Price adjustment could be a valuable tool for retail
The era of price adjustments and price matching has ushered in an indisputable series of wins for consumers.
Instead of searching a few dozen sites to make sure someone else doesn’t have a lower priced item, or having to wait a few days in case a big sale is imminent, consumers can click “buy” with confidence, relying on the fact that retailers are increasingly willing to match a competitor’s price or refund money if a major sale occurs within a certain time frame (usually 14-30 days).
But for retailers, Karen Webster noted in a recent conversation with Paribus CEO Eric Glyman, the obviously winning proposition is a little less clear. Of course, the consumer may convert for the lower price – but the point of retailing isn’t just to sell the good, it’s to make money on the sale. If retail is still in a race for the lowest price, Webster noted, margins will become so thin that only the biggest players will really be able to play. Unless a merchant has the ability to tap into another revenue stream or rely on massive volume of low-margin sales to prevail, Webster noted, it seems the Age of Alignment prices could usher in a dangerously expensive period for most retailers.
Glyman agreed — and noted that price matching works better for some retailers than others. “If you sell largely commoditized products and depend on the same SKUs, the same product with no differentiated service offering, [retailers] will have a problem.
But from a marketing perspective, he noted that it’s very expensive even to get a customer through the door of a retailer or across a digital threshold on an e-commerce site. “Price matching plays a vital role in ensuring that the person you’ve been trying so hard to get through your doors actually checks out with a purchase in hand,” he added.
Glyman said pricing — when done right — is a great way to build customer loyalty. The trick, he noted, is to match services with the right kinds of players and ensure they are efficient and useful for consumers and merchants in the transaction.
The power of price matching
According to Glyman, price matching is most effective when paired with the right type of merchant – one that favors a lot of “exclusive items you can’t get anywhere else” and a very service-oriented outlook, especially around payment.
“What most retailers who have been doing this for a while know is that this is a tool,” he explained. “If you look at these policies and where they’re coming from, they’re mostly associated with high-end, high-service channels. A good example is Nordstrom: it’s not a commodity-based discount store, and their policy is that they’ll take back anything you find at a better price at another store. »
Consumers don’t often accept the policy, but the mere existence of the policy gives shoppers confidence – and this ease of access ensures a positive shopping experience. As Webster noted, if the consumer had to make 16 phone calls before the retailer finally relented in offering a match or price adjustment, a good result is still considered a bad experience.
“If you spent 30 minutes to get $10 back, it just isn’t worth it for most people,” Glyman agreed.
The magic of automation
Consumers don’t want to do a full-time job monitoring purchases they’ve already made. It’s just not worth their time. They can’t know when all the sales are happening, or the ins and outs of each retailer’s policy – or even who to contact if they find an adjustment that should be made in their favor.
That’s the problem Glyman said he and his partners wanted to solve for people two years ago: to help consumers get back the money they left on the table.
Paribus uses technology to do what technology does best: track SKUs and sales and retailer policies. They do this by scanning consumers’ email accounts for business receipts of purchases made at retailers, and then monitoring the purchase of that item for the 30 or so major Internet retailers that are part of their network. The theory is that consumers buy and spend more because the FOMO (fear of missing out) on a sale or item is removed.
“We’re part of Capital One now, but we started as a two-person startup in Brooklyn in a living room with this tunnel vision — and we’ve really seen how the broader market reaction to that has really changed over time. time,” Glyman said.
The evolution continues
Retailers reacted differently to the coming era of consumer-centric pricing. Some have limited their returns and pricing policies in response to the ease with which consumers are using services like Paribus to squeeze their margins. Others, he noted, have become more expansive in their policies as they realize it can be a useful tool on which to build future conversions.
For example, he noted, while most retailers offer the price-matching refund as a credit to the original card, some are moving towards offering a gift card instead. – or offer the choice of a gift card instead of a statement credit to create a more personal relationship with their brands.
“The savviest players have turned to a gift card model – because it costs them the least, but also because when the customer comes back to use the gift card, they are very likely to spend a lot more. than the face value of the card,” Glyman noted.
Customers keep coming back: Glyman said the data they’ve collected over the years indicates this is affecting consumer behavior. Spend and share of wallet are growing at merchants who prioritize price adjustments, which he finds especially important as retailers gear up for the holiday season.
“If you just think about Black Friday, the marketing costs for retailers are going to be much higher,” Glyman observed. “An adjustment policy says to a consumer: ‘Your Black Friday starts today, so don’t worry about waking up at dawn to get the deal you want – buy the things you want and relax – you, because those savings will come back to you automatically anyway.’”
For a retailer, this is a huge bargain. It extends the sale without having to formally extend it and gives customers a reason to buy – and also provides demonstrable value for doing so before the binge.
“It all comes down to giving customers confidence that they’ll get a good deal,” Glyman noted.