Are retailers out-of-step with consumers when it comes to price?

Discussion
Photo: @maginnis via Twenty20
Oct 31, 2019
George Anderson

A recent survey of senior retail executives and consumers found that both groups are in agreement that quality is the most important factor in purchasing decisions. There is a big disconnect between the two, however, when it comes to the importance of price in deciding what to buy.

Only 20 percent of executives think pricing is most important in purchasing decisions. Way more consumers (40 percent) say price is the most important factor in deciding what to buy.

Price perceptions are also in stark contrast between the retailers and consumers surveyed. Only twenty percent of retail executives think consumers believe prices are going up online and in stores. Consumers see this differently, with 51 percent reporting online prices increasing and 60 percent saying that they are paying more for in-store purchases.

“These data show consumers are more concerned with pricing than many senior decision makers in the retail industry suspect,” said Greg Petro, CEO and founder of First Insight, in a statement. “The impact of this disconnect will only continue to grow as prices rise due to tariffs. Retailer and brand decision makers need to understand consumers’ perceptions to ensure they are able to continually attract today’s consumers with the right price-value equation.”

Thirty-six percent of consumers point to price promos, coupon availability and better pricing as one of the three biggest factors that make them choose to shop in a store rather than online. Only 12 percent of retail executives think these factors are important when consumers determined where they will shop.

Consumers and retailers surveyed agree that being able to see and touch products and being able to take a purchase home immediately are among the three top factors in whether to shop in a store rather than online. Retail executives, in both cases, see these as more important than consumers. Thirty-six percent of consumers rank being able to see and touch products among their top three factors compared to 44 percent of executives. The divide is even more noticeable on being able to take immediate control of a purchase. Forty-one percent of consumers name this as a top-three factor compared to 59 percent of retailers. 

DISCUSSION QUESTIONS: How well do most retailers understand the importance of various factors involved in consumer purchasing decisions? Do you think the findings of the research cited in the article are reflective of current reality or are they an outlier in some way?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Retailers want to make as many sales as possible and consumers want what they want at the lowest possible price. There will always be some form of disparity between the two. "
"Price is a major factor or Walmart wouldn’t be where they are."
"With all of the advancements in pricing analytics, most retailers still look at price two ways: regular retail and promoted retail."

Join the Discussion!

23 Comments on "Are retailers out-of-step with consumers when it comes to price?"


Sort by:   newest | oldest | most voted
Neil Saunders
BrainTrust

I don’t think this is about price; I think it’s about value. Often the problem is that retailers see their offers and products as being more valuable than consumers do – and that’s because many retailers are out-of-step with what consumers really want. On top of this, retail is more of a buyer’s market right now: there’s lots of competition and that means consumers can be picky when it comes to price.

Georganne Bender
BrainTrust

I’m with you, Neil. I don’t think it’s about price either.

Bob Amster
BrainTrust

Did you read my comment BEFORE I posted it???

Bob Amster
BrainTrust

It is not pricing per se, about which there may be basic differences. The industry is separated into numerous price level segments e.g. luxury, moderate, bargain or discount. The prices in each of these segments are not the most important factor but the perceived value of the purchase for that price is very important. If there’s value, they will come!

Dick Seesel
BrainTrust

Shoppers have been trained for years to wait for sales, to use coupons, or to save money using other incentives. Technology has only encouraged related behavior (like “showrooming”) since everybody can comparison-shop on their phones.

But “value” isn’t just about the lowest price. If a retailer expects a customer to pay more, is it offering higher quality or better service to justify the difference? If it’s not meeting this standard (and many retailers do not), it’s no wonder that shoppers tend to focus on price alone.

David Naumann
BrainTrust

Understanding what is important to consumers is imperative for retail success. We have done a lot of research on both consumers and retail executives and it is very interesting to examine the gaps between what consumers want and what retailers offer. If retailers aren’t paying attention to their customer preferences on all aspects of the shopping journey and all of the factors that impact their purchase decisions, they should start now.

