Is Price Really King This Holiday Season?
The holiday season represents a massive opportunity for retailers, both online and traditional. Last year’s Adobe Digital Index Report showed consumers spent $91.7 billion online in the U.S. alone, an 11 percent jump from the year before. In Canada, the U.K., and France, this rate of growth was similar, with jumps of 14 percent, 11 percent, and 14 percent, respectively.
Part of what the retail industry has learned from this growth is that when it comes to holiday shopping, consumers value price cuts and promotions more than anything else. Retailers that leverage deep discounts as part of their holiday marketing strategy, especially around Black Friday and Cyber Monday, win the holiday season … or so the retail industry thought.
As it turns out, there's strong evidence that suggests this might not be the case.
Recent studies validate that consumer behavior may be trending in a different direction. Data shows a disparity between what consumers say they want and what they actually want. Consumers say price is king, but their behavioral patterns indicate otherwise.
Data from millions of customer reviews and 13,000 consumer surveys, part of Trustpilot’s Consumer Behavior and Expectations: The 2017 Holiday Season report, indicated pricing was one of the most important considerations for the 2017 shopping season. Of the 8,000 respondents to an August 2017 survey in which participants were allowed to select more than one response, 62 percent agreed.
Yet participants were more likely to use review sites over price comparison tools to assist in purchase decisions. In a separate survey of 5,000 consumers, 48.2 percent of respondents said they were more likely to rely on customer reviews, suggesting a fundamental difference between perceived and actual shopping behavior.
In fact, language analysis of more than 1 million customer reviews from the 2015 and 2016 holiday shopping seasons showed the word “price” in only 4 percent to 5 percent of one-star reviews; 10 percent in five-star reviews. Put simply, price just didn’t have much of an impact in overall customer satisfaction (or lack thereof).
On the other hand, “customer service,” “days later,” and “still waiting” dominated one-star reviews, and the appearance rate of “delivery” in one-star reviews rose from 17 percent in October to more than 19 percent in December of last year. “Great service,” “excellent service” and “fast delivery” were frequently cited in five-star reviews, peaking in December 2016 at nearly 22 percent of all five-star reviews on Trustpilot.
Conflicting, to say the least, but it does beg the question: Just how much should retailers focus on pricing this season, especially if they’re looking for high retention rates and customer loyalty for the remainder of the year and into next?
One plausible explanation for the conflicting data is that retailers are running out of wiggle room on pricing. As traditional and online retailers continue to battle over price, they’re creating a level playing field. Perhaps shoppers are starting to look at other areas to help them decide what and where to buy. Furthermore, sellers that rely heavily on price but fail to meet post-transaction expectations are paying dearly in customer reviews, which have year-round ramifications.
In summary, if you’re playing the holiday retail game, perhaps low prices shouldn’t take a front and center seat. Don’t ignore it altogether — after all, it’s likely your competitors are slashing prices to win business both online and in-store — but re-allocating some of those dollars to push customer service offerings and timely delivery will undoubtedly serve you well. It might even lead to a higher retention rate and increased revenue over the long haul.
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