Thursday, January 22, 2009

Retail Pricing - Customer Satisfaction Still Critical

Here is an interesting article from a retail industry blogger arguing that low prices are not the only key to retailer success and customer loyalty:

"While the retail industry has been hyperfocused on pricing, the retailers who have continued to focus on customer satisfaction, like Amazon and Apple, have emerged as the winners in a losing holiday season.

"The link between customer satisfaction and sales is not breaking news. The confirmation that overall customer satisfaction still matters in a price-conscious economy is definitely headline worthy. According to the "2008 Holiday Top 40 Online Retail Satisfaction Index" report from Foresee Results, the most satisfied customers still spend more, make more repeat purchases, and make recommendations to friends.

"...Retailers in all channels would do well to heed the warning. While pricing seems to be the main consideration for fearful consumers, it is still not the only consideration. A hyperfocus on pricing to the exclusion of other aspects of good retailing will result in a diminshed customer experience, decreased satisfaction, and eventually, the loss of reputation, the devaluation of brand, broken loyalties, and, as we will observe repeatedly in 2009, complete business failure."

PPS experts have been covering this aspect of pricing strategy for years and from all angles, and the recent economic hardships are doing a good job of bringing this fundamental principle of pricing back into focus.

At the end of the day, this principle applies across all businesses - low prices cannot make up for bad business practices or bad products. Smart pricers apply customer relationship strategies as part of their overall pricing strategies instead of using pricing as a stand alone - or in many cases this year - a last breath strategy.

Several more articles on this subject are available in the PPS archive, including "Applying Customer Relationship Valuation to Strategic Pricing Optimization," "Customer Value Driven Pricing to Enhance the Bottom Line," and much more.

In tough economic times, returning to foundational pricing principles is your best bet. Warmly, EM

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2 comments:

Unknown said...

Eric, which "retail industry blogger" wrote the above? I'd be curious to see a link to the original.

My firm, RetailNet Group, just published a brief survey of our recent store visits. It is clear that retailers are delivering price and value in new and interesting ways in-store.

http://retailnetgroup.com/Newsletters/Files/R
NGStoreVisitsJan2009.pdf

Professional Pricing Society Blog said...

Here is the link to the original:

http://retailindustry.about.com/b/2009/01/03/lowest-prices-may-lose-customers-retailers-still-win-with-customer-satisfaction.htm

Thanks for your feedback. I would love to hear more from your perspective - EM