Why Low Prices Don't Guarantee Customers
The conventional marketing practices of many top retailers are based the natural assumption that consumers will choose the cheapest option when offered the same product at different prices. It is therefore up to the seller to convince the consumer that it is indeed offering the lowest price. Guarantees, coupled with a promise of reimbursement of the price difference if a cheaper option is found elsewhere, are an increasingly common method to deliver this impression.
The technique is also used to avoid showrooming; when consumers go in-store to decide the product to buy but in the end use the Internet make the final purchase at the true “best price”.
New research from Reims Management School has found, however, that such strategies can cause consumers to become suspicious of the offer and may avoid making the purchase all together. The researchers conducted three experiments consisting of 662 subjects, with the objective of better understanding consumer behavior, their perception and their attitude in relation to these low price guarantees.
“This research has significant implications for retailers but also for manufacturers,” said Adilson Borges, head of the Value & Persuasion Research Center at RMS. “If the offer seems too good to be true, the consumer may start to believe that there is a catch, and become wary or suspicious of the details. This bad image creates a negative effect. The offer must appear to be credible. It must be truly beneficial and financially interesting for the consumer.”
A price guarantee, which offers an automatic refund of the difference where the retailer is constantly surveying competitors’ pricing, works well and gives a positive image of the seller to the consumers. However, an automatic guarantee with a reimbursement, which is too high such as five or ten times the difference, engenders a caution of the product from the consumer, and conveys a rather negative image. Consumers were observed to reduce their purchase intention when facing these types of deals.
The technique is also used to avoid showrooming; when consumers go in-store to decide the product to buy but in the end use the Internet make the final purchase at the true “best price”.
New research from Reims Management School has found, however, that such strategies can cause consumers to become suspicious of the offer and may avoid making the purchase all together. The researchers conducted three experiments consisting of 662 subjects, with the objective of better understanding consumer behavior, their perception and their attitude in relation to these low price guarantees.
“This research has significant implications for retailers but also for manufacturers,” said Adilson Borges, head of the Value & Persuasion Research Center at RMS. “If the offer seems too good to be true, the consumer may start to believe that there is a catch, and become wary or suspicious of the details. This bad image creates a negative effect. The offer must appear to be credible. It must be truly beneficial and financially interesting for the consumer.”
A price guarantee, which offers an automatic refund of the difference where the retailer is constantly surveying competitors’ pricing, works well and gives a positive image of the seller to the consumers. However, an automatic guarantee with a reimbursement, which is too high such as five or ten times the difference, engenders a caution of the product from the consumer, and conveys a rather negative image. Consumers were observed to reduce their purchase intention when facing these types of deals.
