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"The Discount Trap" article in PFM

Beveled

SGF, Supreme Grumble Framer
I just finished reading Goltz article on Discounts. It was candid and made so much sense to me. In fact, it's what I've been hollering about for awhile now: If people can afford to buy nearly everything else at regular price, why are they expecting a discount from us?

We're never going to change their mindset, if we don't change our own first.

Okay, I know this is a big subject that's been beat to death, but I'd love to hear your thoughts on the article.
 
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jim_p

SGF, Supreme Grumble Framer
I just finished reading Goltz article on Discounts. It was candid and made so much sense to me. In fact, it's what I've been hollering about for awhile now: If people can afford to buy nearly everything else at regular price, why are they expecting a discount from us?

We're never going to change their mindset, if we don't change our own first.

Okay, I know this is a big subject that's been beat to death, but I'd love to hear your thoughts on the article.
I think it's because what we're doing is custom work, so the price is basically "under construction" right there at the design counter as opposed to a fixed price for, say, a box of cereal.

Which makes me wonder: for those framers who use package pricing with posted prices: do you get fewer requests for discounts as a result?
 

FrameMakers

PFG, Picture Framing God
But they are using a coupon for that box of cereal or buying the store brand instead of the name brand. I would venture to guess that at least 1/2 of today's purchases are made with some kind of offer attached to them. This is the way that retail works in the 21st century.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Problem is they buy everything at a discount. Many items they don't have to haggle on because they can see the same item at a bazillion websites or stores.

Having a good selection of package priced items gives you a win/win situation. Customer loves an item but wants it at half price so you point to the packages which are half the price. Now the customers gets to make the decision of how much they love the first item over the lower priced item.

How many people have you met who paid full price for their car unless it was just released a minute ago. Jewelry is rarely sold at full price, furniture is discounted, appliance discounts, bedding, carpeting, etc., etc., etc.

So the real question is, what do people pay full price for these days.
 

Beveled

SGF, Supreme Grumble Framer
So the real question is, what do people pay full price for these days.
I'm going to quote the article:

"Many of these same customers pay full price for their gas, clothes, plumbing, car repairs, doctors, landscapers, and exterminators. And pretty much everything else. So why can't they pay for their picture framing without a discount? They can't afford it? Please."
 

troyveluz

MGF, Master Grumble Framer
To me a better question is "What is full price?"
I've worked for a high end shoe distributor and also a high end denim clothing manufacturer when I was in college and I've observed how they were pricing their products. They were all pulling it out of their @sses. They would sell the same item to 3 different retail stores and give them 3 different MSRP.

I've observed Walmart price the same item differently in their different store locations within 10 miles of each other.
I've also observed Kroger will lower a price on one item and raise the price on another then reverse it the following week.
When I was working for the shoe distributor in NYC, I would stop by the retail stores that we sell to and look at how they were pricing the shoes that we sell them. I have observed that they were tagging the item as high as 300% their wholesale cost then putting a 20 to 50%off tag on it.

So what is full price?
 

Jeff Rodier

SPFG, Supreme Picture Framing God
If the framing is at a good price a framer can say no to discounts and traffic will continue to flow into the store.

Now for a story I had considered putting on the G this past week:

I went to the dentist for my teeth to be cleaned which is covered under my insurance. I need a bunch of assorted dental work to be done so I told them to schedule items in intervals to be sure that I max out my insurance benefits before the end of the year. I also said I will continue into next year so they can schedule items which will max out my benefits in January for next year if they like. My only goal is to use up my maximum benefits and the rest I will pay out of pocket no problem.

They work up a plan beginning with a broken tooth and rebuilding 2 other teeth that are cracked and will break in the near future. This dentist has purchased this practice a little over a year ago and sent a letter out several months back to all of the patients who hadn't been in for services. They figure up my expected bill and deduct $100 because of the offer they sent out several months ago which I didn't even know existed. My share of the bill would be $207 and they tried to convince me of how important it was even though it was a lot of money. Nobody in Jay's article has ever walked into this dentist/oral surgeon's office since they felt I would bolt for the door when I heard the cost. The total cost was $207 of $1,000 worth of work and history has taught them I was likely to say no based on other patient's responses.

I will be having a root canal plus some other work on Monday. The total of the procedure is about $2,000 and my out of pocket is under $400 but once again they are trying to convince how important it will be once they hand me the projected out of pocket. None of these full price people are going in for oral surgery and just paying full price or they wouldn't be working me over so hard to confirm I wanted to keep the appointment.
 

