Last year, holiday sales were down 3.4%. This year, even more Americans are dealing with job loss, fear of job loss, wage cuts, a drop in home prices and a rise in credit card interest rates.

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So what will consumers do? What's a retailer to do?

Working twice as hard but not making anymore
Let’s start with retailers. Dropping prices to push out inventory has become the norm since last year. Offering extreme discounts is a tactic many will use to try to get customers in their doors. Here's what that means:

Let’s say you have a product that costs you $10. You normally sell it for $20, leaving you with a $10 profit. You decide to cut your price by 25% to $15.

So now you make $5 every time you sell a product. You have to sell twice as much of this item just to make the same amount of money!

In this example, we used a product sale to keep it simple. However, many small businesses sell a service. So think about it this way:

Carrying forward the numbers above – if you cut your hourly rate by 25% – you would have to work twice as much but you wouldn’t make anymore.

Is it worth it? Would you be better served pursuing another strategy?

Consumers are more price-sensitive, but value is still king
Now, let's look at those customers. Experts cited in the article say consumers will shop for good value on items they want and need. Note the term “value”, not price.

Consumers are more price sensitive than ever. However, because they have been bombarded with super-low prices, they are beginning to think that those products are worthless.

Furthermore, they will pass up an offer – even if the price seems too good to be true – if they think they just don’t need the item. If you cut prices too much, you may kill your business by killing your customer with kindness!

3 strategies for a tight-belt economy:

• Divide your product or service offerings into three categories – must have, need and want. In this economy, focus on the must haves. Which customers must have your must have product? Focus most of your efforts here.

• Is there a way to bundle a “need” with a “must have” or a “want” with a “need”? Offer a special deal on the bundle rather than the individual product or service. You may find that you can sell more without having to work a lot harder.

• Think about your customer’s bottom line. How can you add value to your product or service and boost your customer’s bottom line at the same time?

For example, is there some essential knowledge that you could impart to help your customer use your product or service to save money? If so, they’ll be much more likely to buy – even now.

How are you compelling your customers to buy your products or services?

Share that with us by leaving a comment, e-mailing us at bigginfo@biggsuccess.com or leaving a voice message at 888.455.BIGG (2444).

We think you’re too kind for checking in with us today. Thanks so much!

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There’s a popular celebrity who says it took him 26 years to get one mile down the road. Please join us next time and we’ll fill you in on his story of bigg success. Until then, here’s to your bigg success!

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That creates an opportunity.

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So we’re putting a 180 degree spin on the old advertising slogan – buy now, pay later. This year, we moved to buy now, pay now. Let’s just take one more step – pay now, buy later.

Old ideas, new popularity

The old idea of “layaway” was used more this year than it had been for some time. K-Mart even built an ad campaign around it. It’s not as easy for retailers to administer as buy now, pay later programs – like when you use your credit card – but in today’s economy they’re just happy to make any sale.

Another old idea is also seeing newfound interest – the Christmas Club. Your parents may have done it; your grandparents almost certainly did.

The Christmas Clubs of old didn’t pay a lot of interest and they carried restrictive rules about early withdrawal. Good for those not disciplined enough to leave it alone. Not desirable should a true emergency arise.

Create-your-own Christmas Club

But you don’t need a Christmas Club Account to fund next year’s Christmas presents. You can create your own – probably using a Money Market Account or a Money Market Fund.

Assume that you plan to spend $2,000 next year for Christmas presents. Right now, you could find a Money Market Account that pays around 2 percent, according to bankrate.com. 

If you were to invest $220 every month, starting in January, you would have your $2,000 by the end of September. Get ready to shop in October, with cash in hand!

You won’t earn much interest because rates are so low right now. But look at it this way – you won’t be paying interest on next year’s Christmas presents either!

Your Club Account … not just for Christmas anymore

A Christmas Club Account is just a fund dedicated for a specific purpose. You can extend this concept beyond Christmas. What if you …

• funded next year’s property taxes in advance? It’s your own escrow account!

• set money aside to pay your insurance annually so you get a better discount?
• paid for your next vacation a little bit at a time before you go? Talk about stress relief!

Getting a kicker

You can do this for any, and every, major obligation or opportunity you have. And here’s the kicker …

For major expenses that are several years away, you can set money aside in an account that may pay higher interest.

Generally speaking, the longer you can wait to get your money back, the higher the rate of interest you’ll earn. For example, if you’re funding a car purchase three years away, you may be able to put money in a 3-year CD.

The key is to match your investment time frame to when you will need the money for the obligation or opportunity.

One caveat

Of course, if you have outstanding debt, especially credit card debt, you’ll probably want to pay that off before you start funding other obligations – even if that means postponing, or cutting back, on discretionary expenses like a vacation.

We got used to easy credit – buy now and pay later with interest. We suggest paying now and earning some interest so when you buy later you’re money ahead!

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Thanks so much for reading our post today. Join us next time when we ask three questions that lead to a brighter future. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00296-122908.mp3

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