Price transparency has become the new norm. It’s easy for shoppers to get information on the best prices from dozens of different sources without visiting lots of stores. To counter this movement, retailers now have tools to change prices very quickly.
Shoppers vs Retailers – guess who wins
One result of using these tools is that as shoppers become aware of retailers changing prices up to nine times a day, their trust in them starts to decline as they feel that they are being manipulated. To make matters worse, shoppers find that they can’t use familiar key products as consistent price reference points to help them make comparisons or buying decisions. The bottom line is that while retailers love what dynamic pricing can do for them shoppers don’t like it or want it.
Lowest price can lose
It’s clear that too much intra-day pricing runs the risk of irritating shoppers and sending them elsewhere, even from stores that usually have the lowest prices. The best way to really turn off shoppers with dynamic pricing is when they discover that the price was cheaper just five days before.
Another ramification of always striving to show that your prices are lower is the impact on brands. The more that retailers squeeze suppliers on price the more likely it is that the brands will sell through other channels. In fact an SPS Commerce survey found that 50% of manufacturers already sell direct to consumers, typically via digital channels.
As Paula Rosenblum at RSR says – just because retailers can do dynamic pricing doesn’t mean they should do it.
What should retailers do with pricing strategy?
There are many answers to this question but whatever strategy is adopted there are certain characteristics that should be common.
- Shoppers should find it consistent and easy to understand.
- Shoppers must be able to trust that the retailer is being fair and honest.
- Retailers must make it easy for shoppers to use their own benchmark prices consistently.
- Retailers must make it as easy as possible for shoppers to make a buying decision and believe a few days later that it was still a good decision.
Implementation starts at the shelf edge
Most shoppers mentally test the above four points at the shelf edge when they visit any store. Therefore the signage plays a vital role for the success of any pricing strategy.
To find our more about what other retailers are doing and perhaps how Pierhouse might help you best respond to the hot four at the shelf edge we need to talk…
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