Read the warnings of the man who said no to Walmart as a salutary warning against aggressive price-cutting.
It tells the tale of how a gardening equipment manufacturer Simplicity, the maker of the Snapper brand of lawn-mowers, took the brave decision not to continue supplying retail behemoth Walmart.
“If you know nothing about maintaining a mower, Wal-Mart has helped make that ignorance irrelevant: At even $138, the lawn mowers at Wal-Mart are cheap enough to be disposable. Use one for a season, and if you can’t start it the next spring (Wal-Mart won’t help you out with that), put it at the curb and buy another one. That kind of pricing changes not just the economics at the low end of the lawn-mower market, it changes expectations of customers throughout the market. Why would you buy a walk-behind mower from Snapper that costs $519? What could it possibly have to justify spending $300 or $400 more?
That’s the question that motivated Jim Wier to stop doing business with Wal-Mart. Wier is too judicious to describe it this way, but he looked into a future of supplying lawn mowers and snow blowers to Wal-Mart and saw a whirlpool of lower prices, collapsing profitability, offshore manufacturing, and the gradual but irresistible corrosion of the very qualities for which Snapper was known. Jim Wier looked into the future and saw a death spiral.”
Beware of the high cost of low prices – discounting is a race to the bottom. At IncentiveDirect, we believe that customer loyalty incentives, and staff sales incentives that encourage sales staff to be knowledgeable, articulate and passionate about the products they sell are the alternative to discounting. As Snapper believed, the value is not just about the price. At the end of the day, Walmart, (and as mentioned before, Amazon), don’t care what you buy, as long as you buy something.
“Selling Snapper lawn mowers at Wal-Mart wasn’t just incompatible with Snapper’s future – Wier thought it was hazardous to Snapper’s health. Snapper is known in the outdoor-equipment business not for huge volume but for quality, reliability, durability. A well-maintained Snapper lawn mower will last decades; many customers buy the mowers as adults because their fathers used them when they were kids. But Snapper lawn mowers are not cheap, any more than a Viking range is cheap. The value isn’t in the price, it’s in the performance and the longevity.”
To “do more than just reward” also means doing more than just selling.