Is Price Matching a Mistake?

Discussion
Jul 23, 2013

Showrooming is a bogeyman for brick and mortar retailers who operate in today’s hyper-vigilant pricing environment. One of the common responses is for stores to offer price-matching programs whereby they meet the published price of some or all competitors. Generally speaking, this tactical response has been seen as a positive for the retailers offering such a program, but is it?

In the case of Walmart, John Murphy, the chain’s former VP operations, believes that Sam Walton never would have gone for an ad match. Speaking on last weekend’s 8th and Walton Saturday Morning Meeting program, Mr. Murphy said that 30 percent of Walmart’s customers "are unbanked and a lot of them don’t speak English." Rather than try to haggle with a Walmart cashier over an advertised price of milk, that shopper is more likely to go down the street to buy a gallon of milk that is 50 cents cheaper.

Mr. Murphy argued that price matching is simply too complicated a process for customers and associates. "You’ve got to make it easy on the cashier and you’ve got to make it easy for the associates working in the store so that they are convinced that truly, you [have] the lowest prices in town on the right items. You don’t have to be on every item, but you do have to be on key items," he said.

[Image: Saturday Morning Meeting

Safeway is another chain that has decided that matching doesn’t make sense. According to the Coupons in the News site, the chain has ended its two-year "Deal Match" test in Chicago and Hawaii. The grocer offered a different spin on matches, choosing to offer it only to its Just for U rewards club members and only on specific items. About a dozen price-match items were made available on a weekly basis.

Is price matching generally a positive or negative for the retailers offering it? What alternatives do you see to price matching for retailers concerned about consumers’ perceptions about its pricing?

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23 Comments on "Is Price Matching a Mistake?"

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Bob Phibbs
BrainTrust

As I said in my first book, “You Can Compete: Double Sales Without Discounting” nearly 10 years ago, price matching is a losing situation. You’re allowing your competitor who may not have much debt, may have knock offs or may not know how to mark merchandise is determining your profitability.

The only hope for retailers is retail sales training. You must hire employees to embrace selling. You must teach retail sales training. And you must inspect how well they do it. Otherwise price matching—as this article shows—is way too complicated to think it’s a compelling strategy.

Mark Heckman
BrainTrust

On high ticket items, where the difference in price could mean hundreds of dollars in savings, price matching still makes sense. In fact, I believe that those retailers who sell commodity, high-ticket items, have learned that having some sort of price matching guarantee has mitigated some lost sales to online and other bricks and mortar stores. To that end, for those retailers, making the price matching process customer-centric should be a legitimate tool in their loyalty marketing arsenal.

However, supermarkets and other retailers, with their average ticket price being relatively low and the number of items placed on sales each week, price matching is likely to be more trouble than it’s worth.

Alternatively, I am convinced that supermarkets and other retailers with lower average item prices should focus more on having competitive deals and keeping their shelf prices within reasonable range of the low price leader. Consequently, I can understand why Safeway has ended their Deal Match test program.

Frank Riso
BrainTrust

Showrooming and matching price is a concern for many retailers in the specialty retail space and may have a need to be there. However, George seems to point to the grocery space and in that area I completely agree with him. This segment needs to compete in how their fresh departments differ and let price be a part of competition but not to match at every turn but to offer the best price on the right items. It is convenience, customer service, and who has the best meat, produce, and specialty departments that make the difference.

Robert DiPietro
BrainTrust

Price matching is generally a negative for the retailer (and the consumer) as it sets up a confrontational experience with the customer. The customer has to show a competing ad usually, then the retail associate has to act like judge and decide if meets corporate requirements (distance, competitor, like product).

One alternative may be to offer price match for members of the retailer loyalty program on key items against key competitors. E.g., we offer the lowest price on milk and monitor it for you on a weekly basis against these local competitors if one of them has a lower price and you have recently purchased milk this week, we will alert you and automatically credit you account with points equivalent to the price discrepancy, or send you a coupon for 2X the discrepancy $ off your next purchase. The key is to monitor it for your best customers on the key items.

David Dorf
BrainTrust

Getting good intelligence about competitors and pricing products competitively in the first place is the key. I agree that once the customer complains, its probably not worth the hassle of price-matching (except perhaps for high-touch environments or big-ticket items).

What’s pathetic is that on a recent trip to Walmart, they refused to price-match their own website. The associate said, “you should have ordered it online for pickup in the store.” Geez.

