Why Low-Price Leaders Aren’t Sustainable as a Best Business Model, Seattle Business Coach

April 3, 2012 - PRLog -- Using Best Buy as a case study, Seattle Business Coach Terry Corbell says always selling products at the cheapest price will make a company unprofitable.

“Best Buy is trying to lower its expenses by $800 million by 2015 in closing 50 of its superstores and by laying off 400 employees,” says the Seattle management consultant (http://www.bizcoachinfo.com).

“But cost-cutting and low prices aren’t the best long-term profit options, adds Mr. Corbell, a business-performance consultant. “True, Best Buy has been hurt somewhat by the Internet, especially Amazon.com and the manufacturers.

“If you register a purchase, you’ll be inundated via e-mail by the manufacturer,” says Mr. Corbell. “It seems almost daily – manufacturers the likes of Lenovo and Hewlett-Packard are trying to sell products to consumers directly.”

However, Mr. Corbell points out most purchasers want a test drive before they buy a new tech product.

“Though not known for selling the newest products, Costco makes it work by creating trust with great customer-service policies,” explains the profit professional. “So for Best Buy, it should mean an advantage. But it isn’t. For confirmation, try shopping at Best Buy.”

Mr. Corbell’s bottom-line: Historically, no company has ever been profitable long-term solely by trying to sell electronics products at the lowest price.

“It’s important to understand why people will buy from you – remember it’s always an emotional decision,” says The Biz Coach. “Admittedly, about 18 percent of customers – blue-collar and professionals, alike – will only buy if you’re selling at the cheapest price in the marketplace.”

Mr. Corbell advises avoiding those people. They are the most troublesome, according to his research.

“Even if they buy, they’re more likely to show up the next day demanding to return their purchase,” he says. “Even if they keep the purchase, they complain the loudest and longest. So focus on people who are motivated by price and value – the other 82 percent.”

Here are the five value motivating perceptions:

#1 – Employees, Spokespersons – 52 percent. The key characteristics are integrity, judgment, friendliness and knowledge. Remember, about 70 percent of your customers will buy elsewhere because they feel they’re being taken for granted by your employees. And customers normally will not tell you why they switched to your competitor.

#2 – Image of Company – 15 percent. They are concerned about the image of your company in the community. Cause-related marketing is a big plus in forging a positive image. So is cleanliness and good organization.

#3 – Quality of Product or Service Utility – 13 percent. The customer is asking the question – “What will this do for me?”

#4 – Convenience –12 percent. Customers like easy accessibility to do business with you. That includes your Web site, telephoning you, and the convenience of patronizing your business.

#5 – Price – 8 percent. Price is important, but it’s the least concern among the five value-motivating perceptions. Use the eight simple strategies to give you pricing power  (http://www.bizcoachinfo.com/archives/7698).

Further, Mr. Corbell says it’s important to know what drives your profit (see http://www.bizcoachinfo.com/archives/8101).

As The Seattle Biz Coach, Mr. Corbell’s portal (www.bizcoachinfo.com) provides proven solutions for maximum profits in Planning, Operations, Marketing / Sales, Finance, Technology, Public Policy, Human Resources, and Wall Street.

Plus, it has informative news videos: World, U.S., Economy, Markets, Health and Sports.

All columns and videos are free.

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Seattle Biz Coach Terry Corbell is a business-performance consultant and profit professional. He also publishes performance-enhancing strategies at The Biz Coach: http://www.bizcoachinfo.com, Proven Solutions for Maximum Profits.