700 return.” He explained joyously, “However, by the time I had finished with the add-ons, it was over €1,000, but I still felt like I’d got a great deal”.
It was a great deal because he was not comparing the €1,000 price online, only the €700 ticket price. The competitiveness of the €700 ticket, legitimised the additional purchases.
I suspect that some of the ways we currently retail in the UK, do not add tangible value to the customer. Value to such an extent that customers would be willing to pay extra for it. A customer may be asking him or herself “If I do not want, need or use a particular service of yours, should I have to pay for it?”
The realisation of this, may result in business owners having some very difficult conversations internally over the coming months.
The airlines and example retailers covered in this series of posts have illustrated that some services do add tangible value and will be paid for by customers. Crucially, however, they must be presented in the right way at the right moment in the transaction.
Regional Workshops Next Week
Our Music Retail Futures workshop programme is designed for store/branch managers and supervisors, responsible for driving the performance of shop floor sales teams.
Adopting a train the trainer type approach we will be looking at the skills store teams need, to increase productivity, sales performance and profitability. We will provide the learning tools for shopfloor training through an online learning platform and share the skills to measure and manage behavioural changes within a sales team.
Sessions will explore new opportunities for your team to sell profitable add on products and unique services.
The workshops will also share the ingredients for managers to develop extraordinary and future proof retail experiences that reverse the trend of declining footfall and profitability in your business.
Our regional workshops are London Monday 18th June, Coventry Tuesday 19th June, Leeds Wednesday 20th June & Manchester Thursday 21st June.
Reserve your free seat today for MIA retailer members, £149+VAT for non-members at www.eventbrite.co.uk/o/mia-music-industries-association-15069947337