3 Myths (and Truths) About Online Pricing Expectations

With tightened budgets and increasing online tenure, consumers are smart about the way they shop across channels today. Comparison shopping engines and widgets, for example, make it easy for consumers to quickly find the cheapest price for an item. This access has accustomed shoppers to finding the best deals or values available online — and the majority of online buyers select the item with the lowest price, regardless of channel. This easy access creates a conundrum for retailers, who must manage consumer expectations around pricing, but who also want to be consistent in their business practices. Forrester Research, in a recently published report titled "Higher Prices In Your Stores: OK Or Not? How Consumers React When Store And Web Prices For An Item Differ," examined this issue and revealed five retailer myths surrounding the topic of consistent pricing across channels. They include the following: Myth No. 1: Prices must be consistent across channels. Truth No. 1: Consumers seem to understand the logic behind price variances and hardly bat an eye, according to the report. In fact, even though they notice price differences between channels, 60 percent of U.S. online buyers said in a Forrester Research preholiday online retail survey in the third quarter of 2009 that they just buy in the least expensive channel.Myth No. 2: Lower web prices will lead to a price-matching nightmare. Truth No. 2: While there are costs associated with price matching, the report pointed out, the benefits are that retailers can effectively compete in a growing channel and maintain that competitiveness with an extremely valuable consumer. In fact, the population segment that's most likely to use comparison shopping engines has household incomes 54 percent higher than the segment least likely to use them. Myth No. 3: Different prices in different channels are terrible for my brand. Truth No. 3: Just one in 10 U.S. web buyers surveyed said they lose trust in a retailer when they discovered that the product they intended to purchase had a different price online than in-store, the report said. That said, the report suggested that clarity around differences in pricing, and clear policies and instructions on how shoppers can address those differences, can help work around the discrepencies. Wal-Mart, for example, displays a secondary price line in addition to the web price to show if the product price is different if bought in brick-and-mortar stores, the report noted.4 key tacticsThere’s simply no way to shield consumers from the amount of pricing information available on the web, especially as that information becomes increasingly more accessible. Sixteen percent of online buyers, for example, have used their mobile phones to compare physical store prices with online prices, the report noted. Depsite these challenges, the report offered the following four tactics online retailers can use to win the pricing war: 1. Get serious about the site experience. Not all online retailers can compete to offer the lowest price, but they can fight back by making the online shopping experience so pleasant and easy that shoppers will never want to go anywhere else. 2. Honor price matches. Companies, particularly those that sell commodity products that are widely available, need to understand that lower prices — and, consequently, lower margins — are a permanent reality of retail. If other web stores don't offer a lower price, a competitor like Wal-Mart will. 3. Actively monitor violations of minimum advertised pricing (MAP). Use solutions from vendors like Where 2 Get It and The Brand Protection Agency to help monitor MAP violations, the report said. These companies invite consumers to email screenshots of any lower prices they’ve found from competitors, then ask their buyers to address the violation issues with their partners. Manufacturers generally will not take responsibility in these situations, preferring to blame their distributors. But, the report noted, when confronted with physical evidence, they'll be forced to be more vigilant of violations of MAP. 4. Provide limited-time offers. One lesson to be learned from fashionable companies like Gilt Groupe and HauteLook is how to discreetly price-discriminate under the radar. Private sales that are only accessible via email links for a short period of time is one approach that we’ll likely see more companies engaging in during the years to come, according to the report. Also, vendors such as Runa allow retailers to make offers that expire once a consumer exits a web session. Calls to action like this can keep shoppers on a single retail site, making them less likely to leave the site and shop around for better offers, the report said.

Ecommerce News

3 Myths (and Truths) About Online Pricing Expectations

Melissa Campanelli

About

Subscriptions

Events

Publications

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!

Melissa Campanelli