When competitors enter your territory, it’s tempting to wield price as the weapon of choice. However, an all-out price war rarely leaves a clear winner. You’re likely to sustain significant damage to your reputation if shoppers start to equate low price with low quality products. Your bottom line will also likely suffer, as profitability is directly tied to your pricing.
The better option is to look for ways to send the message to shoppers that your prices are fair without robbing your margins. Since many consumers believe that independent retailers have high prices, it’s critical you take active steps to shape your price image if you want to show you’re competitive. An effective price image is created by a variety of factors, such as your overall pricing strategy and your merchandising. Here are 10 suggestions to create the price image that will give you the upper hand.
1. Learn More About Pricing
The more you know how to use pricing strategies, the better equipped you will be to impress customers with your prices. This month, NRHA released its new course in Basic Retail Pricing to help you understand pricing fundamentals and how to use them to your advantage. To learn more, visit nrha.org/training.
2. Price Audit Regularly
Shoppers are comparing your prices to other retailers, so shouldn’t you do the same? Price auditing (also called price shopping) ensures that your prices stay in line with what your competitors are charging and that you’re not over. You could find items where you are overpriced or undercharging.
3. Offer Price Guarantees
Perhaps the most effective way to let customers know they are going to get a fair price at your business is to offer them some type of price guarantee. Few customers will ask you to match a price, and even if you lose a few dollars on the customers who do, it will strengthen your position as a viable alternative to the big-box price leaders.
4. Price Audit Blind Items, Too
While it’s natural to focus price audits on price-sensitive items, consider the whole basket of products. Most customers have an idea of a fair price, so if a customer finds out you are significantly higher on a blind item in relation to another retailer, either be prepared to defend your price or match the competitor’s price.
5. Call Out Price Changes
When you’re offering discounts, don’t expect customers to find them on their own. Tell shoppers about them as loudly as you can. Use signage that draws attention to the prices at the shelf level and place discounted merchandise in more visible areas, such as endcaps and dump bins. It may not take more than a few promotions to create a positive price image.
6. Widen the Selection
Having a good-better-best selection helps your price image. When customers can choose the price and quality level they want, they are likely to view your prices favorably. If your selection is heavily weighted toward low-priced items, customers may think you can’t compete on price. If you only carry expensive items, shoppers might think your overall prices are higher.
7. Emphasize Value
Use point-of-sale signage that lists your competitor’s price next to yours. Even if your prices are equal, use the space to list the other services you have to offer that the other retailer doesn’t, such as free assembly, free delivery and access to knowledgeable sales associates.
8. Utilize Loss Leaders
In order to be competitive, you’ll likely need to drop your prices on some items. If you’re using a variable pricing model, then you will make up for that loss on other items. Loss leaders get customers in the door and are probably the first items customers will compare with your competitors. If you can win the sale on those items, then you will likely sell more products long term. A few low-priced items will go a long way in creating an overall positive price perception.
9. Hold Sales Events
A storewide sales event can strengthen your price image. This can be a good way to convert new customers, too. Hold a sales event in conjunction with a community or nonprofit event. You could expose your store to a new set of shoppers, and their first impression of you will be a sale, a positive way to start off your new relationship.
10. Tap the Power of Endcaps
Endcaps are one of the most effective merchandisers for communicating price, but they must be executed properly. Maintain endcaps by rotating them regularly and include several lower priced items to appeal to price-sensitive customers.