I’ve seen lots of “low price guarantees” while shopping recently. The premise is usually the same regardless of the institution: if you find a lower price in 30 days, we’ll match it. Or, if you’re lucky, the business will match the lower price and give you a little bonus.
So what’s the catch?
You have to do all the work.
Yes, you the customer have to diligently track prices across stores or websites and then go back to your original vendor and prove you found a lower price.
This process is tedious, time consuming, and too complicated. Companies promise you a great price knowing full well that you won’t do your homework to prove them wrong.
The price guarantee looks great, but upon further inspection is completely unfriendly to customers.
I mentioned in my Sears fiasco that they should have an automatic price guarantee. Imagine if a store’s price guarantee required no work from the customer. Imagine if the business’ database tracked purchases and automatically compared the original price with same store and competitor pricing over the next 30 days. At the end of the month, a check would be automatically printed and sent to the customers whose products were cheaper any time after the date of purchase.
Seth Godin in his book Purple Cow, talks about making your business truly remarkable. How would you feel to receive a check from a store with a note stating you qualified for their automatic price guarantee? I’d say “wow!” I’d tell my wife, my coworkers, and friends. Why? Because such proactive customer care is remarkable.
If you’re going to compete on price, you need something to differentiate you from the competition. Give your “low price guarantee” some teeth. Revitalize your current guarantee: make it automatic!
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Yehuda Berlinger
June 4, 2007
I think you missed the point on this one, practically speaking.
Like rebates, the economics of price matching only works if a small percentage of people actually use them. The ones who care about the money are assuaged by paying the lower price, and the rest don’t care. As a result, the store makes -delta overall.
If they were to match the lower price for all customers, the whole thing collapses. It could be that the store really pays more for their product, overhead, or customer support, and really needs to charge more. In this case, they can’t compete on price.
But they can still throw a bone to those who just can’t get over paying that extra amount, even though they prefer the store.
Obviously, the thrust of your post is about surprising the customer, which I agree with, of course. I just think that this isn’t a workable example.
Yehuda
Pascal
June 4, 2007
Joe,
Amazon is already doing this (well almost), last time I ordered some books, the price (ok, theirs) had dropped and they automatically credited the difference back to my card
Yehuda, you may have to sacrifice short term profit (or loss here) versus long term (read lifetime) profitability and greatly increasing your chances that customers will return because they know you have their best interest in mind, not just yours. Of course, it remains up to you to make a profit.
Joe Rawlinson
June 5, 2007
Yehuda, I agree that the logistics of such an automatic price guarantee will be challenging. Unless it is managed carefully, and fully automated, the costs may be prohibitive to a company.
Nevertheless, Pascal is right in that the long term benefits of customer retention and referrals will make up that difference and prove a good return on investment.
Pascal’s Amazon example shows how they are leveraging their already efficient automation to even more advantage in building customer loyalty.
Businesses that wish to implement an automatic price guarantee will have to be creative to do so. Maybe they give store credits instead of a check. Maybe it is only applicable to products over a certain dollar amount. Or maybe a check is sent only if the difference is a certain minimum.
Of course the more restrictions and caveats a business puts on their price guarantee, the more the goodwill of that policy is lost in the customer’s eyes. It would be better to have no price guarantee policy than to have a half-baked draconian version.
If your business is going to implement an automated guarantee, make it simple to understand and don’t fight having to give your customers a refund!
Jeff Barson
June 21, 2007
Jeeze, I can’t think of something that would cause my staffs more duress than this. Maybe medicine’s not special.
Joe Rawlinson
June 22, 2007
Jeff: In the medical field it would appear that if you are competing on price it may raise some questions as to the quality of the service. I don’t think a low price guarantee would work well in that industry. I’d hope that a medical professional would focus on his or her expertise and skills and not rely solely on price to attract patients.