Carragee Consulting

La Sportiva Mythos climbing shoes are fantastic. They are extremely comfortable, so on long days or multi-pitch routes you don’t worry about cramped feet. They edge well and smear even better and best of all they fit my feet perfectly, without heal-slipping issues or rubbing. I’ve had several other pairs of shoes which didn’t fit or perform as well as my Mythos. Some with synthetic materials would smell horrible after the first few uses. Others don’t seem to hold up as long. The point is, due to a very strong value proposition, I will continue to buy these shoes as long as they are available, even if they do cost $40-60 more than other climbing shoes.

Since I know I’m going to keep buying the same shoes, and my foot size is not likely to change, when I find ways to buy them on sale I tend to want to stock-pile them. I see other shoes, even other ones from La Sportiva go on sale pretty frequently, but these shoes unfortunately are always $140. Recently REI ran a promotion with 1) free shipping on orders over $75 and 2) a $25 gift card to be used in the up-coming month. I hadn’t worn my Mythos out just yet, but I ordered a new pair anyway just because they went on sale. I haven’t opened the box yet. They are sitting in my closet, still in the shipping packaging waiting for my old ones to wear thin and need re-soling.

When companies run sales on premium, durable products with long shelf lives and low storage costs, they encourage this type of stock-piling. Its true too in manufacturing, especially where many sales are made through distributors. Sales metrics are usually reported on a quarterly basis and if sales are not meeting projections, a common habit is to introduce a discount to make those numbers. This leads to Channel Loading which is just a fancy term for distributors stocking up on goods at a low price with the option to pass that discount along to the customer and move more product in the short term, or to hold on to it and make higher margins later while providing the same end customer pricing. If end customer pricing is not changed, then the manufacturers discount serves only to pad the margins of the distributor, not to drive incremental end customer sales.

I worked with one Medical Device manufacturer which was aware of their end of quarter discounting issue, but unfortunately also simultaneously codifying the issue in to their new pricing process. They desperately wanted to be able to track a count of Implants (medical devices with government tracking numbers which are surgically implanted into patients — not they silicon variety that came first to mind) versus Sales to get a sense of how shelf or consignment stock levels were being managed by their customers. It was a fuzzy picture due to timing, buying groups and other factors, but certain data worth gathering. When Implants weren’t running the same rate as sale you might be able to identify problem accounts.

If you’re interested in learning more about discounting cycles and how they become less effective with each subsequent use check out “Pricing with Confidence”*, which has good visual on how over time, as distribution channels increase their own stock levels, deeper and deeper discounts are required to reach the same sales volume and Average Selling Pricing plummets.

The point as usual, is that ad hoc discounting isn’t the best answer. It’s not going to grow the market the way you want it to, or the way proper segmentation, product development and effective messaging might.

Source: *http://www.holdenadvisors.com/holden-interactive/pricing-with-confidence/