Value: a small word with big implications for today’s retailer. With a positive value perception, a single store can grow into the largest retailer the world has ever seen. Without value in the mind of the customer, you can become one of many retailers who has failed, be it a single store operation or a once-mighty retail giant.

The definition of value is as simple, or as complex, as you want to make it. Benefits that you offer your customers like low price, selection, service and convenience are components of value as perceived by customers. The fallacy of value that many retailers have is that price alone is the only variable that provides value for the customer. A more general definition of value is “the degree to which customers perceive you are meeting their needs with benefits and solutions.” Serving your customers’ needs, then, is the key to value.

Value can be considered a psychological concept. It’s complex and is influenced by a wide variety of factors and situations. Different groups or niches of customers weigh components differently, either consciously or unconsciously, based on their demographics, various influences and events happening in the world. These components must be considered and managed by you to achieve a balanced value perception for any customer base you are trying to reach.

Basic components of value include what I call the seven P’s of marketing: product, pricing, promotion, presentation, people, place and perception. The overemphasis, or under-emphasis, on any of these seven components may imbalance the process, creating a “value gap” between you and your customer. For this article, I will address the product, pricing and promotion benefit components.

Product
Having what the customer wants in stock at the right time — both every day and seasonally — is paramount. Having a fog machine with no fog juice, selling inflatable balloons but not disposable helium tanks, having Spiderman plates but not napkins — all this creates a negative value image. This will force your customer to go elsewhere to get what they expected you to have. Let this happen more than a few times, and three strikes you are out. They will go elsewhere and find a new place to shop. Key rule — if they expect you to have the item, it better be in stock!

The greatest marketing and the most prime location in town will mean nothing if you cannot provide the customer with benefits and solutions. When you do not have what the customer wants, there is no quicker way to lose value in the customer’s mind. Review your product assortments to make sure each is complete. Review each item’s inventory level to insure you have what the customer expects you to have and the necessary complementary products when they want it. Use a rebuy and open to buy program to keep your stock investment dollars in line with your sales estimates.

Pricing
The retailer must actively practice margin management in addressing pricing and profit issues. Establish an overall gross margin goal you must have to have an acceptable profit or return on investment. You cannot have the lowest price on every item. If you try to match every other retailer’s low price, you won’t be in business. Your goal should be to have everyday fair pricing.

Be the same or at least close to your chief competitor’s pricing on KEY, recognizable items. If necessary, bring in a separate category to meet the competition, such as dollar store items. For other non-recognized items in your store, use the margin management approach to adjust retails to help you achieve your gross margin goals. There will be a retail price for each item that your customers will feel is fair and will provide them with a benefit and solution. This price will not negatively impact your value perception, and will also maximize your turns and profit.

Special note — customers remember! A customer’s perception of value is made up of many shopping events. Customers shop many venues, and your store is just one of them. If you are at $1.99 on a highly recognized item, while your competition is at $1.29, you immediately create a value gap between you and your customer. This is a glaring price difference, and the customer could care less about your problems, because you have just made another problem for yourself.

Promotion
Advertising is expensive. So, why do you advertise? What are you trying to accomplish? It is to draw traffic into your store? Because your competition does it? Do you promote “hot” prices, sales on regular items or some other technique? What image are you trying to project?

Word of mouth is the very best advertising a company can have to build a value image. Susie tells her friends about her great experience with your store, and they tell others. By the same token, Susie telling her friends of her awful experience in your store will spread quicker than one can imagine, destroying months of hard work. Even a rude employee can be your worst nightmare to your value image. Attention to the total shopping experience for your customer is very important.

Advertising should communicate your benefits to your customers. It should also keep your name in front of the public, build special events and create an exciting atmosphere as the place to be. It doesn’t always have to be about price. Free tickets to a movie premiere, having a costume character, announcing a new party pattern in stock, free how-to seminars — playing these up will help build your benefit and solution value for your customer.

Remember, you are providing customers with benefits and solutions to build your store’s value in their minds. Customers are generally shopping with you for a specific reason, such as dad’s birthday, July Fourth decorations, Christmas décor, Halloween costumes, over the hill party, etc. If you address the reason they are patronizing you with proper benefits and solution at a fair price, you are well on your way to creating value for your customer and gaining their long-term loyalty.

MBA Frank Hull is a retail consultant who has managed big box stores as well as his own retail chain. He also spent six years as the director of marketing and buyer for a 30-store party goods chain in Texas, and is currently the seasonal buyer for a worldwide retail chain. Contact him at flh1@swbell.net or (903) 654-0044.