ColumnistsMay 24, 2022
The PR Adviser: 10 Questions to Contemplate ColumnistsMay 31, 2022
Squirrel Spotting: Growing Your Business When Unit Sales Peak
Discount less and sell more expensive products, Peter Smith writes.
Peter Smith is an industry consultant, speaker, sales trainer, and author. He can be reached via email at TheRetailSmiths@gmail.com.
Dan Ariely, the author of “Predictably Irrational,” one of the seminal books on psychology, wrote, “If we see a discounted item, we will instinctively assume its quality is less than that of a full-price item—and then, in fact, we will make it so.”
The psychology of pricing is no easy matter.
In many respects, we see what we want to see, and, absent the safety of company prohibitions, our actions are often the result of personal biases, effected with little consideration for the overall health of the business or the longer-term benefits to customers; pricing becomes nothing more than a baseline for discussion, even as that discussion is often a catalyst for customer anxiety.
Price ambiguity can, at its worst, be a descent into the abyss of unprofitability.
Accepting the profound impact that pricing has on profitability, and, consequently, the health of a business, one would expect a good deal more discussion on the subject, as a moral issue, as a practical matter, and from the perspective of consumer psychology.
With the amazing run we are seeing with jewelry and timepiece sales these past couple of years, it would be easy to ignore the impact of discounting and pricing decisions in general. However, there are signs now emerging that should signal a note of caution for the near future.
The biggest of those signs is a flattening of unit sales with independent retail jewelry stores.
Related stories will be right here …
The psychology of pricing is no easy matter.
In many respects, we see what we want to see, and, absent the safety of company prohibitions, our actions are often the result of personal biases, effected with little consideration for the overall health of the business or the longer-term benefits to customers; pricing becomes nothing more than a baseline for discussion, even as that discussion is often a catalyst for customer anxiety.
Price ambiguity can, at its worst, be a descent into the abyss of unprofitability.
Accepting the profound impact that pricing has on profitability, and, consequently, the health of a business, one would expect a good deal more discussion on the subject, as a moral issue, as a practical matter, and from the perspective of consumer psychology.
With the amazing run we are seeing with jewelry and timepiece sales these past couple of years, it would be easy to ignore the impact of discounting and pricing decisions in general. However, there are signs now emerging that should signal a note of caution for the near future.
The biggest of those signs is a flattening of unit sales with independent retail jewelry stores.
March’s decline of 1 percent and April’s decline of 2 percent might not yet trigger fire alarms, but they are import indicators as unit sales have long served as a proxy for foot traffic. Put simply, foot traffic has likely begun to recede from the heady days of late 2020 and 2021.
If you plan on growing your business in an environment with fewer people coming through your door, and fewer units of sales, you must explore strategies to increase your average ticket.
There are effectively two ways to do that.
The first is to stop discounting, or at least discount less, and the second is to sell more expensive products.
In a prominent case on price perception, researchers from Stanford and California’s Institute of Technology tested wines on students while measuring their brains on fMRI technology.
Without telling the students, the researchers presented the same wine twice. Once, telling the students that the wine was a reasonably priced variety. The second time, telling the students that the wine was a very expensive type.
The reaction of the students was to point to the most expensive wine (again, the exact same wine they had tasted earlier believing it to be a lower price) as the most enjoyable.
However, rather than arriving at their assessment of the “expensive wine” because they believed they ought to prefer the expensive wine (who among us wants to admit we can’t tell the difference between ordinary and extraordinary wine?), what the researchers discovered was something they had not expected.
“If you plan on growing your business in an environment with fewer people coming through your door, and fewer units of sales, you must explore strategies to increase your average ticket.”
When the expensive wine was presented and the students were told it was the expensive wine, there was a flurry of activity in their medial orbitofrontal cortices not witnessed when they believed they were drinking the lesser priced wine. That’s the area of the brain where we perceive pleasantness.
In short, telling the students that it was a higher-priced product actually changed their neurology and improved their enjoyment of the wine.
Roger Dooley wrote in his book “Brainfluence: 100 Ways to Persuade and Convince Consumers With Neuromarketing” that, “What the research shows is that what customers believe about a product can turn into reality; if they believe a product is better, it will be better.”
This is probably as good a time as any to remind ourselves that we can’t make a silk purse from a sow’s ear. I’ve never seen any research to support the idea that taking a poorly constructed piece of jewelry and marking it up to pretend it is something else is ever a good long-term strategy.
What customers want more than anything else is to come away from their shopping experience feeling good about what they purchased. They don’t want to harbor regrets about whether they bought the right thing or not and, provided the quality is good and as stated, they actually feel better when they pay more for a product. They assume that the premium priced product is a better quality.
You may believe your customers want the lowest price. Your salespeople may be primed to negotiate and make a deal with every diamond conversation. You may even believe that you are doing your customer a favor by discounting your products or by under-selling the customer.
But you would be far better articulating the real value proposition of your products. Understand what customers really want and inspire them to reach and extend themselves to acquire the best products they can. That, ultimately, is the best deliverable.
You might even include a nice bottle of wine.
More on Columnists
The Latest
SourcingDec 02, 2022
Alrosa CEO Sergey Ivanov to Step Down, Report SaysAccording to Russian news sources, the sanctioned head of the diamond company is leaving to take a job with an investment group.
