Price matching. It’s an age old customer service strategy that businesses everywhere – whether a market trader or a retail giant such as John Lewis – have come to rely upon.
In today’s fast-paced and competitive marketplace, prices change daily. It’s a fact of life. So how do businesses keep their prices on track, while also keeping their customers happy? We’ve already explored product comparisons and price, and the reasons why perhaps two similar, or even the same, products may have a different price. But to remain competitive, and to retain loyal customers that we love doing business with, sometimes prices need to flex.
When creating the proposition – the reason why a customer would buy a product or service from a particular place – among other things, a business will look at the quality of their product, where it’s placed, who their customers will be and the price it will cost.
The price is likely worked out by the cost of that product or service to the business – if it’s a product that’s made up of components from other suppliers, those will be taken into account, as well as the time it will take the business to create their unique package for it and, of course, competitor prices will be considered. Taking insurance broking as an example, the premiums a customer is charged are calculated based on the risk that that customer presents – worked out from factors that may include location, age, security measures in place and marketplace analysis and experience – and the service that the broker will offer.
So why, if the price has been carefully calculated, might one business be able to charge less than another?
The answers may be simple and it may be that that product or service is not exactly the same as the one it’s being compared with. In insurance this may be because it offers less cover in a certain area, or it may leave you less well supported in the unfortunate event of a claim being needed. That said, the product and service may be almost exactly the same, and the competing business may have chosen a loss-making pricing strategy to win more customers in the short term.
Does price matching add up?
Whatever the reason, for a business that places customer service at the core, price matching may sometimes be the answer. Here are two advantages and their counter arguments, for choosing a price matching strategy:
Price matching plus points
1. Competitive proposition – with prices in every marketplace fluctuating daily, it can be impossible for a business to always keep track of their competitors’ prices and what might one day be the lowest fair price on the market can very quickly prove to be less competitive the next. Price matching helps businesses to keep up with the ever-changing market.
2. Customer confidence – as we’ve already explored, comparing products is no bad thing, and most consumers today will explore the market before making their buying decision. Choosing a business that offers great service and is aligned in terms of green credentials and ethics is equally important. Our customers want to know that we have their best interests in mind. That they’re buying from an honest and fair trader. Price matching helps with this, as they know a business will discuss their needs with them, make sure a comparison is like for like, and try to match the price.
The cost of price matching
1. Ever decreasing margins – price matching comes with a cost and, if a competitor business has chosen a loss making strategy, price matching can cut margins too far, risking the stability of a business as a whole. Different businesses, whether in retail or services, have different costs, so what’s profitable for one may not be profitable or even sustainable for another.
2. Damaging price wars – while most customers will shop around but will prefer to stay with their trusted supplier, sometimes price matching can result in a costly price war, where a back and forth scenario can mean pricing for a customer is cut again and again. It’s always best for a company to know their limits, pricing competitively, but also realistically and without risking having to offer a lesser service to attain the customer’s cheapest price.
Price matching for insurance
In services, such as insurance, it’s less easy to compare policies on price alone, as covers and service levels may vary greatly. It’s always good to talk, though, and at Ryan’s, our team is here to help customers compare fairly, to make sure your cover is matched to your unique needs, and to work out the best ways of working together to get the best deal.