Online shopping is rapidly approaching 5% in Australia, 10% in the US and almost 20% in the UK. Retailing will become more and more cut-throat, and the competition can be on the other side of the street or the other side of the world.
As more and more consumers make price-based purchasing decisions, remaining competitive on price will mean the difference between smaller profits or losses for many retailers, large and small. Online pricing competitive intelligence toolsand platforms will become firmly entrenched in many retailers’ arsenal, but used the wrong way and they will contribute to retailers’ demise.
What role, if any, social media plays in pricing will become a bit clearer in 2013. Early in 2012, there was some irresponsible scaremongering about the concept of “behavioural pricing”, whereby Facebook fans and Twitter followers would be asked to pay more for goods they liked or followed.
Amazon tried something similar to this in 2000, when they charged different customers different prices (30%, 35% or 40% off) for the same product. Customers didn’t take too kindly to this, and despite the cost being small (an average of $US3 being refunded to 6,896 customers) the damage to Amazon’s goodwill was far greater.
More interesting are developments at fashion retailer C&A in Brazil, where products are hung on coathangers that show the number of likes the garment has had on Facebook (assuming the garment is on the correct coathangar).
Marketers have certainly learned a lot from behavioural economics (BE) over the past 30 years. With a fairly robust set of heuristics now firmly established, I wouldn’t be surprised if BE provides marketers with a new, third-generation approach to market segmentation.
But I also believe cracks will start to appear in BE – the first of which involves trust. Why would I accept a ‘nudge’ in the direction of a particular products or service, whether it’s offered by a bank or a government, if I don’t trust them?
Technology may also start to undermine BE. Imagine a smartphone app that, upon scanning a product’s barcode, tells you whether you should buy it on cash or credit, which bank account or credit card to use (talking into account overdraft limits and interest rates), and what your loyalty points balance will be after the transaction has been completed? Technology will provide the rationale for those irrational decisions consumers had been making.
Some of these developments are already under way, and some may never happen. But as Bill Gates once said, we tend to overestimate what will happen in the next two years, and underestimate what will happen in the next 10 years.
Jon Manning has spent most of his career pricing products and services, in the corporate world and via his consulting business Sans Prix. In 2011, he launched the world’s first and only crowdsourcing platform for pricing, PricingProphets.com, where companies can ask a panel of global pricing experts what price they should charge for a product or service and why.
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