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Is Personalized Pricing Helping or Hurting Sales?

Personalized Pricing: Helping or Hurting?

 

If you’re looking into marketing strategies and you thought data collection and specialized pricing to individual customers would be the next best thing, you might be wrong.

I spend a lot of time in Germany and recently, I saw a special expose on how grocery shops are now offering personalized coupons for individual shoppers. Each customer will get a free membership card which will be swiped every time they shop. This is obviously nothing new but there is an extra step being taken now.

There will be a machine put in place where you can insert your card and get a printout of what special deals you get. These deals are only for you based on previous purchases you’ve made. The store will know how much you’re willing to pay for items as well as what items you need (based on how often you’re buying “said” items).

In an age where people are crazy for coupons, the new personalized pricing technology couldn’t come at a better time. Supermarket chains all over the world are using relevant data pulled in from billions of purchases. They then offer special deals for their customers. This is going to boost sales and keep customers loyal, brilliant right? There are pros and cons based on this idea. Some say it’s the greatest thing since sliced bread while others are saying it’s full on discrimination.

How do these businesses know what you want?

So here’s an example, Joe regularly buys Lay’s ripple chips and Coca Cola to watch a full day of NFL football. His Safeway shopping app offered him a super deal involving his favorites chips and Sunday beverage. Of course, he took the bait, who wouldn’t? Joe never gave the store information about himself but through joining Safeway’s Just for U program, they found out about his shopping habits.

The program uses complex algorithms which sort through shopping data. After processing all the data, the program can anticipate what Joe will need and want.

How Will It Influence the Online Experience

Well, as I was doing research for this article, I was given a big coupon at the top of the business site I was on. I noticed it’s lovely brand icon and in larger letters, a percentage off of a product line I was just looking at. Before I started working on the article, I was on a site for my favorite hair brand. I was putting items in my cart just to see how much it would tally up to.

I immediately saw it, got totally distracted from my work and my thoughts and went to the site. Sure enough, 20% off all the products I had put in my cart and I made the purchase. I felt pretty satisfied and happy because I got the product I wanted at a price that was less than I was going to pay for it originally.

I don’t think much of the brand for using these tactics but everyone’s doing it so why shouldn’t they? So I guess in my experience, it was beneficial to get an offer but it also slowed down my progress.

While this type of ad is highly distracting, we’ve always had to deal with ads. I guess most people who are online a lot are used to it by now. These are now targeted ads for each person so they do offer extra value.

What does the general public think about these marketing strategies?

You’d think that getting great deals would make the masses happy. Not always. Some consumers feel a bit pissed that they receive better deals than someone else. People feel like loyalty isn’t honored with these programs even though they look to gain your loyalty. Practices are being set based on the way we shop. The products I bought earlier were already in my shopping cart on the website and then I left it. I got a coupon for 20% off, I guess they thought they were going to lose the sale.

The question is, do you want to risk the credibility of your online company to this practice? It’s being called discrimination in some cases.
Here are the degrees of price discrimination;

  • First degree involves charging every individual customer a price based on how much they’re willing to pay. With big data and all the analytics that support this new way of selling and shopping, retailers in a sense manipulate customers more than ever before. Prices change based on customer reactions. Cookies and third-party data identify what shoppers are doing on their sites and create a profile of how much you spend and what brands you like.
  • Second degree charges on the amount of goods purchased as opposed to past customer behavior and characteristics. Another form of second degree is when special prices are offered for new customers. This is often seen in subscription models and can be highly insulting to loyal customers as they don’t get the same kind of discounts.
  • Third degree is when customers are put into groups and charged separate rates on the basis of who is willing to pay within the sectors or groups. An example of this would 13-18 year old girls and a certain brand of hairspray.

While this manner of business may be advantageous to you for a while, it could backfire later. It’s transparent that price changes occur when your consumers don’t buy. In that knowledge, why would consumers want to purchase anything at full price anymore?

The value of a company’s integrity is lost and getting that back is difficult. As a marketer or business owner, you work hard to gain exposure and keep customers. This negative effect on your business in the long run could be devastating.

It is said that if you’re going to collect data on your customers and use it, be honest. Let your customers know why they’re getting a different price. Appeal to their ego and make sure it’s a reason that is individual to who they are. Price is just one of many factors that create customer loyalty and building brand allegiance. Think about how your customers will perceive your marketing practices.

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Staff writer: Loraine Couturier is a jet set writing chick from Canada that travels around the globe. Her writing and marketing skills are what keeps her eating exotic meals and jumping on planes. Loraine loves writing about pretty much anything and likes to pass on the knowledge she has to others. Visit her at lorainecouturier.com

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Staff writer: Loraine Couturier is a jet set writing chick from Canada that travels around the globe. Her writing and marketing skills are what keeps her eating exotic meals and jumping on planes. Loraine loves writing about pretty much anything and likes to pass on the knowledge she has to others. Visit her at lorainecouturier.com

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