Comments on: Make Low Price Guarantees Automatic

By: Joe Rawlinson

Joe Rawlinson — Sat, 23 Jun 2007 03:37:50 +0000

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.

By: Jeff Barson

Jeff Barson — Fri, 22 Jun 2007 02:45:50 +0000

Jeeze, I can’t think of something that would cause my staffs more duress than this. Maybe medicine’s not special.

By: Joe Rawlinson

Joe Rawlinson — Wed, 06 Jun 2007 00:40:25 +0000

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!

By: Pascal

Pascal — Tue, 05 Jun 2007 00:52:02 +0000

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.

By: Yehuda Berlinger

Yehuda Berlinger — Mon, 04 Jun 2007 19:30:07 +0000

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