As online shopping takes its place within local and global retail offerings, many businesses are not only fighting to be found but implementing various tactics in order to grow conversions and revenue.
As described by the Sydney Morning Herald in its article ‘Why pay more? Because they know where you click’, some retailers are now making use of the granular data provided through online channels in order to personalise pricing for customers based on a variety of factors, including geography, socio-economics and even technology (e.g. Apple vs. PC).
Although recognising this as the evolution of e-commerce, we asked two of our experts (Emmanuel Churchley and Raymond Nazloomian) to go head-to-head as to whether or not this approach would be accepted by Australian consumers, especially in the current retail environment. We will leave it to you to decide through comment who presents the more compelling argument and invite you to share your thoughts on this subject.
Why consumers will embrace the adaptive web approach
When I first saw the article in the Sydney Morning Herald about ‘adaptive web’, my first thought was (probably the same thing you’re thinking right now): ‘How outrageous, I don’t think I should pay more to shop online!’.
However when I really thought through this approach and the potential benefits it offers that could actually enhance the e-commerce experience – it is not as shocking as you first think.
Are the off and online worlds that different?
In the physical world we don’t all pay the same price – pricing based on personal characteristics already exists? Doing a quick brainstorm, I can think of a number of different pricing models I’ve experienced in the physical world in the last week:
- Socio-economics – Factors such as age, gender, ethnicity, worth, financial status, etc. For example, many Government bonuses, grants and deductions are means tested based on socio-economic factors.
- Geography – Factors such as physical location assessed in terms of post code, suburb, country, etc. For example, depending on which suburb you’re in at the time of purchase the price of common groceries (e.g. bread, milk, eggs) can vary greatly.
- Community – Factors such as loyalty and VIP programs, as well as email subscriptions, etc. For example, customers who are part of loyalty programs get exclusive discounts and rewards.
- Preferences – Factors based on personal preferences and requirements, in terms of whether customised service is required, if you choose a premium product or buy in bulk, etc. For example, customers who want fully flexible airfares pay a premium for this service.
The bottom line is, pricing assessed on various factors already exists in the physical world and it is accepted as common practice, so why should online be any different?
Who will foot the bill for customised products and services?
While some consumers are all about self service, others are constantly in need of additional support (e.g. require call centre support, want paper statements, etc). As consumers increasingly demand personalised products, sales and service, it naturally follows that they should expect the prices they pay to reflect the differing costs of service.
On the product and sales side – some customers want personalised products from retailers such as Shoes of Prey, others want immediate delivery such as that offered by The Iconic, or extra baggage on an international flights. Ultimately these ‘value-adds’ are to the benefit of consumers, the question is: do they value these options so much that they are willing to pay a premium for these and if so, how much?
From a retailer’s perspective and given the current consumer environment, it makes sense to personalise pricing for those individuals who want all the ‘bells and whistles’ and are willing to pay more to have this choice. Rather than blanket these costs across all segments, including those that just want the no-frills offering.
Looking at the ‘bigger picture’
Finally, from a purely economic and altruistic point of view – does equity mean everyone pays the same price? Or… does it really mean we take into account peoples’ ability to pay and means that everyone is given equal access and opportunity?
Examining the bigger picture and at a time where there are reports that retail in Australia is in decline: if pricing is slightly varied based on, for example, socio-economic factors, this will likely translate to increased consumption, purchases, sales and revenue, perhaps resulting in the retail industry and all related industries get stronger too. Overall the economy grows and in essence we are all winners.
Although it might be shocking at first and unpopular, with the customisation of products, sales and service opportunities offered by online retail, this is the logical next step for retailers who are footing the bill to meet increasingly demanding customer expectations.
Why consumers won’t embrace the adaptive web approach
Retailers are forever in the public’s eye, being scrutinised for every move they make. When they do something good, they are applauded with reservation. When they do something bad, everyone’s an expert and advocates their demise for ‘un-Australian’ behaviour.
Amongst other things, retailers want to be known for offering value for money and being trusted. Coles’ ‘Down Down’ campaign wouldn’t have been successful if ‘Prices are up and staying up’. Aldi via its nationwide pricing strategy encourages trust that customers are getting value no matter at which location they shop. Sure, a lot of people might not care if others pay more than them, but no one wants to pay more than they have to.
So why would any Australian online retailer play with prices? Well obviously they operate to profit. But if businesses attempt to make a little more on transactions without the customer knowing, they are ultimately encouraging them into the welcoming arms of their competitors.
Tweaking prices is a poor attempt at profit grabbing and erodes customer advocacy. Think it will work? Consider the following ways consumers can get great priced goods:
Using crowd power
A Jamie Oliver book was promoted on Click Frenzy’s Facebook page and within four hours the crowd had suggested cheaper retailers. The crowd knew better and shared it. Forums, where like minded people connect, always have members sharing the best and worst retail offerings and experiences. Vogue’s Forum is always populated with discount codes, where to buy items and other useful tips – for free.
Clicking their finger to harness the power of search
Searching online for the best price is only a click away. A search for a microwave gave me nine retailers with all the information I needed to get the best deal. What if I still want more information about which product to buy? Decide.com will guide me, using enough data to make a product marketer sweat and a data scientist swoon.
Finding the retail innovators
Startups continue to disrupt retail, focussing on providing customer centric solutions. For example Flightfox is an affordable concierge service that gets its customers where they want for cheaper. A bonus on top of its prices, are its exceptional customer service and attention to detail that far exceeds store, telephone and most other online experiences.
Using digital disguises
With the 2012 Olympics coverage bringing awareness to the masses about VPN services that allow users to change their IP address (as reported by TechCrunch), consumers are well aware of how to change their browser information. There are plenty of products available (Easy-Hide-IP.com, Hide My Ass!, Hide-IP-Soft.com), with the simplest option using a freight forwarder to provide a localised address. For consumers, a case of hide and then seek!
Clicking off and heading into a store
At the end of the day, consumers always have the option to go in store to have their online prices matched or beaten. Chances are they will save more money offline than online and obviously (in most cases) the goods are available immediately.
Retailers seem to continually doubt the wisdom of the consumer, their networks and information access. Although in the short term price tweaking might work, consumers will get wise to this strategy – when they do, they won’t forgive and forget, they’ll just find a better deal elsewhere.
Rather than play with prices, retailers could try the following:
- Customise offers – With the amount of data available, retailers should focus on personalisation and unique offers. If a customer looks at the same product three times during the week, then offer a discount if bought by a set time. If a customer checks into a location near a store, offer them a discount on a regularly purchased item to drive them in store and keep you top of mind.
- Embrace real innovation – Retailers should be looking at how they can innovate across their products, services, offers, as well as in the way they operate internally. Easier said than done but a worthy investment.
- Enhance the online experience – The online experience needs to be better than a store, something that makes customers want to use your site. Provide simplicity and delight your customers.
- Be open and honest – A well set up business will have enough data on a customer to know them better than others would, even acting as a pregnancy detection service (demonstrated by Target). Make Privacy Policies and Terms and Conditions easy to understand. Make customers aware of what they can opt out of or what you do with their data. Duckduckgo, a search site, clearly states what they do and don’t do with data. They make clear what others don’t mention and in doing so gain user trust.
What are your thoughts on this? Will retailers be able to harness adaptive web techniques for broader online gains without upsetting already sensitive consumers?