How Retailers Compete on Price Image
In the time of Amazon.com, e-commerce and direct-to-consumer (DTC) brands, traditional retailers are continuously having to grapple with how they can compete, and price remains the primary battleground. We're all familiar with the dollars and cents logic behind selling products and maintaining margins, however, winning on price is about more than just hard, tangible figures, it's about “price image” as well.
Simply put, price image is the appearance a retail brand projects when it comes to price — which may or may not be different from its real price position compared to competitors. For example, Kohl’s recently announced plans to “surgically” cut prices on specific items to try to project a more budget-friendly identity. However, setting and appropriately managing a price image is much easier said than done. Here are several key areas that retailers need to be aware of as price image becomes a greater focal point:
- The rise of mobile web: Mobile internet means consumers have access to all your competitors’ prices anytime, anywhere. Hence how many companies now make sure consumers know they will match any online price, for example. This makes it more challenging to truly separate yourself from a price-image perspective, and requires retailers to be much more vigilant about both their own prices and their competitors’ prices.
- Delivery becomes a secondary battleground: Delivery has become a service many customers have come to expect, and they factor its price into their purchasing decision. A delivery fee, when there is one, stands out and is easy to compare from one retailer to another. As a result, more and more retailers online and offline compete on delivery options to improve their price image. Think about how many retailers offer free “slow” delivery and/or cheap express delivery. For retailers, it also means integrating that cost — or added revenue — into their price and margin calculations as well as revenue projections.
- Factoring in promotions, coupons and deals: Discounts are becoming even more important as price-image management becomes increasingly challenging. Deals, promotions and coupons are a key building element of price image given they explicitly promote the savings on offers with your brand. However, simply offering deals isn’t enough anymore. To stand out, deals must now become more personalized. Therefore, retailers must invest in the proper data analytics tools so that they can better understand their customers.
- True geo-location price optimization: Retailers today recognize the value of geo-based data and pricing. The problem is that while many retailers today do try to adapt pricing based on location, it isn’t granular enough to compete effectively. Instead of adapting prices manually with each store manager trying to find the right figures on their own, retailers need to begin investing in technology that can help them optimize prices on a store-by-store level based on hard data and consistent rules. This will help them beat competitors “on the ground” within very specific product categories and will give them more valuable data into how they're performing vs. competitors.
Winning on price image can be tough. However, with the proper strategy and tools in place, traditional retailers can both better understand their price image and tailor it to take advantage of any opportunities that they happen to uncover in the retail marketplace.
Julien Gautier is the marketing director at ActiveViam, a company that provides precision analytics platforms to help retail organizations make better decisions, faster.