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Price-matching guarantees

November 30, 2011 by Dale Furtwengler — President, Furtwengler & Associates, P.C.

Target's third quarter profits are up 3.7 percent according to Andria Cheng in her MarketWatch article, Target profit rises better-than-expected, in the Wall Street Journal. She also relayed this caveat:

"But Target isn't without its own challenges. Analyst David Strasser at Janney Capital Markets said Wal-Mart's aggressive pricing matching guarantees this holiday season may pose a challenge to Target."

The implication is that consumers' buying habits are swayed by price-matching guarantees. Is that true? You're a consumer. How heavily does that price guarantee weigh in your decision on where to shop? My guess is very little. Why?

Extra work:You're required to do extra work to get the price guarantee. Most price guarantees are for advertised prices which means you have to scour ads prior to beginning your shopping trip.

No substitutes: These guarantees require that the competitor's offering be exactly the same as what you're buying. How often do we find slight differences products between retailers? I recall looking for digital cameras years ago when Circuit City was still in existence. The models that they carried were different than those at Best Buy even though the manufacturer was the same. It's one of the ways manufacturers help their retail customers differentiate themselves.

Convenience:If the store offering the price match guarantee is not as convenient as your favorite store, are you going to go the extra distance for that savings? In today's world the few cents saved is more than offset by the price of the gas needed to get there. And let's not forget the time involved. You don't have anything better to do, right?

Different experiences: These price-match guarantees assume that the experience at competing stores is exactly the same - that ambiance doesn't matter. In other words, the experience at Target is the same as that at Walmart. The reality is that every consumer has store preferences. They may not be able to articulate the reasons for their preference, but that doesn't make it any less real.

Buyer reluctance:Many consumers prefer to pay a little extra to avoid asking for the price-match guarantee. Why? They don't want to appear cheap, they don't like to negotiate, they don't want to tie up the line or it simply feels confrontational to them. Regardless of the reason, these consumers are not going to be swayed by the price-match guarantee.

Violated trust:This is my favorite. Do you really want to reward a company by buying from them when they've just admitted to trying to charge you extra? Really, do you want to do business with a company that in essence says, "We're charging you more than it's worth?"

A better way

What's the alternative? Continue to tout your value in all of your marketing materials. If a consumer asks you to match a competitor's price simply tell them, then we wouldn't be able to provide you with (the value touted in your marketing materials.) Help them realize that they're in your store because they prefer it to your competitor's store. You'll not only make the sale, you'll get your price as well.

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