Dynamic Online Pricing: Maintaining Consistency with the Store

online vs offline pricingOn a recent business trip to Miami, I decided to check out a local fabric store (a hobby of mine).  I live close to NYC, which is where many people – even those who live thousands of miles away – aspire to buy fabric because of the assortment and quality.  In my case, though, I sometimes like to visit stores in other cities that have a strong design aesthetic, and Miami fits that bill for me.

In using Yelp to decide where to go, I came across one store in particular that had many reviews, which is among the criteria I use when assessing a business on Yelp.  Unfortunately, not many were positive.  The negative comments were consistent in that there was a certain complaint that the owner charges prices based on how a person physically looks.  Wealthier-looking people got charged more and vice versa.  This practice incensed this store’s clientele.

There was a recent article in the NY Times that talked about the widening gap among some service providers in terms of giving better amenities and exclusivity to customers who are willing to pay moreThe Times cited mostly Norwegian Cruise Lines and Royal Caribbean who now offer almost total segregation from the rest of the ship for this type of customer.  The point the NY Times was making was more about the widening chasm among the classes and using the cruise industry to illustrate it, which is the quintessential example, given their past.

However, what the NY Times article was talking about was not what the fabric store guy was doing.  In a case of tomāto/tomăto, he was either discriminating or segmenting his client base. If one perceives it to be the latter, his practice is not too different from how many ecommerce sites price their online merchandise.  Amazon, for example, changes prices on their products millions of times per day.  Only Amazon knows the criteria behind their algorithm which causes their prices to fluctuate.

I am not going to judge the pricing practices of either the fabric guy or Amazon other than to say that this could reflect badly on the company if the online pricing doesn’t match the pricing for the same product in the physical store.  With algorithms and personalization getting ever more sophisticated in online shopping, this situation is hardly a one off.   If a customer buys online and then picks up in store, she may see a different price of the product on the shelf.  If she researches the item at home and then goes to the store to buy it, she will instantly see the price difference. Retailers are not doing anything nefarious here:  it is simply a combination of factors ranging from the right hand not knowing what the left hand is doing (silos), and retailers who take full advantage of the dynamic pricing their technology solutions provide them in order to improve conversion and profitability.

Last week I wrote about Best Practices in Retargeting and touched upon the sometime inconsistencies in online vs. offline branding insofar as it being confusing to customers.  In the case of pricing, though, any online vs. offline differences have a more profound effect.  Whereas with branding the customer is merely confused, with pricing, it can make customers irate if not handled well.  In my opinion, there is only one approach to take for when customers inform retail employees that they saw a lower price online: the store needs to honor it.  Silos are not the customer’s fault or problem. Until there is a way to ensure consistency in what the ecomm and the retail teams are doing in the way of pricing (assuming ecomm teams would ever give up the ability to dynamically price which is unlikely), the smoothest and best avenue to take is to grant the customer the better price.

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