SourcingDec 02, 2022
Lucapa Sells 170-Carat Pink Diamond Unearthed This SummerSaid to be the largest pink diamond found in hundreds of years, “The Lulo Rose” was sold for an undisclosed sum.
AuctionsDec 02, 2022
Here’s How 2 Royal Jewels Performed at Auction in DenmarkA princess’s tiara fell within its pre-sale estimate while an Art Deco bracelet from a queen doubled it.
Brought to you by
Knowledge and Skills for Today’s Hot TopicsFrom laboratory-grown diamonds to design to country-of-origin, GIA's Alumni Collective™ has a seminar to suite your needs.
CollectionsDec 02, 2022
Piece of the Week: Foundrae’s Chain A closer look at the bold links reveals a subtle, surprising detail.
Weekly QuizDec 01, 2022
This Week’s QuizTest your knowledge of the latest jewelry news with this quick test.
Supplier BulletinDec 01, 2022
Take Your Jewelry Design Process Digital with the GIA Alumni Collective™Sponsored by GIA Alumni Collective™
WatchesDec 01, 2022
Rolex to Certify Pre-Owned WatchesRetailers within its official distribution network will be able to sell the authenticated timepieces.
Brought to you by
Diamond Shoppers’ 2022 Holiday Wish ListGive your customers the best diamond buying experience this holiday season.
CollectionsDec 01, 2022
Kendra Scott’s New Collection is for Barbie GirlsThe capsule collection combines the brand’s classic styles with Barbie’s signature pink color.
AuctionsDec 01, 2022
13-Carat Pink Diamond Withdrawn From Christie’s Auction The auction house is not offering any details on why the fancy vivid pink stone was pulled from its upcoming “Magnificent Jewels” sale.
SourcingDec 01, 2022
Nomad’s Is Selling Its Stones to Raise Money for Ukraine AgainIn the spirit of an advent calendar, “Gems to Help Ukraine” will sell a stone a day through Dec. 24 on the Nomad’s Instagram account.
GradingDec 01, 2022
PhotoScribe Granted Patent for Method that Verifies a Stone’s IdentificationThe secure mark combines an overt mark with a covert data set to provide assurance on a gem.
SurveysNov 30, 2022
5 Things Retailers Should Know About the Start to the Holiday SeasonPlus, what a potential rail strike would mean for retailers.
WatchesNov 30, 2022
Watchfinder & Co. Will Launch a Marketplace Next Year It will provide a place for select luxury watch retailers to sell their stock.
MajorsNov 30, 2022
Pomellato Buys Into Italian GoldsmithThe brand has purchased a minority stake in Costanzo & Rizzetto.
SourcingNov 30, 2022
Firestone Restarts Operations of Lesotho Diamond MineLiqhobong has been in a care-and-maintenance period since the start of the pandemic.
MajorsNov 29, 2022
LVMH Acquires Jewelry Manufacturer Pedemonte GroupThe strategic acquisition will bolster the luxury titan’s production capacity in its watch and jewelry division.
CollectionsNov 29, 2022
Alex and Ani Founder Carolyn Rafaelian Has Launched a Fine Jewelry LineThe new brand, Metal Alchemist, focuses on unisex, classic jewelry designs.
IndependentsNov 29, 2022
Reinhold Jewelers’ Holiday Book Is an Ode to an Important Beverage The 2022 edition of the retailer’s annual publication pays homage to the coffee farms and shops of Puerto Rico.
CollectionsNov 29, 2022
Gabriel & Co.’s ‘Fashion Book’ Is OutNot a catalog, the magazine is a tool for Gabriel & Co. retailers to connect with their customers.
MajorsNov 29, 2022
Claire’s to Open Shop-in-Shops in Select U.S. Macy’s Stores The partnership brings Claire’s jewelry and accessories to 20 Macy’s locations in time for the holiday season.
MajorsNov 28, 2022
Pomellato’s New Videos Raise Awareness of Violence Against WomenStarring CEO Sabina Belli and other celebrities, the videos emphasize the importance of supporting women who have experienced abuse.
IndependentsNov 28, 2022
Bert Kalisher, an Industry Veteran Who Loved Making Connections, Dies at 97 Kalisher started out manufacturing watch bands and later got into publishing, authoring two books and serving as publisher of Chronos.
Events & AwardsNov 28, 2022
Registration Is Open for AGA’s Annual Tucson Conference Scheduled for Feb. 1, the event will feature six gemological education presentations and three hands-on sessions.
MajorsNov 28, 2022
The Kingswood Co. Is One of U.S.’s Fastest-Growing Companies AgainThe jewelry cleaner manufacturer jumped up to No. 3066 on the Inc. 5000 list.
AuctionsNov 23, 2022
This Sapphire Tiara Once Owned by a Danish Princess Is Going to AuctionThe Dec. 1 jewelry sale at Bonhams-owned Bruun Rasmussen will have several other pieces of royal jewelry on the block.
FinancialsNov 23, 2022
Movado Lowers Guidance Amid ‘Uncertain’ Retail EnvironmentIts Q3 sales dipped as inflation took its toll on shoppers in the U.S. and Europe.