Bryan Pearson
BrainTrust

With the economy struggling to come back and retailers competing hard for every sale, it’s easy to get caught up in the showrooming panic. Still, that could be an expensive mistake, especially for smaller retailers that may not have the pricing power of the big chains.

Shrewd marketers will step back and determine how and even if showrooming is impacting their businesses. Insights from transaction data can be used to separate price-conscious (read: low-profit) shoppers from those who are more brand-loyal. Then marketers can design a loyalty strategy around those high-value, repeat customers, while at the same time preserving marketing dollars that may otherwise have been spent on marketing offers that in the end negatively impact revenues and don’t drive customer engagement.

There’s a great article on COLLOQUY.com called “The Gift of Showrooming” that’s worth a read. Find it here: http://colloquy.com/article_view.asp?uid=10307

Dr. Stephen Needel
BrainTrust

This is really a question to be split in two—for grocers, no, it doesn’t make sense; for high-end products, yes it does.

David Livingston
Guest
3 years 5 months ago

Price matching can be mess, but it shows you mean business. It’s a positive which Walmart has proven. It’s extra work for both store and customers. And customers don’t want to work. What if your major competitors don’t have advertisements or don’t have the exact comparable items? Obviously, if a retailer cannot be price competitive, they will eventually be out of business.

Walmart usually takes their major competitor’s ads, then lowers prices slightly below the advertised price of featured items so cashiers don’t have to be bothered. Customers quickly see Walmart is cheaper and just toss the ad. Some retailers have used the loyalty card gimmick, but it can be effective only to a certain point. Eventually the smarter customers will just cherry pick you.

Liz Crawford
BrainTrust

I like price matching. It doesn’t matter how complicated the process is, or how little it is used. The assurance that the retailer is willing to match the lowest price is all that many shoppers want to hear. The benefit of price matching is the claim itself (like “whiter teeth!” or “there’s no more powerful cleaner on the market”). Most shoppers want assurance that they are making a smart choice by shopping a particular store, whether or not they pursue every avenue to unearth a deal.

Matt Fifer
Guest
Matt Fifer
3 years 5 months ago

I worked with and for many people at Walmart over the years who rightly struggled with the Ad Match program. For one, it makes the customer do all the work, which is particularly difficult to understand for a retailer who touted for so long the “Always Low Prices” slogan and could have/should have been much more proactive at the local level in advocating for those customers by way of comp shopping.

It also becomes a trust issue, as it sends a message to consumers that promises low prices, but if you catch them getting beat, they’ll reward you … but only you.

Ryan Mathews
BrainTrust

Price matching is institutionalized corporate insanity. If the best you can do is ape what somebody else has already done, you’ve got big trouble. Ditto if the only way you can gain loyalty is to buy it.

Mark Price
BrainTrust

Price matching is generally seen by consumers as a positive; however, consumers also have skepticism about whether a retailer will actually match or just try to squirm out of the discount.

In addition, larger retailers have countered by requesting that manufacturers provide custom SKUs so consumers cannot price match. The custom SKUs vary by only one small detail in many cases, but that is enough to invalidate price matching efforts of consumers.

Alternatives include bundling products to provide greater value, offering a mix of prices that include some that are the lowest in the market and offering ancillary services or benefits (free shipping, etc.) that make the calculation more complicated for consumers.

James Tenser
BrainTrust

Price-matching policies are a glittering promise the retailer can put into its ads, but it sets up a rather ugly kind of in-store interaction.

For high-consideration purchases, the better, simpler solution is to price the product competitively in the first place. When the in-store price already meets the price found in pre-research online, the sale is a cinch to close, and the store’s value reputation is reinforced.

In grocery and other FMCG, this is a bit less practical. Most item purchase decisions are not so much pre-researched as they are grounded in recent past shopping experience and available deals. A price match guarantee makes a positive statement, but it’s risky to invite haggling and intervention at the point of sale.

In sum, price matching is a race to the bottom.

Steve Montgomery
BrainTrust

Price matching is something we see all the time in the retail fuel industry. What it means is that you are at the mercy of your dumbest competitor. As Bob noted, they may be without debt, have an inferior product, or simply be operating with a completely different mindset.

With fuel it is relatively easy to match prices with the guy across the street. There are only three products and price changing is easy, and done without consumer input. In almost any other segment of retail, that is not the case.

Alan Cooper
Guest
Alan Cooper
3 years 5 months ago

It takes a complete company-wide commitment to the price matching strategy. This means extensive training in the customer support, contact center and sales areas. This means that 99.99% of customers with a price match “event” leave satisfied. Without a lofty goal, the business is opening itself to hoards of complaints on the popular complaint boards, no less tarnishing its brand. It could look great as part of a marketing strategy, but the execution can be disastrous for retaining customers. I’ve seen it happen too often.

