Is price matching a good strategy for your company?
Price matching is a marketing technique wherein you match your prices to the competition or refund the difference when your customers find a cheaper price elsewhere. The customer must provide you with proof of the price difference to obtain a refund or match.
1. Why use price matching?
When you promise the customer that you will match the competition, they instantly perceive you as a vendor with attractive pricing.
Because what vendor would offer to reduce their margins based on the competition if they were not sure they had the best prices? With price matching, even if some items are cheaper elsewhere, you are sure to recover your losses. When a customer sees price matching, they immediately think, “I’m going to get a good deal”.
This is why this marketing technique is such a good idea!
The main factor in whether or not a customer buys a product is the price. If consumers think you have the lowest prices, they will turn to your brand more often when they need to make a purchase. This means that with price matching, you reduce your margins, but you increase consumer loyalty and your market share.
Another advantage of price matching is that it allows you to improve your brand image. If you can maintain this strategy over the long term, you will become a brand associated with low prices. The consumer will spend their money with you without spending much time thinking about it, assuming that your prices are the best available.
2. What are the weaknesses of price matching?
Like all strategies, price matching has weaknesses. The first, which we have already discussed, is that it reduces your margins. Before implementing this strategy, you should therefore ensure that aligning yourself with the competition will not jeopardise your profitability. If you go bankrupt before you can increase your market share, it’s useless!
The second danger of price matching is that it encourages customers to look at your competitors. When implementing a price matching strategy, you need to make sure that at least a substantial portion of your catalogue is cheaper than the competition. Because if your competitors’ prices are too much lower than yours, customers will not come back to you for price matching. Being able to take advantage of a selection of lower prices from you and the best prices from the competition is what builds customer loyalty on the medium term through this strategy.
3. Weaknesses eradicated with dynamic pricing tools
Today, thanks to dynamic pricing tools, you can limit the risks associated with price matching if you sell on the Internet. Most dynamic pricing tools, like our software myPricing, include monitoring features. They allow you to analyse your competitors’ prices and compare them with your selling prices or cost prices. This way, you can quickly see if you can match the competition.
Using dynamic pricing tools, you can also ensure that you have the best prices on the items of your choice. A dynamic pricing tool allows you to set up pricing rules, which will automate your pricing, making sure your offer is always the best. For example, you can create a rule such as: I want my prices to always be 10% lower than the lowest competing offer. The dynamic pricing tool will then analyse your competitors’ prices and change yours if they do not follow the rule. This automatic price change does not jeopardize your margins if you use myPricing. Our tool allows you to set the minimum margin you wish to achieve on your products. It will never sell them at a price that does not give you that margin.
Price matching is a good technique if you want to quickly increase your market share. Before you start using price matching, however, you need to make sure that you are able to match the competition without jeopardising your profitability. You also need to ensure that you have a wide selection of items that are cheaper than your competitors. Otherwise, price matching will drive your customers to the competition. Fortunately, with a dynamic pricing tool, you can manage these risks.