The cost-of-living crisis and the recession is already considerably affecting consumer behaviour and their specific choice of products, and even retailers. Switching to cheaper alternatives or those that offer better value overall is only going to continue.
An interesting scientific study looked at pricing strategies to understand which approach is better to adopt for the retailers. They specifically wanted to compare whether deep-discounts from time to time or continuously ever so slightly lower prices versus the competitors were more effective. The participants were asked to make their typical 100 weekly purchases yet focus their decision making on the price of the products (a mindset that many customers share right now). The participants were also not able to check the retailer’s prices before their shopping trip and the researchers manipulated the pricing strategies between the two retailers.
The researchers found that participants preferred the retailer that was less expensive more often than the retailer they believe is the cheapest on average.
It makes sense. In a normal day to day shopping, it is quite hard for the human brain to create an average of all shopping trips and compare and contrast the potential savings over a longer period of time. However, continuously seeing (at least some) lower prices on key products creates an overall perception of a cheaper retailer, which further builds trust and loyalty.
Considering how many customers will be living even more paycheck to paycheck in the coming months, implementing a consistent lower pricing strategy (vs competitors), especially on key everyday products, will be crucial.
If your brand is also taking advantage of the loyalty programmes, how about making these prices personalised to each customer’s spending habits. Is your customer focusing on buying sustainable household cleaning products? Give them discounts on these, so that they don’t have to trade off their important environmental and ethical values. It can lead to an even stronger loyalty that stems from gratitude and reciprocity.
Do you think these strategies are only suitable for grocery stores? Certainly they will be way more effective for supermarkets, but this doesn’t mean that fashion, beauty or lifestyle brands can’t take advantage of them. Are you selling kids clothing? Do you have a cafe or a juice bar in your store? Do you sell seasonal essentials? Or are you a low-priced retailer? You can all benefit from the same strategies.