As a self-professed retail geek, I’m always noticing prices and deals that retailers offer. More than that, though, I notice what these prices really mean. What are you saying to a customer when you set the price of a product? It’s a good question, because you end up saying a lot.
Price is, of course, one of the central touchpoints of retail. But it’s a lot more complex than it seems. The customer wants to feel good about the amount they paid for their purchase, and while this can mean that they feel like they got a great deal, it can also mean that they feel like they paid a fair price for a premium product. If your customer feels like a high-quality product is priced too low, they might start to doubt the quality.
Therefore, understanding your customer base is just as crucial to pricing your products. Similarly, a surprising amount of retail pricing is based on “gut feel,” or simple tradition—if we did it last year, why not do it again this year? Well, maybe you should, but really look at the data and decide actively.
So, after hearing about all the things you shouldn’t do, what should you do? It all comes down to the need for a strong and specific pricing strategy. Don’t confuse or mislead your customer with your pricing, but instead make sure you have specific reasons for the prices you set and the deals you offer. Think specifically and strategically about your pricing decisions.
On your way to creating your pricing strategy, there are a few key points to keep in mind. These common mistakes are easily avoidable, but often the first step to eliminating them is just being aware of how they affect your customer.
- Make sure your advertising is consistent with your stock levels in store. I saw an ad for a weekend deal at Best Buy for a Surface Pro, but when I went into my local Best Buy on Saturday morning, the advertised model was out of stock not only in that store, but in every store in the area. Coordinate retail stock before advertising special deals, and your customers won’t be left empty-handed and disappointed.
- Pricing surprises lead to a lack of customer confidence. I went into GameStop with my son. He chose to buy a used game instead of the new game because of a $15 price difference. But after we had checked out, the cashier next to ours leaned over and told us about a promotion that would’ve made the new game $10 less than the used game. Now when I go to GameStop, I always make sure the price on the box is really the best price. Even one incident like this can prevent customers from trusting your prices, and therefore from trusting your business as a whole.
- What do your sales say about your regular price? I was in a gas station chain store recently and ran into a “buy one, get one” deal that offered one Gatorade for $2.50 at the regular price, or three for $3.00 on sale. This leads me to believe that their regular price must be so inflated that it should never be paid. Make sure that part of your pricing strategy focuses on setting regular prices at a reasonable rate, so customers don’t feel cheated when they see your sales.
- Don’t confuse the customer. When a large national retailer asked me to come and help with some pricing strategy, I discovered that a single item might have up to twelve different prices on any given day at any given store, based on the different discounts that could be applied. Customers and even associates never really knew what the “right” price was. Another retailer I worked with had over 700,000 price corrections a week made by associates at registers. That’s 700,000 times customers did not pay the price as marked. Always coordinate your pricing, and always make sure your customers and employees both know the correct prices for all your products. Keep it simple and your customer will trust you.
At the end of the day, this last point—keep it simple—is what it all comes down to. You want your customers to always know what they’re getting from you, whether that be price or quality of your product. Customers want to feel confident when they shop with you, and setting reasonable prices and exciting—but clear—sales is the foundation of that kind of confidence. If customers can’t trust the prices you set, they won’t trust your business—but if they know you set fair prices, offer good deals, and always communicate clearly, they’ll know they can trust you, and will keep coming back.