FrameMakers

PFG, Picture Framing God
I'm going to quote the article:

"Many of these same customers pay full price for their gas, clothes, plumbing, car repairs, doctors, landscapers, and exterminators. And pretty much everything else. So why can't they pay for their picture framing without a discount? They can't afford it? Please."
Many do not.

Lets go down the list

Gas, I know that I use a grocery store card where I get a discount for my gas purchases.

Clothes, really, unless your purchasing high end garments, these are always on sale or going to be next week if their not.

Plumbing, OK this one you probably are not going to see a coupon for on a regular basis, but the need for a plumber is often time an emergency. As has been often said there is no such thing as a framing emergency.

Car Repairs, I see these all the time from a 19.95 oil change to specials on tires. I also see percentage off discounts for for auto repairs.

Doctors, While you generally don't see these for GP or specialty services, I see coupons and offers from Dentists all the time.

Landscapers are always running ads for everything from lawn mowing to arbor services.

Exterminators. The Orkin man always has an ad in my local coupon magazine.

So while many may not use these, ALL of them have offers out there.
 

tedh

SPFG, Supreme Picture Framing God
I'm going to quote the article:

"Many of these same customers pay full price for their gas, clothes, plumbing, car repairs, doctors, landscapers, and exterminators. And pretty much everything else. So why can't they pay for their picture framing without a discount? They can't afford it? Please."
Most of these are non-discretionary. Who the h*ll needs art in a down economy?
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Had a nail in my tire when I left the shop so did I run down to the Michelin store? No I went over to Sams Club because they do free plugs for this type of thing and I have used them several times. I have also purchased 5 tires from them in the last 5 years because they always have the best price.

While at Sams I did a little shopping and picked up a 4 pack of Sprayway for the price it costs for 2 elsewhere. What I observed while there was a whole bunch of 18 karat gold watch wearing customers. The ladies were sporting 2 karat diamond rings. Mercedes, Jaguar, BMW drivers filling the lots. Several nurses in scrubs and most likely a doctor the one nurse bumped into at the check out line talking about the number of patients they saw today.

The parking lot at the local Wal-Mart is always loaded with $70,000 cars. About the only place I see people paying full price is the high end restaurants and a large number of their customers shop at my store. It is a very common occurrence to see $70,000 cars parked in front of my store.
 

tedh

SPFG, Supreme Picture Framing God
Just read the article, and have these observations:

- I question that most framers are found in affluent areas. Has anyone seen evidence of this? What I have seen are Statistics Canada numbers about the population required to support certain types of businesses. Anecdotally, my customers come from a variety of income levels. If I'm located in a lower-than-average income area, does Jay conclude that I won't succeed?

- I have many customers who have come in with horror stories about being "overcharged" by other framers. There seems to be a threshold, above which customers will never go back to the framer that screwed them on price. Why do they complain? Because they did not receive "value".

- contribution margin and breakeven analysis play a part: taking a job to help pay the rent, even if there's no profit, but excess capacity, will help you stay alive. In busy times with no excess, kill the discounts.

- has anyone seen a study about the phenomenon of repeat customers? If I were to take the time to figure out what percentage of customers had come back at least once, I figure I have a very high rate, indicating satisfaction with price, quality and service.

- Jay's article omits the impact of a bad economy. Marginal framers get shaken out when times are bad. As I said above, who the h*ll needs art when times are bad?

- Like Rodier, I believe you can discount: with very smart buying (box quantities, shopping the lowest prices, negotiating discounts), and other efficiencies such as buying length, not join, you can beat your competition, or at least make your customers happy.

Finally, Jay's example of the discounted $160 job, or the full-price $200 job: if you go with the $200 job, how can you be sure that the customer will come back for that second job?
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Today was a good example of where we trip ourselves up on pricing. Customer had a small needlework and wanted a very narrow frame. No prices were discussed and she simply stated she wanted something narrower because she didn't want to spend too much money. Since I own everything I sell and know exactly what I paid for each item I pulled 3 for her to choose from to keep her price low. She will stretch and fit herself to save money.

The most expensive thing I sell is my time. If I had to go through pricing a couple of dozen of tiny mouldings and then order it there could be no deal. She chose a very nice Italian moulding that I got a smoking deal on and the thing will run her $20 for frame, glass and backing. She is one of my couple of dozen of little old needlework ladies that I have convinced to stretch and fit their own stuff. If I worked the no discount model it would have been 45 minutes in design plus hassles and no order. This order will be 2 minutes design, 5 minutes work and some scrap.
 

