Marketers of no-frills and budget brands want to make prices easy to compare, as do marketers that want to use price as a method to grab quick market share.

Pricing transparency and price-led promotion enables them to maintain their brand positioning as the category low cost provider or achieve short-term objectives related to volume or market share.

Price Comparison Services.

The first technique budget brands use is price comparison services on the Internet. A price comparison service (a shopping bot) allows customers to compare prices for specific products.

The shopping bot websites do not usually sell the product. The retailer has a commercial relationship with the price comparison service. If the retailer is selected by a customer, the retailer may incur a pay-per-click charge for the listing and referral, or may be invoiced for a small percentage of whatever is sold.

Some larger price comparison sites require vetting of retailers before a commercial relationship is established. This is done to ensure the legitimacy of the store prior to any customer transaction.

Examples of price comparison websites include:

www.getprice.com.au

www.shopbot.com.au

www.lasoo.com.au (which displays retailer catalogues)

Per Unit Pricing.

The second technique used is per unit pricing. One way to make prices easy to compare is to charge products at a unit price. With unit pricing, the price is stated in some common unit of measurement, such as the price per kilo or pound, or price per dozen for example.

Recommended Retail Pricing.

The third technique used is recommended retail pricing (RRP). A recommended retail price is usually set by the manufacturer of a product to encourage competitors to charge the same price for identical products.

Smaller retailers tend to keep close to the RRP (where one exists). It enables them to avoid price competition while they earn a profit. Some manufacturers, such as Apple Computers, also have minimum advertised prices which their authorized resellers are bound by.

Price Transparency.

The fourth technique is publishing a price list. Marketers can add a great deal of transparency to pricing by publishing their price lists. Everyone (including competitors) knows what your asking price is and competitors may begin to price match against it.

Price Undercutting.

The fifth technique is undercutting competitors. This technique is the domain of a large competitor and is common in the retail sector. Some marketers actively promote that they will price match (or beat pricing by a modest percentage) competitive offers.

This is good pricing strategy. The onus falls to the customer to find the cheapest price and present evidence of it to receive the discount. In the absence of such evidence, the marketer charges its normal (higher) price.

This technique is beneficial to the marketer in several ways.

• It allows the marketer to retain a budget positioning.
• It enables the marketer to hold the margin for products unless the customer asks for the discount to be applied.
• The marketer is the recipient of a substantial amount of market intelligence that he or she doesn’t need to expend effort to gather.
• It’s main disadvantage is that it can result in making revenue forecasting more difficult to achieve accurately.

Bidding or Tendering.

A business-to-business or government customer may use a bidding process to establish prices. Bidding occurs when multiple sellers submit proposals to the customer and usually, but not always, the lowest price is accepted.

To make these bids easy to compare, the customer will establish the tender template which all bidders are required to complete and submit for consideration.

Where this occurs, it becomes very difficult for the marketer to make its prices hard to compare with competitors.

Related Post: Pricing Strategy: Making Prices Hard to Compare.

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