Monday, March 21, 2016

Explain Channel Pricing Differences

Are you among the storefront retailers who also have an online sales channel? It’s a smart thing to do, since consumers appreciate options in ways to order merchandise. But do you maintain the same pricing in both channels? When you offer a promotional discount through one, do you offer that same discount through the other?
     Researchers at Katholieke Universiteit Leuven analyzed retail situations in which a promotional discount was offered in one of the channels, but not the other. As common sense predicts, shoppers who were aware of the difference in pricing moved their purchases away from the channel which maintained the regular price and toward the one offering the discount.
     What these research findings did add to our common sense notions was the finding that the cross-channel cannibalization effect was stronger when the discount was online. Internet specials ate away at storefront sales revenues more than storefront specials ate away at internet sales revenues. Also, the effects in both directions were stronger for customers loyal to the retailer.
     So stay aware that internet specials can significantly deprive you of the benefits in loyal customers visiting your store. Benefits such as the opportunities to get to know the customer better, stay up-to-date on their needs, personalize your selling, and appeal to a broad range of sense modalities. One way to meet this challenge is to provide purchasers an incentive for picking up at your store merchandise ordered online.
     Another challenge with different pricing for your online store than for your bricks-and-mortar store is a need to explain why. If you do find yourself in this situation, the way you frame the explanation makes a difference. With a short-term promotional difference, it’s best to describe why the internet price is lower.
     This is the opposite of what you’ll do when a channel pricing difference is a standing policy. In that case, take inspiration from research on another type of differential pricing: Researchers at University of St. Thomas and University of California-Berkeley presented some study participants with a situation where a dry cleaner gives a discount when cleaning a man’s shirt that is not given when cleaning a woman’s blouse. About 70% of the study participants said this was unfair. Only if the cost differential was called a surcharge—not a discount—and a reason was given—“more pleats, ruffles, or sensitive fabric”—did most respondents consider it to be fair.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Utilize Multichannel with Hedonic Selling
Offer Exclusive Price Discounts Cautiously
Use Partitioned Pricing to Highlight Benefits

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