RParrish

PFG, Picture Framing God
Most offers of discount are small change, made to give the consumer the feeling of satisfaction of a deal. People do pay full price for a range of things, most of them are based on "needs" not "wants", if you "need" something you are going to get it. If you "want" something your more likely to bargain shop.

Look at the tizzy everyone had about Larson and 2%, can't get their 2% cash discount....

Honestly if your going to offer a discount, it's not a "real" discount, the price is bumped up then lowered, at least that is one method. Another would be a real discount on material goods or retail items, those have a shelf life, even if it's a photo frame. If it sits too long that is your money sitting there, you have to get that money back and discount it, even it it means taking a loss. Goltz does this all the time at his store on his photo frames. I see them on sale for 50% all the time.
 

Paul Cascio

SGF, Supreme Grumble Framer
The "Don't Discount" tune has lead framers down a path of doom.

You can't ignore public sentiment and consumer buying habits if you want to grow your business. Look at those among us who have suceeded over the past several years. They're not the ones listening to Goltz, they're the ones who go out and compete for customers. They're the ones who go head-to-head with the Michaels, and other chains, and beat them at their own game.

Jay is a smart guy, but he's dead wrong about this, and has been for more than a decade.
 

tedh

SPFG, Supreme Picture Framing God
Paul: couldn't agree more. The framers around here who constantly upsold following the LJ model, the framers who charged $400 to frame a diploma, are all gone. Who's remaining? Me and the wives running hobbies. The only way I can survive is to buy box, get prices down, and wow them with great designs. The Wizard is a productivity enhancer, and is essential to the Wow factor I need.

I just can't understand why Jay would say some of those things. Jeez: the biggest PIA in terms of nagging me for discounts was the little old lady who owned a Jaguar, a Porsche, and a fancy VW, all nestled into a three-car garage in the toniest part of Ottawa.
 

Less

SGF, Supreme Grumble Framer
For Less

Because someone else is willing to work for Less.

Seems to Less that discounts in today’s world are a crock of ****.
Less bought a pair of shoes from Kohls – $75 on “sale” $54.99, plus a 20% coupon = $44. You tell Less which one is the real price?

Less shops around for almost everything now. It is now built into the American way. Less asked and got a break for installation of a new furnace just today.

Wanna bet Goltz negotiates everything too? Bet he did not get paid as much as he would like to get for this article.

Sometimes Less get More and sometimes Less - just as long as Less gets.
 

tedh

SPFG, Supreme Picture Framing God
Because someone else is willing to work for Less.
Less: it's not just that someone is willing to work for less: getting your costs down can give you equal margins, and still make your customers happy. To me, the whole thing is about margins, which is why I won't do consignment: why take a 30% margin, when you can get double that selling art you own?
Margin Margin Margin is just as important as Location Location Location.

Then again, so is Repeat Business Repeat Business Repeat Business.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
It is a real shame that these magazines and newspapers that run his articles never run a follow up piece. I remember about 3 years ago there was one where he told the story of a furniture store in I believe it was Colorado. The store ran regular sales on furniture and the article targeted sofas as the topic of discounts. He looked at the number sold and declared that if the owner no longer offered sales they would sell 7 rather than 9 and the business would be healed.

If this were the huge success story that the magazine would like us to believe why was there never a follow up article. Did the numbers really work out to be 7 more profitable sales or did the store go back to using sales to attract buyers. Did this business even survive or did they close up and go home.

The publications running these articles constantly run pieces on how to negotiate better pricing and buying smarter. Many times the pieces on buying better and negotiating are for the purpose of being more competitive rather than padding the balance sheet. I'm sure some of the "Charge More" philosophy comes from his business that sells a product that many would say is not very competitive in the wholesale market place.
 

GUMBY GCF

SGF, Supreme Grumble Framer
Actually both business models work.
You have to figure which one will work in you local economy.
The customers you have or want to zone in on.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Actually both business models work.
You have to figure which one will work in you local economy.
The customers you have or want to zone in on.
While I totally agree with that I know for a fact that you can't just say I'm high end and it becomes successful. Successful businesses that choose to be high end spend large amounts of money on branding and atmosphere. Look at brands like Mercedes and Lexus and you will find they are located on the most expensive piece of land in town. Then they are advertised on television during prime time or in half page color ads in the newspaper.

