February 10, 2014

We'll Match Their Price!!

Price matching works in a world where the potato chips cost $2.39 a bag and somebody down the street has them for $2.29 a bag. You're higher, but it's an issue of being off by 4%.

Last month, my printer died. I called the manufacturer, it's not under warranty, and they won't send a new printer head because it essentially costs the same amount as the printer. So it's time for a new printer.

The printer manufacturer says the printer will cost $212. I visit Costco.com, where the price is $195 (never mind that two weeks later, I found the printer priced at $164 in-store ... #omnichannel!)

The printer manufacturer offers a refurbished model for $188 - they're price matching, heck, they're beating the price. Good! I guess it's good, because it is refurbished. Then a little research suggests that the refurbished model is slightly, and I mean just slightly different. Oh oh.

So I head out to Amazon ... where the slightly different model sells for $117.


So I tell the poor guy on the phone about this little issue - he visits Amazon, notices that the unit is $117, and offers to match the price. Of course, he tells me that free ground shipping will take 9 days - which is funny, because I tell him that Amazon will get it here for me in two days for free - at which time he tells me he can get me the item in two days for $40. Ok, I'll go with ground shipping - but only because he's giving me a two year warranty and on Amazon I only get a one year warranty.


Except that this isn't wonderful.

At all.

I can't tell you how often I'm asked why customers won't "convert" on the web. "Maybe we haven't optimized our site properly?" And all sorts of vendors and consultants and trade journalist will beat the living daylights out of you for not optimizing your site properly. You're stupid - just ask them!

But that's not the issue.

Honest and fair pricing, that's the issue.

The internet, and even more these days with mobile, is pushing pricing into three tiers - but you already know this.
  • Tier #1: The lowest possible price with the fastest possible service (Amazon).
  • Tier #2: Profit generated from uninformed customers.
  • Tier #3: A "branded" experience that the customer is willing to pay a premium for.
That's it - take your pick. The vast majority of customers can't afford anything but the lowest possible price with the fastest possible service (Amazon), and let's be honest, that's a pretty good deal for the customer - not a good deal for the American worker, but that's a topic for another day.

The maker of the printer falls into Tier #2. This printer is #omnichannel - selling on Amazon and generating almost no profit there - selling on their website and over-charging uninformed customers. Of course, this strategy works in the short-term. Once the customer is burned a couple of times, that all changes.

Most of the businesses I work with are trapped in Tier #2.

Tier #3 is our future, mastered by folks like Apple, or Nike, folks who get you to pay more for items - items that you can get similarly but not the same elsewhere.

It's easy to try to be in Tier #1 but almost impossible to win.

It's painful to be in Tier #2. It leads to games like "We'll Match Their Price", which, in reality, means "we'll rip off uninformed customers so we can stay in business".

It's very hard to try to be in Tier #3.

But long-term, it may be the only choice.