Saks Takes Good, Better, Best Approach to Selling

Discussion
Jun 22, 2007

By George Anderson

Saks Fifth Avenue caters to a very upscale clientele but the department store’s management knows that there’s rich and then there’s super rich. That’s why the company has developed a three-tier price point strategy to meet the needs of its range of affluent shoppers.

Saks Inc. chairman and CEO Steve Sadove told attendees at the Reuters Consumer and Retail Summit in New York that the company is making strides in competing against the likes of Neiman Marcus.

“There’s an enormous amount of work that needs to be done, and building the customer base is part of it,” he said.

The customer, according to Mr. Sadove, makes $200,000 or more annually and looks for internationally recognized brands such as Chanel and Fendi. The department store offers goods from these designers but also alternatives for those shoppers who seek them. Think of the Saks’ approach as a good, better, best strategy with price points reflecting the level of style and quality in each tier of goods.

“Our low end would probably be a high end of a Nordstrom and Bloomingdale’s,” he said.

Discussion Question: Considering the consumer base, is Saks on the right track with its three-tier pricing strategy?

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16 Comments on "Saks Takes Good, Better, Best Approach to Selling"


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Stephan Kouzomis
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Stephan Kouzomis
14 years 11 months ago

What better way to focus on your most loyal to just loyal shoppers. And this market segmentation of the Saks consumer base will bring more sales. The secret is customizing the service level to its core shoppers.

Not a bad thought for the food industry!

Another proven MAD MARKETING vehicle, which most retailers in any industry overlook!

Hmmmmmmmmm

Susan Langley
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Susan Langley
14 years 11 months ago

If Saks is after the “affluent” consumer, tier pricing, based on their description of who that consumer is, really makes no difference. An affluent shopper buys what they like or what they want. Loyalty to the Saks brand and store experience will keep the affluent customer shopping. Customer Service, personal attention and unique offerings are a must to retain this top tier group of clientele. In my experience, Saks salespeople approach those who “look” like they have money. The “judging a book by its cover” approach will have to change to bring any consumer back. I have to disagree with Mr. Sadove’s quote that “Our low end would probably be a high end of a Nordstrom and Bloomingdale’s.” Has Mr. Sadove spent time in a Nordtrom Store? Nordstrom segments merchandise by lifestyle, and several departments appeal to the affluent consumer, including international brands and couture garments. Unless Mr. Sandove considers a cocktail dress retailing at $5,000+ to be low end equivalent tier pricing for Saks, his perception of the competition needs to be refreshed.

Roger Selbert, Ph.D.
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Roger Selbert, Ph.D.
14 years 11 months ago

The affluent market is huge, vibrant and growing, as wealth and income reach unprecedented levels. We’re probably talking about 18% of all US households, and a disproportionate share of all retail sales ($1 trillion by decade’s end, says Boston Consulting).

But the way to segment the luxury market will increasingly be by age.

According to Unity Marketing, the average affluent consumer spent $56,000 last year on luxury goods and services (up 6.6% over 2005). But young affluents (age 40 and below) spent most lavishly (32% more than those over 40), and are the key to future growth in the luxury market.

How to reach and sell to this new affluent market? You had better have a killer web site for shopping, driving traffic and selling, and you had better have great CRM to enhance frequent high-ticket, multi-item purchases, and to generate referrals.

Mel Kleiman
Guest
14 years 11 months ago

If the buyer sees good…better…best not only in the name on the merchandise but also in the quality, then this could be winning strategy. The key to making it work will be the shopping experience itself. If everyone who walks into the store feels like they are being treated as if they are in the BEST category then I think the strategy will work but if you not only separate merchandise in the the 9 grid model but also provide different levels of service, the consumer is going to see right though what you are trying to do and I think the model will fail.

Craig Sundstrom
Guest
14 years 11 months ago

Ultimately Saks has the sort of “tween” problems we often see associated with Macy’s, et.al.: bracketed on one side by ultra-upscale stores who offer $50K dresses (and $5K jeweled dog bowls), and “downscale” retailers like Nordstrom who offer greater market presence and–probably–value. (And I certainly second Susan’s questioning of Mr. Sadove’s perception of Nordstrom’s price points…a rather ominous observation, if we assume that knowing your competition is key!)

Certainly, luxury can be lucrative, but it’s also a fickle and (thus) risky market as well.

Ryan Mathews
Guest
14 years 11 months ago

Let’s see — good, better, best — ego, superego, id….who wants lower tier luxury goods????

Janet Dorenkott
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Janet Dorenkott
14 years 11 months ago

Good, better, best…I think Saks has the reputation of catering to “the best.” If they want to now cater to “the good” and “the better,” they have to be careful not to make “the best” feel like their store is no longer catering to “the best.” In addition, they have to make sure that “the good” don’t feel as though they aren’t treated as well as “the best.”