The Chevy dealer has a location that is more budget minded and offers real deals to attract buyers. McDonalds uses the highest traffic location and serves sub par food but you will never see one go out of business. Subway offers acceptable food in mediocre locations. All of these businesses have a comprehensive business plan and a budget to implement the plan.

The framing industry would be better served by people writing articles about how to be the type of shop owners desire. When a frame shop opens the decision should have been made many months before a lease was signed. If you want to be the Morton's Steak House of picture framing then you need to understand that a million dollars will need to be put at risk. I've seen stores that want to be the McDonalds of framing by choosing high traffic locations but not spending $50,000 on signage so nobody even notices them in an area that has a thousand vehicles drive past them every hour.

If a frame shop wants the average frame job to be $600 they better convey the expectation to the potential customer that is what it costs. Lexus does a good job of not attracting Chevy customers. BMW lets you know they are expensive but there might be one model you can afford.
 

FrameMakers

PFG, Picture Framing God
One other thing that frosts my cookies is the way that magazines run these articles which contradict the way that the person writing them actually run their own businesses. I caught one a few years ago and called him on it (not Goltz). His rational was that his situation was different and that what he did would not be good for the average framer. Funny thing is, people read his articles because of the way he ran his shop.
 

Warren Tucker

MGF, Master Grumble Framer
To answer Less' question: my guess is that the shoes probably did cost $75 at one time and they were priced at $55 because they weren't selling for $75 for some reason (out of style, nearing out of season, mistake on the part of a buyer) and it was time to move them out. At the same time, Kohls wanted to get more traffic into their store so they offered a one item 20% discount. Less gets the shoes for $44 because he's interested in utility rather than style and he lucked into the one time discount: power buy. A win for Less and a win for Kohls. We can only speculate what the shoes cost Kohls in the first place.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
I spent a few years as a manufacturers rep for shoes and clothing. Shoes are much lower margin than most people would think and keystone is almost never achieved. Major retailers will treat these items as a single unit so I had one chain store that would buy 20,000 at a time. Those 20,000 pairs were a single unit for them and once they surpassed the break even point every pair sold was considered 100% profit. Once the sizing scale is broken to where there can no longer be all sizes in a style the items begin to get marked down.

If the goal is to achieve 30% margin and 15,000 pairs have been sold with a margin of 20% on the 20,000 pair unit the mark downs will occur until all pairs are gone and the total 30% margin is achieved. This is common on items where there are size scales that can not be replenished. In chain stores a single store may still have full scale but chainwide that is not the case so the entire chain will implement the mark down.
 

David N Waldmann

SGF, Supreme Grumble Framer
McDonalds uses the highest traffic location and serves sub par food but you will never see one go out of business.
Actually, I have. Windsor, VT had a McDonalds for probably 20 years, but it's closed now.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Did it go out of business or was it relocated somewhere else. McD's has both company and franchise operations and in both cases if one closes it is usually replaced in a different location even if 20 miles away. There are times where a long time span may pass but a franchisee is usually very well compensated during that time.
 

David N Waldmann

SGF, Supreme Grumble Framer
Vermont is not that spread out. Except maybe in the "city" of Burlington a town either has a McD's or not. Windsor used to have one and now doesn't. The remaining McD's in a (probably) 100 mile radius have been there 30+ years.
 

pwalters

SGF, Supreme Grumble Framer
One other thing that frosts my cookies is the way that magazines run these articles which contradict the way that the person writing them actually run their own businesses. I caught one a few years ago and called him on it (not Goltz). His rational was that his situation was different and that what he did would not be good for the average framer. Funny thing is, people read his articles because of the way he ran his shop.
What? Say it isn't so!!!!!! This has been going on for years. There as a "framing god" in this market that spoke at all of the trade shows, was published, etc. that often preached the gospel of no discounting. Then was on the radio, in every money mailer/valpak, direct mail with 30% off the entire order coupons. I sat in on one of his speeches at a trade show and got up midway through and left since I could tell it was all B.S. anyways.
 

FrameMakers

PFG, Picture Framing God
Yep, I am sure it was the same guy.
 

Beveled

SGF, Supreme Grumble Framer
To be clear, I think the article was referring to excessive discounting. We all have some discount programs in place (I think) for galleries, designers, etc. But some framers, feeling pressured, will discount to anyone who may suggest that they want a discount. Why? Why should we do that?

