Why Online Retailers Should Avoid Price Matching

Everyone who runs a retail or ecommerce store understands that if you want to make more money you need to sell your products at a higher price, but if you want more people to buy your products, you need to sell them at a lower price. This is a widely understood concept. You meet it somewhere in the middle, the ‘right’ price, and strike a balance between units sold and profit per unit. Discovering exactly what this right price is can be extremely tricky, however, and may make the difference between your long-term success and failure. Many retailers resort to copy and pasting the strategies of similar companies and hoping for the best. This is often a failing strategy.

One of the natural outcroppings of this train of thought is price matching. Guaranteeing to match or beat your competitor’s prices. While on the surface this seems like a prospect guaranteed to lead to sales success, this is often not the case. Not to say this can never work, just that it is not the silver bullet for price evaluation many think it is. It often fails to have the intended results - possibly leading to confusion, arguments and a decrease in customer satisfaction. Even when these little complications can be ironed out, the underlying logic behind this sales strategy is flawed. Making sure the customer knows they are being treated fairly is definitely a smart principle to uphold, but many fail to realize the price of the product is not the only factor one weighs when making a purchase.

“Offering a price match guarantee is detrimental to some retailers’ brand promise, i.e. it adversely impacted margins of those who don’t typically position themselves as low-cost leaders…”

-Mauricio Barberi, UpstreamCommerce, automated and rules-based price optimization software

Price optimization, predictive analytics, and dynamic pricing are pieces of software that you should highly consider. These technologies have shown that much more goes into the “right price” than it simply being the lowest. The ability to predict increases in demand and the purchasing habits of people from certain demographic backgrounds allows sellers to raise and lower prices to match what the consumer is willing to pay, rather than just what competitors are offering. Increasing profits when possible also allows you to dramatically undercut competitors when demand is low. This not only maximizes your short-term profits, but it also builds up brand image and customer loyalty in the long run.

Going back to the idea that the ‘right price’ isn’t always the lowest, it’s clear that brand image has a lot to do with this truth. Many “high-end” retailers can often sell comparable goods for much higher prices. They get away with this by increasing the value of the product through perceived (actual or otherwise) product quality, bundled services (like free installation or rewards programs) or simply the ease of use and store experience. Many customers purchase multiple items at once, often the fact one of these items cost a dollar or two more or less will be inconsequential when compared to the myriad of other factors that led the shopper to your store.

Your best bet is to invest in software that helps you make informed decisions on prices while focusing on the overall quality and presentation of your store. This combination will allow you to attract customers due to the quality of the experience, and to sell them products at the price points they are comfortable with paying. In many cases, consumers will actually opt for a slightly higher priced comparable product, willing to err on the side of reliability and the perceived quality that comes with a higher price.

Most importantly, don’t let your competition dictate your offerings. Simply selling the same products at the same prices as another store won’t set you up for success in the long run. Differentiation is imperative. Also, If they are consistently offering products at prices you simply can’t match, you just need to show shoppers the added value you bring to each item.

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Assaf Dudai

Head of Content

eTraffic

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