Introduction
With the democratization of digital channels, buyer behavior is changing.
Traditional barriers between physical and online sales channels are being broken down. Consumers research online, compare prices before buying in-store or on a merchant site, and are prepared to visit several stores to find the best deal.
For retail chains, the question of implementing an omnichannel pricing strategy is more important than ever.
- Should you opt for a uniform price across all channels?
- Is it better to vary prices according to each channel?
- Or would it be better to opt for a middle way, with arbitration by product or category?
It’s a complex issue that can’t be resolved with a one-size-fits-all answer. There are far too many criteria to be taken into account, ruling out a simplistic solution.
In this article, we address all the questions that will help you decide between the various possible approaches.
Step 1: Define a channel in your context
Before talking about omnichannel strategy, before asking whether you’re going to unify or differentiate your prices across your different channels, it’s necessary to be clear about what you call a channel.
There may be more to a canal than meets the eye. It’s not enough to distinguish between physical points of sale and digital channels. The definition of a channel varies according to how you envision and segment your sales structure.
Let’s take the example of a supermarket chain. It includes hypermarkets, supermarkets and convenience stores in city centers. Each store type will potentially have a specific pricing strategy. So, in this case, the store type can be considered a channel in its own right.
Another example is a company which, although relatively modest in size, has several separate online sales sites. Each website represents a channel, with its own pricing strategy.
If you take into account both physical and virtual points of sale, the number of channels to consider can quickly become impressive. It’s then up to you to decide whether to treat each channel specifically, segment them into categories, or apply a unified pricing strategy.
Step 2: Identify how your customers buy your products?
The choice between a unified or differentiated pricing strategy also depends on the nature of the products you sell.
For certain types of product, such as automobiles or household appliances, the purchase has a major impact on the consumer. As part of their purchasing process, they will spend a great deal of time online, comparing prices on merchant sites or via comparators, consulting customer reviews, and so on.
In this case, the adoption of a unified pricing strategy may seem appropriate. This means offering a consistent price across all sales channels, to create a seamless, transparent purchasing experience for the customer.
For example, it’s hard to imagine a major carmaker charging different prices from one dealership to another. This would damage the brand’s price image and confuse consumers. In general, pricing is unified and the brand communicates a national sales price.
In the household appliances sector, similarly, we need to take into account the buying behavior of customers, who tend to monitor prices online first and then, if necessary, visit a sales outlet to obtain information from a salesperson.
Many customers therefore know the prices before they come into the store. If a TV, for example, is listed at 249 euros on the website, but is offered at 299 euros in store, this can lead to misunderstanding and frustration for the customer.
On the other hand, when it comes to purchases with less impact, consumers are less tempted to compare prices. Or they only compare them between different local players. In this configuration, a differentiated approach is more justified.
Step 3: Clarify and prioritize the competitors you want to align yourself with?
When it comes to developing a pricing strategy, there is no absolute truth. All the choices you make are based on a dual rationale of profitability and competitiveness.
To be competitive, you need to know who your competitors are and analyze their pricing strategy.. The choice of a unified or differentiated strategy therefore also depends on who you consider to be your competitors.
→ With whom do you want to align your prices?
In a unified pricing approach, there may be a risk if your online competitors are not the same as those operating in-store.
Pure players, who specialize solely in online sales, may have a different pricing strategy from your physical competitors. As a result, you need to take into account the competitors you face on the distribution channels relevant to your business.
However, if you consider too broad a spectrum of pure players, you run the risk of engaging in a price war. This is not necessarily desirable, as your operating costs are much higher than those of your online competitors.
The challenge, then, lies in making the right choices about which price alignment battles to wage. Don’t try to compete on all fronts, but focus on strategic products and competitors.
Step 4: Identify your network structure
The structure of the distribution network is a key element in the implementation of an omnichannel pricing strategy.
Several factors influence your strategic choices:
- Sales outlet types
- The geographical location of your stores
- Whether your stores are integrated or franchised
One of the main benefits of a unified pricing strategy is the simplification of the pricing process. The company concentrates on setting the price of a product and then maintains price consistency across all its channels.
This approach has its drawbacks, notably its lack of flexibility. For example, it can lead to the loss of margin opportunities, as in the case of stores in high-rent locations. Retailers sometimes need to set higher prices to compensate for the high operating costs associated with a prime location.
The unified approach is therefore not necessarily ideal for chains with a large network of outlets with heterogeneous characteristics.
At the opposite, differentiated pricing allows chains to adjust prices according to store location, local demand or other geographical factors. However, it adds complexity by forcing the company to take into account a large number of criteria when determining its prices.
Another point to consider is that franchising introduces additional challenges. Franchisees generally have their own pricing autonomy. They may choose not to follow the central price recommendations to align themselves with their local competitors, with consequences for the brand’s price image. This heightened complexity in hybrid networks, made up of both integrated and franchised stores, calls for very fine-tuned pricing management.
Conclusion
Implementing an omnichannel pricing strategy in the retail sector requires careful thought. The questions and steps we’ve explored in this article will hopefully help you make informed decisions that are right for your business.
Whatever your choice of pricing strategy, the structure of your brand or the competitors you want to align yourself with, our OptimiX XPA solution helps you manage and automate your pricing process.
What’s more, as the retail landscape evolves, with new channels and new trade-offs to be made, you need an agile solution that will enable you to respond to any changes in strategy.
Are you looking for a publisher who can provide long-term support for your pricing needs? Contact us for a demo.