Question: should the richest people really be called “the best?” Some of the best people I know make very little. I think they should call it catering to “the rich,” “the richer” and “the richest” since that is what they are actually doing. And yes, I do believe Saks can be successful doing this.

Dan Nelson
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Dan Nelson
14 years 11 months ago

The good, better, best assortment has been around for many years, so calling that the “differentiator” won’t achieve the results. True differentiation (especially targeting the $200K+ shopper) will require a much more personalized, customer centric approach than assortment focus.

How Saks goes about really “connecting with” this targeted shopper segment will determine their success. Very affluent shoppers have a “catered to” lifestyle; in their careers, in the private enclaves where they live, and when they travel and vacation.

Dick Seesel
Guest
14 years 11 months ago

Saks is recognizing the need for more lifestyle merchandising, not just a range of price points to appeal to its opening-price and “trade-up” customers. Sadove mentioned in a recent Wall Street Journal article that his team evaluates product according to good/better/best and also according to classic/modern/contemporary. This isn’t far removed from the “nine box grid” that Kohl’s (at different price points) has been discussing with analysts for a few years. Both stores recognize a broad demographic and psychographic range of customers walking through the door, and both stores seem to be benefiting from the strategy.

Joel Rubinson
Guest
14 years 11 months ago

A critical success factor will be branding the store against the right price tier. If you offer “good, better, best,” are you being thought of as the store that offers good, or the store that offers best, but where “good” purchases of exceptional value can be found? I think the latter strategy is more interesting (works great for Coach and Tiffany), but the most important thing is to have a strategy along this dimension and then assiduously measure shopper perceptions to make sure they are on strategy.

Liz Crawford
Guest
14 years 11 months ago

The good, better, best approach aligns with consumers’ pocketbooks just fine. The trick is not to let the “better” people feel that they are not getting the “best” for their money.

This goal may be achievable with plenty of consumer feedback and research. But consumers are a savvy lot and they would rather feel that they were getting a real brand name at a bargain price, than second-best on anything.

Alex Har
Guest
Alex Har
14 years 11 months ago
In a good-better-best strategy…I was taught and have somewhat tested to find it true that if correctly priced, 50% of customers would opt for the best. I wonder if others share this experience. Ultimately the issue, I guess, is about choice. Few consumers today confine themselves to products that are “the most expensive.” It is more likely that many would not want to be caught dead in a discount shop. I remember some senor executives from my company visiting Bangkok, some years ago. They were attracted by the large variety of cheap clothing they see on the streets but felt below themselves to shop there. To solve the problem I arranged for a street vendor to bring a suit case of stuff to the hotel. Almost every piece was sold. Going by this story, it would probably be a clever strategy for Saks to carry lower price stuff. Saks also has choices. It may only want to confine this to just one of two categories for start–or to offer cheaper stuff as a them campaign,… Read more »
Gregory Belkin
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Gregory Belkin
14 years 10 months ago

I have to agree with Janet Dorenknott’s comments above. Saks is known for selling super fancy goods (and the higher prices) to affluent customers. If they are serious about the 3-tiered approach, they will have to 1) Convince not as affluent shoppers to take a second look at Saks, and 2) Not alienate the more traditional shopping base, who may have some feelings of exclusivity.

I also agree with her “the best” comment. Making that connection to the wealthiest of shoppers begs a conversation that would “best” not be held here. 🙂

Odonna Mathews
Guest
Odonna Mathews
14 years 10 months ago

The success of Saks’ new strategy depends on how it’s marketed overall and how it’s offered in their stores. Will all groups of consumers receive the same level of customer service even though there are three tiers of pricing? Will associates treat all consumers the same or lean toward a higher priced customer?

And I wonder what their consumer research shows is the percentage of consumers who would buy good, versus better or best?

Christopher P. Ramey
Guest
14 years 10 months ago

He, no doubt, is referring to the intersection of price elasticity and value proposition. That is the sweet spot for Saks Fifth Avenue, and all marketers of luxury products and services. No easy trick in a world where 80% of the affluent come from middle-American households.

Selling to the affluent is never about a three tier price strategy. It’s about creating harmonic intimacy.

I wouldn’t be too harsh on the price point comment. He is merely positioning where he’d like Saks’ price points to be. Ultimately, Saks needs that customer.

William Passodelis
Guest
14 years 10 months ago

I agree with Mr. Nelson. Assortment is of utmost importance to Saks, however it is SERVICE and customer centric attention that would really deliver a punch for Saks and further increases in their fortunes. I applaud their focus and attention to product that they have done over the last 1 – 2 years but service is the true definer for the top level of retail and is why Neiman Marcus is top dog – or is seen as top dog.

Attention to service and having knowledgeable sales people can build on their improving product assortment to really solidify them in the minds of their customers as The Store to turn to.

Good, better, best is fine, as long as the good IS best at the majority of other specialty retailers and boutiques that are available. (I am certain they know and) They SHOULD know their competitors’ assortments, amenities, and service.

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