12 Ways Price Matching Can Hurt Retailers

The strategy of meeting your competitors' pricing, price matching seemed like a good idea to combat showrooming. A few months ago I wrote about some of the internal problems stores were having with price matching (10 Reasons Price Matching Is A Risky Strategy": Ask Walmart, ToysRUs and Best Buy). A recent Retailwire article, "Is Price Matching A Mistake?" noted that some big retailers, like the Safeway grocery chain, which had been testing price matching have abandoned it for a variety of reasons. Here are some very astute observations and comments about Price Matching, in general, made by pricing experts in response to the Retailwire article:

Some Of The Ways Price Matching Can Hurt Retailers:

1. It's risky to invite haggling and intervention at the point of sale.

2. Price matching sets up a confrontational experience. The customer has to do all the work -- show a competing ad, then the retail associate has to act like judge and decide if meets corporate requirements.

3. Price matching places doubt in the customer's mind about whether a retailer will actually match or just try to squirm out of the discount.

4. Price matching is just too complicated for customers and associates and cashiers to worry about and execute properly.

5. When it comes to some items (like groceries, in particular), it's a lot easier for the customer to go somewhere with a lower price than haggle about it.

6. Price matching makes customers suspicious: Why didn't you have the "right" price to begin with?

7. Price matching becomes a trust issue, as the retailer (e.g. Walmart) sends a message to consumers that promises low prices, but, if you catch them, they'll reward you, but only you, for finding the discrepancy.

8. You're allowing your competitor -- who may not have much debt, have an inferior product, may not know how to mark merchandise, or simply be operating with a completely different mindset -- to determine YOUR profitability.

 9. Smaller retailers may not have the pricing power to price match the bigger, deeper-pocketed chains.

10. The retailer will have to work with the manufacturer about putting on special SKUs that can't be easily matched.

11. It takes a complete company-wide commitment to the price matching strategy. This means extensive training in the customer support, contact center and sales areas. (You have to do this) to insure that 99.99% of customers with a price match "event" leave satisfied.

12. If customers are unhappy about how they're treated re price matching, they'll let others know through social media comments.

Arguments FOR price matching:

1. Most shoppers want assurance that they are making a smart choice by shopping a particular store. The assurance that the retailer is willing to match the lowest price is all that many shoppers want to hear.

2. A price match guarantee makes a positive statement.

3. Price matching makes the most sense when a customer researches an item, such as a TV online, and then checks availability and goes to the store to pick it up, so they come to the retailer (Like Best Buy) ready to buy.

4. Price matching, leveraged properly, keeps the shopper happy and keeps the shopper spending in the store.

Some Gems Of Wisdom From Pricing Experts For Your Retail Bottom Line 

* Getting good intelligence about competitors and pricing products competitively in the first place is the key.

* Winning the shopper involves "image wins." An "image win" happens when a shopper gains the right price and feels good about the retailer.

* The ideal retailer doesn't need price matching to keep their customers: More important that they hire well, train well, merchandise well, keep their stores clean, provide great quality, respond quickly to any customer concern, and price reasonably.

* The ideal retailer will have a strong price intelligence program enabling active management of pricing on key items, combined with a strong non-price value proposition so that you can attract and retain customers without racing to the bottom on every item.

* For high-consideration purchases, the best solution is to price the product competitively in the first place. On the other hand, on high-ticket items, where the difference in price could mean hundreds of dollars in savings, price matching still makes sense. (However, for supermarkets and other retailers, with their average ticket price being relatively low, price matching is likely to be more trouble than it's worth).

* Consumer perception about pricing is not the only factor consumers use to make shopping decisions. Treat customers right, offer unique goods, create a unique and appealing shopping experience, engage throughout the shopping experience, and at times be willing to bargain to get a sale.

* Stick to your pricing strategy. You don't see Whole Foods price matching, yet their stores seem to be filled with customers looking for quality and value—and they sometimes pay a little more for that.

* Price matching could look great as part of a marketing strategy, but the execution can be disastrous for retaining customers.

* Some say that price matching goes to those who can't create enough value to justify their prices.

* A simple, clear, hassle-free customer transaction should be your goal for each and every customer.   

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Gilon Miller, CMO

About Author

Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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