The era of price adjustments and price matching has ushered in an uncontestable series of wins for consumers.
Instead of searching a few dozen sites to make sure someone else doesn’t have an item for a lower price, or having to wait a few days in case a big sale is around the corner, consumers can hit “buy” with confidence, relying on the fact that retailers are increasingly willing to match a competitor’s price or refund money back if a big sale comes up within a certain time window (usually 14 to 30 days).
But for retailers, Karen Webster noted in a recent conversation with Paribus CEO Eric Glyman, the obviously winning proposition is a bit less clear. Sure, the consumer may convert for the lower price – but the point in retailing isn’t just selling the good, it’s making money on the sale. If retail is always in a race for the bottom price, Webster noted, margins will become so razor-thin that only the biggest players will really be able to play. Unless a merchant has the ability to tap into another revenue stream or count on a massive volume of low-margin sales to carry the day, Webster noted, it seems the era of price matching could usher in a dangerously costly time for most retailers.
Glyman agreed – and noted that price matching works better for some retailers than others. “If you are selling largely commoditized goods and are reliant on the same SKUs, same product without a differentiated service offering, [retailers] will have a problem.”
But from a marketing standpoint, he noted that it is very expensive to even get a customer through a retailer’s door or across a digital threshold onto an eCommerce site. “Price matching plays an essential role in making sure the person you tried so hard to get through your doors actually checks out with a purchase in hand,” he added.
Glyman said that price adjustment – when done right – is an excellent way to keep customers coming back. The trick, he noted, is matching the services to the right types of players, and making sure they are efficient and useful for both the consumer and merchant sides of the transaction.
The Power Of Price Matching
According to Glyman, price matching is most effective when paired with the right kind of merchant – one that favors a lot of “proprietary items you can’t get elsewhere” and a very service-oriented outlook, particularly around checkout.
“What most retailers know who have been doing this for a while is that this is a tool,” he explained. “If you look at these policies and where they came from, they are mostly associated with high-end, high-service chains. A good example is Nordstrom: It is not a low-cost, commodity-based store, and their policy is that they take anything back if you find it at a better price in a different store.”
Consumers may not often take them up on the policy, but just the existence of that policy gives buyers confidence – and that ease of access ensures a positive shopping experience. As Webster noted, if the consumer had to make 16 phone calls before the retailer eventually relents to offering a price match or adjustment, a good outcome is still mentally logged as a bad experience.
“If you spent 30 minutes to get 10 bucks back, it just isn’t worth it for most people,” Glyman agreed.
The Magic Of Automation
Consumers don’t want to make a full-time job out of monitoring purchases they’ve already completed. It’s simply not worth their time. They can’t possibly know when all the sales are happening, or the ins and outs of every retailer’s policy – or even who to contact if they find an adjustment that should be made in their favor.
That’s the problem that Glyman said he and his partners wanted to solve for people two years ago: helping consumers recapture the money they were leaving on the table.
Paribus uses technology to do what technology does best: keep track of SKUs and sales and retailer policies. They do this by scanning consumers’ email accounts for commerce receipts of purchases made at retailers, then monitoring the purchase of that item for the 30 or so large internet retailers that are part of their network. The theory is that consumers shop and spend more because the FOMO (fear of missing out) on a sale or an item is removed.
“We are part of Capital One now, but we started out as a two-person startup in Brooklyn in a living room with this narrow focus – and have really seen how the entire marketplace’s reaction to this has really shifted overtime,” said Glyman.
The Continuing Evolution
Retailers have reacted differently to the coming era of consumer-centric pricing. Some have reined in their returns and pricing policies in response to how easy it has become for consumers to use services like Paribus to push their margins down. Others, he noted, have become more expansive in their policies, as they realize it can be a useful tool on which to build future conversions.
For example, he noted, while most retailers offer the price-matching refund as a credit back to the original card, some are moving toward offering a gift card instead – or offering the choice of a gift card in lieu of a statement credit to create a more personal relationship with their brands.
“The savviest players have moved toward a gift card model – because it costs them the least, but also because when the customer comes back to use the gift card, it is very likely they will spend much more than the face value of the card,” Glyman noted.
Customers do come back: Glyman said the data they’ve gathered over the years indicates that it does affect consumer behavior. Spend and share of wallet increases at merchants who prioritize price adjustments, something that he finds is particularly important as retailers gear up for the holiday season.
“If you just think about Black Friday, marketing costs for retailers are going to be much higher,” Glyman observed. “An adjustment policy says to a consumer: ‘Your Black Friday starts today, so don’t worry about waking up at the crack of dawn to get the deal you want – buy the things you want and relax, because those savings are going to come back to you automatically anyway.’”
For a retailer, that is a huge boon. It extends the sale without having to formally extend it and gives customers a reason to buy – and also provides demonstrable value for doing so ahead of the frenzy.
“It all goes back to giving customers an assurance they are going to get a square deal,” Glyman noted.