How to “Net” a Customer – It May Not be the Lower Price

A News Feed From Kevin Coupe, Morningnewsbeat.com

Boomerang Commerce is out with a report that, while in some ways states the obvious, is worth considering because its recommendations run counter to how many retailers operate.

Because pricing is “a key weapon to increase market share and disrupt the market,” many retailers believe that price-matching is the best way to compete in a dog-eat-dog marketplace. But, the report suggests, it is not always the best way.

A News Feed From Kevin Coupe, Morningnewsbeat.com

Boomerang Commerce is out with a report that, while in some ways states the obvious, is worth considering because its recommendations run counter to how many retailers operate.

Because pricing is “a key weapon to increase market share and disrupt the market,” many retailers believe that price-matching is the best way to compete in a dog-eat-dog marketplace. But, the report suggests, it is not always the best way.

“Having a low price on a product will help you nab a transaction,” it says. “But, having a low price ‘perception’ will net you the customer. Your goal is to consistently build and maintain a ‘perception’ that makes your website the go-to website in the customer’s mind for all his purchases. Price perception is a measure of how high (or low) your customers see or ‘perceive’ your prices to be. ‘Everyday low price’ and ‘New low price’ are examples of retailers building price perception in their stores. So, how can you build, manage and measure price perception in a digital world where the customers have limited attention span and easy access to competition?

“To enjoy a good price perception in the market, the key decision is – identify products which ‘influence’ perception. At a high level, the strategy is very simple – price competitively on these products and drive up margins on the others. Achieve the opposing goals of achieving great price perception without sacrificing profits.”

KC’s View: It always has been the belief here that too many retailers chase the lowest price strategy, which generally is a mistake because you cannot always be the lowest price on everything … somebody can always undercut you on something.

I also think that one of the best examples of the price perception strategy can be found online, where retailers like Amazon can engage in dynamic pricing that is literally pegged to what people are looking at and how often, and what they seem willing to pay. It is all done by algorithm, but companies like Amazon know precisely which items that they have to be price-sharp on, which ones they do not. That’s a powerful tool…

Remember … it is the companies with the most actionable data that then actually act on it that tend to be the winners in the new economy.