Price matching involves the following factors and decision points for the employees: one day sales, clearance, coupons or gifts cards offered with, other rebates, limited quantity offerings, exclusive SKUs, no sales tax, internet only, multiple quantities purchased only, etc. This certainly can be very complex, too complex, for a retail associate-customer transaction. If it boils down to a detailed scrutiny of the fine print (other than just an effective date), then, all too often, it morphs into a “trial.” Customer lost.

A simple, clear, hassle-free customer transaction is the goal for each and every customer. There are too many choices, and avenues to vent, if not.

Martin Mehalchin
BrainTrust

The alternatives are a strong price intelligence program enabling active management of pricing on key items combined with a strong non-price value proposition so that you can attract and retain customers without racing to the bottom on every item.

Tina Lahti
Guest
Tina Lahti
3 years 5 months ago

I hear the term showrooming most often in relation to high ticket items, specifically electronics. The impression that I get is that retailers such as Best Buy are concerned that customers are browsing their stores, then buying an item that they researched in the store online. In reality I find that the opposite is true. Consumers research high ticket items online and then check availability and go to the store to pick them up. Under those circumstances, price matching is a must. Why would a consumer get in their car and drive to a store only to pay more than they would if the item were delivered straight to their door?

Tom Redd
BrainTrust

The secret needed to win this the shopper is not just price matching—it involves image wins. Now what is this crap? An image win happens when a shopper gains the right price and feels good about the retailer. Feeling good about spending money involves a mix of selling, pricing, and smiling.

To win this game of price match, some effort needs to be put into how to supply store ops changes that can—if needed—support a price match. The real answer is in teaching the store team to SELL to the point where price is not the issue any longer. Sell the shopper “up” off a specific SKU or sell them “down” and and more SKUs to the basket. Get them off the price match SKU.

The new retail world loops back to the old retail world in the aspect that SELLING MATTERS. The best stores are the ones with the BEST SALES TEAMS and STRONG INVENTORY balances. Get out of price and get into SELLING!

Shep Hyken
BrainTrust

Price matching goes to those who can’t create enough value to justify their prices. Deliver enough value, build relationships, create a superior service experience and you will have customers that are less price sensitive. That doesn’t work for every type of business, but some companies have done very well sticking to their pricing strategy. You don’t see Whole Foods price matching, yet their stores seem to be filled with customers looking for quality and value—and they sometimes pay a little more for that.

The late Zig Ziglar once said about higher prices: “Don’t you think it’s a good idea to pay a little more than you thought it would cost, than a little less than you should?”

Larry Negrich
BrainTrust

Treat customers right, offer unique goods, create a unique and appealing shopping experience, engage throughout the shopping experience, and at times be willing to bargain to get a sale. Price matching, leveraged properly, lets the retailer keep the shopper spending in the store.

Jerry Gelsomino
BrainTrust

I would suggest trying give-away premiums, stressing value-added services for frequent and loyal customers, as well as generally offering and delivering a suite of services that make it worthwhile to shop at only one store. Even if it means for some items, you may pay more. Here in Hong Kong, I have to shop in three or more stores to FIND everything I’m looking for. I can’t wait to get back to the States and ‘one-stop-shopping.’

Ed Dennis
Guest
Ed Dennis
3 years 5 months ago
Price matching is a great tactic for retailers who don’t necessarily advertise themselves as the low price leader. No one can complain about a store’s high price if the store has a price match policy. The fact is that almost no customers ask for a price match. I do use it on occasion and have never been refused. The possible alternative is to institute a loyalty program and use this to convey lower pricing to club members. I consider this to be a reprehensible retail tactic. However, my favorite retailer does quite well with out price match or a “loyalty program.” They do something quite remarkable, they hire well, train well, merchandise well, don’t have OOSs, keep their stores clean, provide great quality meat and produce, respond quickly to any customer concern and price reasonably. It would seem that only one or two retailers in the USA can manage 80% of this today. I would also mention that just about every chain retailer in this retailers home market has sold out, gone bankrupt or otherwise left the area. The fact is that consumer perception about pricing is not the only factor consumers use to make shopping decisions. In fact, pricing… Read more »
Shilpa Rao
BrainTrust

Give the customers the ability to choose their own coupons on the items that matter to them and do away with price matches. It is complicated both for customers and retailers.

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