How to Price Match ProfitablyInstead of offering blanket promises, consider price matching as another sales tool to use when working with a customer directly.
Bargain hunters are always on the lookout for a good deal, so being able to meet (or beat) the price of your competitors can give you strategic advantage and make your store a go-to spot for savvy shoppers.
When you offer to price match an item, “consumers interpret the promise to mean your store has low prices, so shoppers are less motivated to search elsewhere for items they want to buy,” explained Bruce Sanders, consumer psychologist and author of “Retailer’s Edge: Boost Profits Using Shopper Psychology.”
Unfortunately, price matching comes at a cost. Here, Sanders shares his advice on how to match competitors’ prices without breaking the bank.
Focus on putting the customers’ interests first
Most shoppers don’t expect small to midsize businesses to always beat out big-box or online retailers when it comes to price, but they do expect a more personal and friendly shopping experience. As such, price-matching should be part of your broader policy to provide stellar customer service, said Sanders.
“I would favor price matching being included as part of general policy of putting the customers’ interest first,” he said. “It’s best if your price-match guarantee is in the spirit of ‘We aim to meet the price of other stores on the same items,’ or ‘On any item you purchase from us, you’ll have paid the best price you could have found given all that our store provides.’ As long as it’s part of a general policy, I think it can be useful.”
Avoid making unnecessary promises
Instead of writing up a formal, store-wide policy, Sanders said to think of price matching as a sales tool you have in your back pocket when working with a customer.
“I would discourage the small to midsize retailer to have price matching set apart as something special, but rather use it in the conversations you have with your shoppers,” he said. “If I can give the shoppers some notion that I’m there to serve them, but I do need to make an adequate profit, then the price-match guarantee becomes just a part of the overall package you get.”
In conversations with customers, you have the opportunity to explain why making an adequate profit is crucial for your small business’ survival. Then, if it makes sense for that situation, you can always offer to match the price — without making a blanket commitment to always do so.
Identify your ‘lighthouse’ items
One benefit of price matching is that it can help retailers evaluate their pricing strategy in case they are overcharging for certain items, said Sanders. Listen to your customers and find out what they would be willing to pay for different products.
“If there’s an item that customers are regularly coming in and saying, ‘I could get that next door for a lower price,’ then that becomes a ‘lighthouse’ item that I want to look carefully at and see if I should be lowering my price on,” he said.
Sanders explained that a lighthouse item is a popular piece set at a very low profit-margin point, that helps draw shoppers into your store. For instance, you may charge a low margin on a trendy dress, but make up some of your profit margin on the scarf that goes with it.
“You don’t have to always beat out the prices. But if there are certain items where you can set a lower price point than you otherwise would, then the shopper is going to feel even better about giving you the business,” he said.
Add value with alternative options
When a customer comes in and asks if you’re able to match someone else’s price, never tell them “No,” said Sanders. Instead, accentuate the positive and come up with alternative ways you can sweeten the deal.
“My first rule is avoid saying ‘No.’ That word irritates shoppers. Instead say, ‘Here’s what I can do,’” he advised.
When coming up with alternative options for haggling customers, think creatively. For instance, you could provide a discount on bundled items or give a discount on extras like gift wrapping, training or installation. If the shopper is a member of your loyalty program, offer to throw in bonus reward points or give them a hefty coupon to use on a future purchase.
Match your own prices
“Also be willing to match your own prices,” suggested Sanders. “Shoppers are more likely to buy from you when you say, ‘If we lower our price on this item within 60 days after your purchase, come back in to claim a store credit for the difference.’”
Not only will customers keep their eyes on your ads, but it also brings them back into your store, giving you another opportunity to sell more.
Regardless of how you choose to match prices in your store, keep the conditions of your price-matching promise simple, said Sanders. If it becomes too complex, you’ll irritate instead of attract shoppers.