Customer Price Sensitivity and Price Comparison Apps
The rise of the internet, the domination of smartphones and their ever increasing number of apps, and customer price sensitivity have turned the physical and online retail landscapes into a continuous and bloody battlefield. The average online shopper will check between 4 and 5 different web stores before deciding from which they will buy. Even shoppers in brick and mortar stores may be comparing the price and availability form alternate sources while they check out the latest tablet or a stunning outfit for the office party.
Price sensitivity is fuelled by competitive comparison
The increased simplicity with which a customer can compare their product of choice across channels had led to increased price sensitivity in the online buyer. The multi-channel availability of the same items from large manufacturing corporations is fuelling price wars between retailers.
Competition, even between omnichannel retailers, makes that price-war all the more fierce when a customer can search for in-store availability in comparison to the store in which they are currently shopping.
How and why do price-sensitive shoppers use comparison sites?
There are numerous reasons why price-conscious shoppers use comparison sites, but we can condense them down to four essential motivations:
Bargain hunting
Comparing Prices
Money Saving
Identifying providers or sellers “to watch.”
Price sensitivity in the retail shopper leads to a higher consciousness of the cycles that occur throughout the year. Many customer-focussed price comparison apps allow customers to watch and monitor product prices for discounts and other changes. For the most sensitive of customers, planning is key to making the best buying decisions at the right price, letting the customer monitor price fluctuations in advance of making a purchase. It is especially important when big-ticket items are on the buying agenda.
The Dangers of Showrooming – add value to the experience
Price sensitivity means that customer-focused apps are continually being updated to search for the better deal. Rather than merely checking for the price, most apps have the functionality to check for the delivery cost as well.
While competitors may be advertising lower prices in their banners, ads, and on the page, they hide their higher shipping costs until the checkout process or in the small print in the site map.
Neutralising Price Sensitivity in Savvy Customers
It would appear that pricing is a crucial element to the comparison with other stores and online retailers, but it isn’t always viable to undercut a competitor. However, it is not impossible to neutralise price sensitivity by other methods.
Premium pricing for a better product can work in reducing price sensitivity because a customer believes they are receiving a product of superior quality, more features, or longer lasting. If the superiority of a product is explicitly detailed, in comparison with a competitor, the price becomes less significant, consequently reducing the price sensitivity. Excessively reducing price can call into question the quality of an item.
Quality has always been a considerable neutraliser of price sensitivity, as the idiom goes “If you buy cheap, you buy twice.”
Language use can be easily used to obscure the ease with which a product can be categorised in online searches. Making a complete and comprehensive description can make your product seem more tailored to specific requirements, while still being searchable by individual characteristics. Descriptions and specifications help to increase the perceived value of a product.
The uniqueness of product lines, even if the products aren’t unique. Services and brands have an easier time of creating new niche categories than retailers and resellers because they aren’t producing the product or the demand, merely providing the means to purchase it. In retail, there are only a few ways to describe a smartphone, dress or washing machine, without fundamentally misrepresenting the item you are describing. On the other hand, fashion and clothing create new categories and descriptions on a whim with the release of new season trends; I give you the Skort (skirt/shorts hybrid).
Added value can come in various guises depending on the products being offered. Large products like furniture and fixtures can be presented with free delivery and/or installation. Likewise with large electronics and white goods. Online retailers can offer free delivery, sometimes as standard and at other times with orders over a set amount.
Basket discount offers obscure the price sensitivity because they deliver a cost reduction over the broad spectrum of items in a single purchase. Price sensitivity is mitigated when the customer feels they are getting more for their money.
Packaging a group of “commonly bought together” items for a fixed price, such as a business suit, shirt, tie, and pocket square means that you minimise the price sensitivity if it seems to the customer that the package price is significantly less expensive than the sum of individual items.
The same can be said for books in a series, a diet book and corresponding recipe collection, or matching kitchen appliances (kettle, toaster, microwave, etc. things that are commonly ‘on show’ on countertops).
In short…
There are ways to circumvent the mental tripwires that price-sensitive customers are all too good at finding. In principle, the best way to minimise price sensitivity in your clientele is to price your products correctly; finding the median point, with enough added value to make shopping around an unnecessary inconvenience. By creating a balance between price, value and service that makes your business the preferred choice, despite minor fluctuations in price between your competition, you can maintain loyal customers while still being competitive enough to attract the new ones.
Pricing correctly, for your market share, audience, and products, is not a simple task, but the assistance available from price comparison software providers makes sense when taking into account the benefits it creates.
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