Warren Buffett once said, “The single most important decision in evaluating a business is pricing power.”
As you may imagine – he’s right.
When it comes to running an ecommerce business, specifically, few things are as essential as ensuring you have a solid price strategy in place. After all, prices are an essential component in everything from customer loyalty to brand perception.
If you offer great prices, customers are more likely to choose your product. If you provide a stellar product and a great price, customers see your brand as reliable and trustworthy, and they’re going to keep coming back.
Right now, large companies like Walmart and Target are great examples of how a low price model can spell colossal success. They’re also an excellent demonstration of how companies that can’t compete on price tend to crumble in the wake of those with robust price strategies.
As a business owner, you understand the importance of price competitiveness. Luckily, there are ways to improve your price strategy and grow your business by being more competitive in your industry. One of the best options is simple: price matching.
Over the last several years, thousands of companies (ranging from venture-backed startups to established organizations) have adopted a price match policy as a way of staying competitive.
In many cases, this approach has created huge levels of success for the companies that use it.
Here’s what you need to know about price matching, and why incorporating it into your organization could be the best thing you’ve done this year.
Types Price Matching Strategies
When it comes to price matching, there are a few different ways to go. Two of the most common are price match policies and best price guarantees.
Here’s a breakdown of each:
Price Match Policy
A price match policy doesn’t guarantee that your company is offering the lowest price. Instead, it merely states that, if a customer finds a better price elsewhere, you’ll match that price.
In most cases, companies keep their price match policies limited to the time before and during the initial purchase, although some extend the policy and will refund the difference if a customer finds a better price elsewhere after they’ve already purchased the item.
Target, Walmart, and Best Buy are all examples of companies offering price match guarantees.
eBay also announced last year that it would offer a price match guarantee on brand new items on its eBay deals page.
Best Price Guarantee
A best price guarantee states that your company is offering the absolute best price on the market. If you’re going to offer this guarantee, it means you’ve spent a significant amount of time studying the prices of your competition, and you’re sure you’re the cost leader.
Statistics on Price Matching
Right now, there are many compelling reasons to offer a price match guarantee.
One of the largest is the rising practice of webrooming. Webrooming, or researching products online before picking them up in a physical store, is becoming more popular in the world of online commerce, and 88% of shoppers are doing it to compare prices between stores. Within this, 75% say they webroom to find the lowest price and 72% are comparing products.
While webrooming can be a perk for companies that use intelligent omnichannel marketing, many large brick-and-mortar retailers, like JC Penny, Kohl’s, and Sears have suffered in recent years because customers compare prices online and find better items.
Here’s a Business Insider chart that demonstrates this brick-and-mortar downfall:
While there are few options for these stores to regain their footing, the best choice would be for each of them to create a quality price-matching strategy, which would allow them to capitalize on showroomers rather than losing customers to lower-priced competitors.
Why Price Matches Matter
As you can see from the price match policy statistics above, price matching has become an essential tactic for any company that wants to retain customers and improve brand loyalty.
Statistics on price match policies repeatedly demonstrate that companies that offer a price match guarantee enjoy the following benefits:
- Greater Customer Retention. After the initial stages of ecommerce are over, customers prefer to purchase products online, since they’re typically much cheaper than offline options. Price match guarantees ensure customers don’t leave your store to seek out other sites, where a better price might be available.
- Higher Level of Competition. Offering a price match guarantee allows you to maintain a competitive approach to other brands that offer similar products. Assuming your products are comparable, a price match guarantee will help you maintain the competitive edge on other companies and keep more of your hard-won customers.
- Larger Average Order Value. According to recent studies, 85% of customers shop in-store because they like being able to see and feel products. When they go online after the fact, though, 70% are looking for the lowest price. When you optimize your store for success in this environment, namely by offering price match guarantees, you increase consumer confidence and keep people coming back. When customers feel confident in your company, order values go up, as does your bottom line.
- Fewer Abandoned Carts. 30% of consumers fill a cart and then abandon it because they found a better price somewhere else. If you want to reduce your abandoned cart rate, offer price match guarantees. Even better yet – utilize plugins that scan competitor prices and adjust yours accordingly.
Price Matching in the Modern World
Modern ecommerce is a competitive industry, and customers who shop with you need to know that they’re getting the best price.
Price match guarantees currently serve several essential purposes in modern ecommerce. In addition to inspiring consumer confidence and keeping people coming back to your store for more, they’re also a great way to stay competitive in your industry and maintain your upward mobility.
Whether you’re a new business or an established retailer looking for a way to be more competitive in the market, a price match guarantee is a great place to start.
