The Folly of Trying to Match Offline and Online Prices

Mihir Kittur, Co-founder and Chief Innovation Officer, Ugam,

Price Intelligence, Dynamic pricing, online offline pricingAs the self-proclaimed most relentless e-commerce site, makes millions of price changes each day. Based on this dizzying situation, it is ludicrous to expect that brick-and-mortar stores should change prices at the same frequency as their online siblings.

Yet, there are some occasions when using Dynamic Pricing could be advantageous in a physical store. Digital shelf price tags or electronic shelf labels (ESLs) are now popular in France, but have yet to catch on with U.S. retailers. Kohl’s is the first major national chain to adopt them.

Price Intelligence, Dynamic pricing, online offline pricingDigital shelf price tags certainly make it convenient for a retailer to more efficiently change signage for weekly or daily advertised sales. Although the capability exists to implement far more frequent updates, customers expect pricing stability when they are physically wheeling their shopping carts down the aisles.

Imagine shopping for sneakers at a sporting goods store and seeing the price change before your eyes as you are tightening the laces. Consumers do not appreciate feeling like they are being manipulated.

Price Intelligence, Dynamic pricing, online offline pricingGEICO insurance recently created a clever TV commercial featuring a supermarket where prices were constantly changing – in the wrong direction. A befuddled shopper unloads her grocery cart at checkout and is surprised to see the cashier act like an auctioneer. Her milk, eggs and produce are all suddenly offered to the highest bidder. The commercial highlights how consumers don’t like unpredictability when it comes to their wallets:

Customers already expect that shopping online involves widely fluctuating prices over a short period of time. But changing prices too frequently in a brick-and-mortar store is a recipe for resentment.

Physical stores retain one advantage that will always remain elusive for the Internet – instant gratification. Does a customer need that ink cartridge to print a child’s book report due the next morning? Do they need a snow shovel because of an expected blizzard? No matter how promising the talk of Amazon using drones for delivery, customers will be willing to pay a convenience premium when they need something now.

No matter how many tantalizing free shipping offers are dangled before the customer, sometimes she or he will want to lace up a pair of new running shoes now. Sometimes customers can wait for sales at their hardware or home improvement stores, but sometimes there are overflowing sinks or clogged toilets that need to be dealt with now.

You know your customers best. By gathering the right intelligence, you can figure out which products are most likely purchased on immediate need and are least vulnerable to online discounting pressure.

For the latest strategies on how to avoid the price matching trap, download a complimentary copy of our new ebook, “Pricing Intelligence 2.0: The Essential Guide to Price Intelligence and Dynamic Pricing,” for retailers and brands.

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The Author:
Mihir Kittur is a Co-founder and Chief Innovation Officer at Ugam. He oversees sales, marketing and innovation and works with leading retailers and brands with insights and analytics solutions around their category decisions to improve business performance.


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