We have discount programs available to wholesale accounts, and large quantity jobs. But I don't see why any framer would just give it out for no good reason. My prices are as low as I can get them and still stay in business. It's fair prices for the work that we do. Any discount here, has to be earned. There has to be a reason for me to give it to them, other than the fear that they might walk out.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
I agree with the just because I want a discount objection. This sign is 24x30 and sits on an easel next to my frame corner samples. I point to it when somebody wants a discount below my already deep discounted price.
 

Attachments

tedh

SPFG, Supreme Picture Framing God
I'm also on side with limiting discounts. When I quote a price, it is the price that I can live with. I've walked away from sales, especially on the art side, when someone wants a price that's lower than I think is fair. Or if they propose to pay "cash" and avoid the tax.
 

Jim Miller

SPFG, Supreme Picture Framing God
Discounting is an advertising tactic. Done right, it attracts customers. Done wrong, it reduces profit.

Too many retailers, including framers, do not understand that when the customers stop coming in, price probably is not the problem. Many have gone broke trying to attract customers by cutting prices, never realizing they failed to attract them to the point of caring about the value of what they were selling.
 

Less

SGF, Supreme Grumble Framer
Funny Man

To answer Less' question: my guess is that the shoes probably did cost $75 at one time and they were priced at $55 because they weren't selling for $75 for some reason (out of style, nearing out of season, mistake on the part of a buyer) and it was time to move them out. At the same time, Kohls wanted to get more traffic into their store so they offered a one item 20% discount. Less gets the shoes for $44 because he's interested in utility rather than style and he lucked into the one time discount: power buy. A win for Less and a win for Kohls. We can only speculate what the shoes cost Kohls in the first place.
LOL - Less finds it funny anyway - funny like:) just in case.

Less has been buying these shoes from Kohls for many, many years. The "sale" is pretty much (kind of like Michaels) always the same, and Kohls sends out a lot of added discounts. These by the way are always in style - LOL. Great for the picture framer who stands on their feet all day. #201 in brown and #202 in black. About the only thing Less will puts on his feet besides sneakers, or what ever they are calling them these days.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Great for the picture framer who stands on their feet all day. #201 in brown and #202 in black. About the only thing Less will puts on his feet besides sneakers, or what ever they are calling them these days.
What are the miracle shoes Less. The only shoes I can stand to wear to work for many years now are Sperry Topsiders. I buy the most expensive comfort version with the thick soles which run $129 retail from the local shoe outlet store. They always sell them for $79 but have buy one get one for 50% off. I keep 2 pairs going in rotation all of the time since shoes get tired too. The trick is to get two different colors so they don't get mixed up and one shoe doesn't wear down more than the other in that pair.
 

Kirstie

PFG, Picture Framing God
What are the miracle shoes Less. The only shoes I can stand to wear to work for many years now are Sperry Topsiders.
I've been wearing four different pairs of Sperry's all summer long. No socks needed, and great colors. I ditched all my flats and can wear these all day. On sale at Nordstrom. Not expensive for such comfortable shoes with good arch support. But winter is coming and almost time to get out the boots.

Carry on...

I'm not even going to try to broach the red hot discount topic. You can sign up for our newsletter to see what our approach is.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
In the winter here I just add socks. About March 1st the socks come off and I'm in heaven again. I can't believe all the money I have spent over the years trying to find comfortable shoes and who would've guessed.
 

Framing:

In Corner
Oh...... oh..... I like the look and sound of sperry shoes..... I feel some retail therapy coming on.... Hopefully I can track them down someplace in Ireland ...... for the last few years my favourite shoes have been Camel Active.

Oh on discounting I am not a fan unless the margins are right......I'm a margins guy for the most part.
 

Kirstie

PFG, Picture Framing God
Oh...... oh..... I like the look and sound of sperry shoes..... I feel some retail therapy coming on.... Hopefully I can track them down someplace in Ireland ...... for the last few years my favourite shoes have been Camel Active.

Oh on discounting I am not a fan unless the margins are right......I'm a margins guy for the most part.


http://www.zappos.com/sperry-top-sider-angelfish-linen-oat

Men's and women's versions available.
Look at the padded inside. They do go on sale now and then. And yes, I do like a discount on shoes.
 

sketchcalgary

True Grumbler
Discount Junkies

I realize this thread is from a few months ago, but I wanted to share an article that I read in Artist Retailer Magazine about a new breed of "monster consumer"... one that will only shop at a store if there are huge "sale signs" up or extreme discount coupons available to be used. Here's the link!

http://editiondigital.net/publication/?i=130402

Article starts on Page 34, "Discount Junkies Create Challenges for Retailers".
 
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