Use Low-Price Guarantees Strategically

Posted by: Today's Tip Contributor on April 5, 2011

With so many consumers currently placing extraordinarily high importance on price, many retailers are promising a payment or credit if the customer later finds a lower price on an item purchased from the retailer. These low-price guarantees are most popular at retailers that hold out their prices as a major reason for shopping with them. However, a low-price guarantee can be valuable for almost any retailer where premium price is not associated with prestige, as long as the guarantee is used strategically.

Offer the guarantee on distinctive items. If your major marketing point is cut-rate prices, you might offer a low-price guarantee on every purchase. If your major marketing point is value, benefit from the draw of the low-price guarantee by offering it on select items. Researchers at Wayne State University, Baylor University, the University of Mersin in Turkey, and the University of New Mexico found that with distinctive items the low-price guarantee results in more customer satisfaction after a purchase, whereas with commodity items the guarantee could encourage your regular customers to shop around more and try out your competition.

Keep it simple. Avoid promises like, "If you find a better price on the same item at another store within 30 days, bring us your receipt, and we’ll give you twice the amount of the difference." To have this guarantee honored, the customer would need to buy a second copy of the product and then bring the original one back to you for the money and then bring the second copy back to the other store to make a return. It’s more credible to say, "If within 30 days of your purchase, you find a lower price advertised on this item, bring us the ad and we’ll give you a credit for the difference." Yes, this means that if you put an item on sale, customers who recently purchased it can request a credit. This is another reason for offering the guarantee only on select items.

Bruce D. Sanders
Consulting Psychologist
RIMtailing
Vacaville, Calif.

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