10 Reasons Price Matching Is A Risky Strategy

10 Reasons Price Matching Is A Risky Strategy: Ask Walmart, ToysRUs & Best Buy

(from an original Post on May 7, 2013 by Gilon Miller )

What started as a competitive pricing strategy has turned into a bad dream for Walmart, ToysRUs, Best Buy and their customers. These, and other big retailers are running into flak because the price matching experience promised in the store is most decidedly not as expected, and some shoppers are angry enough to stop shopping there, reports a Bloomberg article, Price Matching Criticized From Wal-Mart to Toys ‘R’ Us: Retail. For example, Walmart advertised that it would match competitors’ prices right at the register — and “you don’t even need your ad!” But the customers’ experiences in the stores were not as expected.

“Price matching is a necessary evil today,” said a managing director of a brand consulting firm, “because once one retailer offers it, others are almost inevitably forced to follow… but how it’s done is important.” Retailers have to price match because everyone sees everything (transparency). The store has to do it quickly (because it happens right at the checkout lane), and you have to give the consumer the benefit of the doubt because you want that consumer to be loyal to you.

Price Matching has turned out to be a risky strategy because:

  1. The programs are difficult to manage.
  2. Discretion to match or not is often left to store workers.
  3. Store workers don’t understand how the price-matching policy works.
  4. The Ad Match Guarantee is inconsistently applied from store to store within the same retail chain.
  5. Price matching programs vary widely from retailer to retailer. For example, Best Buy lets customers match prices if the rival store is located within a 25-mile radius. Wal-Mart allows managers to define the size of their trade area.
  6. Differing interpretations of “local”.Customers have complained that stores of the same retailer in neighboring towns cite different price-matching rules.
  7. How price-match requests are handled may come down to the needs of individual store managers. Store managers are “empowered” to decide how to implement the policy and the “expectation is that they’re making the decision with the customer’s interests in mind.” “Some might not want customer complaints,” so they match whatever prices the shopper asks for. Others think more about their profit margin and don’t want to give away the store, so to speak.
  8. Mistakes in matching products correctly. Some Walmart stores reluctantly matched (or refused to match) competitors’ prices on seeded oranges, for example, when the point was missed that Wal-Mart’s oranges were seedless and more expensive. Or they matched a lower price on ground beef that wasn’t as lean as the beef sold at WalMart. In some stores, the workers were told not to price-match those types of items at all.  (P.S. This is a good ad for using a top price matching solution).
  9. Shoppers Can Get Confused. They get the stores mixed up, and there are different policies — even in the same store if you go to different cashiers.
  10. Shoppers get angry. If shoppers are not treated well, they “vote” with their feet (out the door).

The Problem:

The company policy may be well intended, as advertised, but the reality is quite different and sometimes arbitrary.

Example: Several clerks at Best Buy gave different interpretations of the policy: “Spot a lower advertised price? We’ll Match it.”

Example: Toys “R” Us workers didn’t know how to implement the retailer’s price-match guarantee.

Example: Walmart said store workers would receive “extensive” training “to ensure the price-match policy is executed consistently across all stores,” which apparently hasn’t happened yet.

Solution: Retailers have to:

— Get their national “act” together.

— Don’t advertise a policy it if you don’t mean it. 

Discontinue overly broad claims or post the limitations.

Get ALL their stores on the same program, and don’t let a few get by that aren’t executing the match the right way.

— Make sure that policies are consistent and clear, to both your workers, AND to the public.

— Make sure that the policies are being executed correctly, accurately, and quickly.

Bottom Line For Your Bottom Line:

Is price matching a good strategy because it entices customers to come in? Or, is price matching a risky strategy because it chases customers away when their expectations are not fulfilled?  Retailers overall could use sophisticated retail pricing intelligence and assortment matching technology on a real-time basis to know specifically what is happening with their competition on a specific product at any given time. And maybe it’s not too far off that we’ll see retailers install a price matching solution tool at each cash register.

Andrew Gregson

Andrew Gregson

Senior Partner at Intent Financials Inc.
Andrew D. Gregson is a licensed financial professional who holds 2 Masters degrees. Mr. Gregson is a former owner of multiple businesses, writer on business matters, published author “Pricing Strategies for Small Business”, former owner of 2 franchises and 5 start-ups and has worked as a Chicago based business consultant.
Andrew Gregson
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