Nikki Baird
BrainTrust
I think there are two things at play here. One, I don’t think retailers have fully grasped just how much the order of selection has changed because of the internet. What I mean by that is, consumers used to select WHO to buy from, before they would select WHAT to buy – because they were pretty much only going to go to one place to get the majority of what they need, and there was no other way to figure out who had what other than going there. Today, consumers have reversed the decision: WHAT to buy comes first, and then WHO to buy it from comes next. If you’re an exec of a branded manufacturer, you don’t really care about the WHO, so long as you win the WHAT. For everyone else, you better care a lot about how you can stand out when it comes to WHO, or else the only way you can win is by offering a better price. Consumers are aware of this – in fact, they can be very… Read more »
Dave Nixon
BrainTrust

It certainly shows the disconnect between what retailers “think” their customers feel and how they really feel. Price disparity is not something you solve with the flick of a switch. Retailers want to make as many sales as possible and consumers want what they want at the lowest possible price. There will always be some form of disparity between the two. There obviously will be those moments when the two meet and everyone walks away with their needs met, but the issue is oversimplistically twofold.

One, a better understanding of customer expectations on what is appropriate or fair pricing for the perceived quality of products and two, dynamic capability for flexible pricing from the retailers at the product level. Retailers’ current silo’ed infrastructure is not set up to be that nimble, contributing to perceptions that prices are rising from shoppers.

Heidi Sax
BrainTrust

It comes down to perceived value. Shoppers are most compelled when the ratio of quality to cost is one that they perceive as beneficial to them. This is based as much on whether they “trust” the retailer or brand in question as it is on price and actual quality, not to mention convenience and ease of experience. We’ve also seen evidence that shoppers are willing to pay more for ethical production. Regardless, a race to the bottom isn’t going to work.

Dick Seesel
BrainTrust

You’re right about the race to the bottom, because there is no bottom. If you think you have the lowest price on something, a competitor can always undercut you. But “lowest price” is more tangible than “value,” which may be why retailers focus on it.

Michael Terpkosh
BrainTrust

Retailers have always struggled with understanding the consumer importance of price. With all of the advancements in pricing analytics, most retailers still look at price two ways: regular retail and promoted retail. The consumer perception of a product’s retail price can vary from store to store, channel to channel. The current omnichannel shopping experience adds to the complexities of retailers trying to understand consumer price perception. The important conclusions from the survey are retailers need to invest more in pricing analytics and consumer insights to try to get a better understanding of the consumer’s price perception.

Michael La Kier
BrainTrust

Price will always be a key concern for shoppers regardless of how well the economy is doing. Retailers that forget that will repeatedly learn the lesson the hard way. That’s not to say that some shoppers and some retailers are price immune, but even for high-end goods, price does play a significant role.

Ian Percy
BrainTrust

I get both sides of the price debate, Michael, but I come down on your side. When people insist that it’s not about the price…it’s about the price.

Ian Percy
BrainTrust
Way back when I was recording my graduate school research on a typewriter, I found that that as you move “up” in an organization, each succeeding level had about 10 percent more positive perceptions. In other words senior executives thought things were amazing, everyone understood the vision, were happy, etc. Those on the bottom rung differed hugely in their opinion. In this case of retailers vs. consumers the same reality gap seems to be evident. My interpretation of such results is that people “at the top” had to think everything was fine because they had no idea what to do if it wasn’t. A highly paid executive sure doesn’t want to admit that! More important to this discussion is a conclusion that there is no direct correlation between price and quality. Thus the disconnect in perception. In fact, I dare say there is considerable evidence that the correlation is inverse. The wealthy will pay the price because if the item falls apart prematurely, they buy another. The not so wealthy want an expensive item to… Read more »
Jeff Sward
BrainTrust

Only 20 percent of executives think pricing is most important in purchasing decisions? That’s almost impossible to believe. It seems like 99 percent of emails, store fronts and websites have some kind of “SALE” banner or % savings or BOGO or “free shipping” or … some kind of savings/promotional invitation to shop and buy. What seems to be missing here is the distinction between the drivers of shopping choices and buying decisions. See and touch is a shopping driver. Pricing is a buying driver. See and touch can be a decision driver and validator, but then consider how easy it is for the shopper to pull out their phone and shop price. The vast chasms of disconnect in this survey suggest confusion in the minds of executives and customers alike on what is really being asked about the shopping and buying decision process.

Jeff Weidauer
BrainTrust

Given the accessibility of consumer data, retailers should be concerned about the disconnect in perspectives. Only 20 percent of retailers believe that price is most important, but the overwhelming message to consumers is price, which creates another disconnect. The challenge is to provide a strong point of difference that’s not strictly price-based, and helps to clarify the overall value to the shopper.

