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06.16.2009

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Values, Not Value, First

“Avast, me hearties! Beware the health pirates!”

BY JAY JACOBOWITZ

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As some independent natural products retailers react to recession-driven declines in customer traffic counts by offering discounts, a new nationwide consumer survey from Bellevue, Washington-based Hartman Group and National Research Network offers two cautions: One, shoppers tend to think the new, economic-downturn discounts mean the retailer has been gouging them with high prices all along and/or, two, the new lower prices mean lower quality. The survey finds that retailers who have started discounting during this recession risk losing customer trust.

To these two cautions I would add a third: you can’t easily stop discounting. Once you start down that road, it is very difficult to come back. The result may be lower profit margins for your store…forever.

As you grapple with the concept of value, the recent rescue by the U.S. Navy of Captain Richard Phillips, commander of the merchant ship Maersk Alabama, from Somali pirates, may offer some insight. Commenting on the rescue, an armed services spokesperson said that the military believes that pirates are easier to defeat than extremist groups in Afghanistan and Iraq because pirates are driven merely by money, while the extremists are driven by ideology—their values.

What values does the customer that asks you to match prices exhibit? Of course, no one wants to overpay, and everyone loves saving money, particularly today. This is simple enlightened self-interest. But if you are a full-service retailer, educating and individually helping each customer achieve well being while offering only the highest quality products, you provide more value than competitors that don’t offer these things.

Customers who take advantage of your knowledge, caring, and quality, but who expect to pay the same prices as lower-service, lower-quality competitors, are no better than pirates blackmailing you for ransom. Health pirates kidnap your time, expertise, and guidance, and then demand money—discounts—as the price you must pay to keep them as customers.

Human nature, being what it is, means there will always be those who value money above all other things. But this unappealing sliver of humanity is a small minority. The great majority is willing to pay you a fair price for the value you provide, and would be embarrassed and ashamed to take unfair advantage.

Before you change your way of doing business to accommodate the health marauders, ask yourself how serious these people are about the long-term commitment it takes to achieve and maintain well being when they are so quick to throw you—arguably one of their most valuable health lifelines—overboard to save a couple of bucks.

Should you hurt your entire profit structure just to serve these health barnacles? Or worse, should you discount only to the freeloaders, making your good customers—the quiet majority that doesn’t expect something for nothing—subsidize them? Are you so afraid of losing a sale?

A good retailer friend of mine, Barb, empowers her wellness team to take time to establish a rapport and truly engage with each new customer. This investment in time—Barb’s staff includes a part-time registered nurse and registered dietician—allows team members to get to know each customer and explain the store’s values. These include the belief that health is holistic, that one must consider the whole person including stress, sleep, and exercise; that one can’t take a slice out of the health pie, change just one thing in the lifestyle, and expect to get and stay healthy. “We tell customers you can’t simply substitute a more-natural pill for a prescription drug you are unhappy with and expect to get good results,” Barb says.

Each week, Barb meets with her team to review customer interactions, and to answer staff questions about handling each one. To customers who insist on a “magic bullet” approach, who are not open to the idea of holistic health, Barb instructs her team to say, “We can’t help you, and we advise you not to buy our pills.” This is not the behavior of someone who is afraid of losing a sale. Barb understands the power of standing up for her values, and of placing those values ahead of the question of value—what price to charge.

With the explosion of chronic disease and special metabolic needs in this country, if you are not seeing a steady stream of new customers flow into your store, the flaw may be your lack of sufficient credibility and visibility in your community, not your pricing model. Fix these things, and you won’t worry about abandoning your values or damaging your value for the few values-challenged health pirates. And as you probably already know, Barb hasn’t had to start a discount program. Imagine that.

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This article, by guest columnist Jay Jacobowitz, president and founder of Retail Insights®, a professional consulting service for natural products retailers. Jay has 31 years of wholesale and retail industry experience. His column first appeared in Whole Foods magazine and is reprinted here by permission. The views in this article are his own and do not necessarily represent those of The Hartman Group.