Bike shops beware 'the net profit killer'

It might be hard to take a tough line with customers asking for a discount, but done in the right way it will benefit your retail business, says sales trainer Colin Rees…
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It might be hard to take a tough line with customers asking for a discount, but done in the right way it will benefit your retail business, says sales trainer Colin Rees…

Most professional sales people at the top of their game detest the attitude of a customer who asks for a discount – and rightly so. They don’t ask in Sainsbury’s and they wouldn’t think to ask the taxman so why do they ask a retail shop owner?

The answer is simple: They think they can get it.

I have said before in these pages, the industry is it’s own worst enemy. By shops continuing to give discounts for the outmoded reasons of thinking they will lose the sale to a competitor, it becomes a self-perpetuating black hole.

It is said that a customer who has a complaint tells on average nine other people. I wonder how many people they tell when they get a big discount from a bike shop or worse still, free goods?

It is certainly the case that some business will be lost if a shop stops giving discounts overnight. What has to be considered is how much net profit does that actually represent? I find some managers think in terms of margin’ (gross profit) not net profit after all the costs are taken out. So, at the end of the day, a discount could represent a loss and one has to do the maths to know properly. 

If that is the case, then saying no to a discount request – which ends in the customer going to a competitor – will effectively damage the competitor more than it will your business. One for the accountants I suggest.

However, being realistic, the entire industry is unlikely to follow the suggestion of stopping discounts overnight all at once so what then can we do to mitigate the effect?

I’ve previously talked about human nature and the expectation that customers are probably expecting ten per cent. I used the example of a discount of £50 against a £500 bike but would they have been satisfied with £25 or even £20? As with all things in selling, it’s all about how you do it.

It may be too much to decide overnight to stop giving discounts, sure. So taking it from the top, what can we do about it? First, do you have a policy and do all your staff know what it is? The best route is to only give discounting responsibility to one person, the manager. That centres the activity and at a stroke, reduces the overall amount you are giving away. You will audibly hear staff breathe a sigh of relief.

Next, ban percentages. They are terribly damaging and give away more than is necessary. Decide what your discount is, say five per cent maximum given in pound notes, perhaps put on the counter. If you were the customer, would you take it if the manager did that? Psychologically, that action is negative but makes people realise what a discount is. We have to get out of his mind it is just something you ‘knock off’. It is an actual wad of cash, so show him (it’s all about how you do it.)

Next, ban giving anyone free goods. Again, it is psychologically bad to condition someone to think they can get free goods. ‘Give’ them at cost or ‘give’ them something off but never anything for free. Suddenly, everyone expects it because someone got it.

You may decide to institute the principle of not ever giving a discount unless you get something back. “I could give you something off if you buy two, sir?”

Lastly, before even considering a discount, create barriers in the customers mind so he has to ask you more than once.

Statements such as: “We would only consider a discount for a (bigger sum) product, sir.” Or: “The manufacturer’s margin on that product doesn’t give room for a discount, sir, what else could you buy?”

Constructing these statements is a science. You must not give the indication you are willing to pass anything over except when you get more from them. The key to this is staff training as only that way do you have a chance of changing attitudes.

One way a favourite bike shop client overcomes the discount question every single time is by saying “There is not enough margin in that product to give a discount but I can show you a cheaper product?”

If you train your staff how to deal with discounts which invariably they hate giving, having first decided your policy, your bottom line will definitely increase, you will not upset customers or lose sales and overall, your world and your wallet will be a better place.

As I said; ’it’s all about how you do it’. Can you train your staff to smile as they say ‘no’?

Colin Rees
Sales Trainer and business consultant
E: Colinrees7
@gmail.com
P: 07540 351530
W: colinrees7.wordpress.com

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Trek UK I Milton Keynes I Competitive Salary I Date Published Wednesday 20th March 2018