Rich Kizer
BrainTrust

First of all I think the retail world has trained customers and made price sensitivity a competitive issue, many times competing with themselves from the internet to the in-store experience. I don’t think retailers are out of touch, but I do think many have turned their eyes off of the quality of the customer experience, staff training and shoppertainment. Take all that out, and we become a transaction business. And therein lies a myriad of problems for the value equation.

Steve Robinson
Guest
21 days 13 hours ago

I highly recommend reading this article. However, I caution against seeing this as a simple answer to a complex problem. While the price is vital according to the surveys cited, it is but one slice of the larger question — why do shoppers buy? Brands must not ignore other equally important factors, which include findability, personalization, and price/value. Brands must manage the experience at every step of the shopper journey. There is no silver bullet solution!

John Anderson
Guest

I find the comments very interesting. The article is about the disconnect between high level execs and consumers on the importance price plays in the decision making and yet, after reading the first few comments (from execs) saying “I don’t think it’s about the price” seems to prove what the article is saying….

Ananda Chakravarty
BrainTrust

Retailers are pretty quick to adapt, and the best retailers can figure out what their customers care about most. The retail exec doesn’t want to drive price wars and a race to the bottom. They understand the importance of price, but are seeking all alternative ways to provide value for that price.

What the study finds is not misplaced however. It outlines that perception of prices overall are going up. This is different from what the exec is thinking. The fact is, the survey is missing the active indicators as customers are responding so strongly about price. The evidence is multi fold. Consumer confidence has remained flat at one of the highest levels in years. The retail market is thriving with >3% growth and unemployment remains unfettered at its lowest levels. Pricing might be rising, but customers are still buying, suggesting that price is not as important as customers response to a survey might be.

Consumer actions speak volumes and that’s where the smart retail execs have their pulse.

Jeffrey McNulty
BrainTrust

I feel that consumers have become smarter and are utilizing their resources to create a favorable shopping environment for their purchases. With the pervasiveness of “planned obsolescence” consumers are demanding that the products they purchase encompass value, reliability, dependability, and performance i.e. “An even exchange of Energy.”

The price point is only one metric that factors into many consumers’ buying decisions. However, there are some customers who are price conscious with all of their purchases. In addition, consumers are starting to question the bloated prices of specific product categories that generally have exorbitant markups e.g., apparel, footwear, electronic accessories.

We have entered a New Retail Ethos where consumers have increased access to pricing modalities while experiencing a cacophony of alternative options to purchase their products.

Tony Orlando
BrainTrust

Price is a major factor or Walmart wouldn’t be where they are. In spite of sketchy service, long lines, and no extra cashiers available, it is the number one retailer in the USA.

Add in Amazon, Costco, Dollar Stores, and Aldi, and you have to really stand out in your business or you will perish. High-end service type stores are aware of value, and no longer can they command the high margins they once had either. The trend to find a deal with free delivery is the new norm, which squeezes bottom lines even lower.

Creating niches and signature items can generate sales and it is crucial to stay creative, and find unique items to boost the bottom line. I live this every day, and price is on everyone’s mind who shops.

Cate Trotter
BrainTrust

It’s interesting how big the gap is between executives and consumers on some of these points. I think it’s indicative of how some of the retail industry is failing to keep pace with customer habits and wants, which is causing it to lose out. Price is certainly important to a lot of shoppers and this has been enabled by retailers through coupons, deals and sales. I would say that it’s not the only factor — what’s important for the customer is the perception of value. The exchange has to feel worth it for the customer and if you know something is going to be on sale in a few weeks time the perceived value of a product can be quite low.

Retailers need to provide an end-to-end customer experience (and by that I don’t mean Instagram walls and big productions — although they can have a place) that makes it worth shopping with them.

wpDiscuz
Braintrust
"Retailers want to make as many sales as possible and consumers want what they want at the lowest possible price. There will always be some form of disparity between the two. "
"Price is a major factor or Walmart wouldn’t be where they are."
"With all of the advancements in pricing analytics, most retailers still look at price two ways: regular retail and promoted retail."

Take Our Instant Poll

How common is it for retailers and consumers to be on different pages when it comes to understanding the factors that motivate shoppers to buy?

View Results

Loading ... Loading ...