If you’ve decided to take on the task of creating an omnichannel experience for your customers, at some point you’ll have to consider your omnichannel pricing strategies.
There is a certain difficulty when it comes to pricing on an omnichannel level. You’re aiming to provide customers with a seamless customer retailing experience meaning they can connect with you across a multitude of different touch points whether that be mobile, marketplaces, social media, online or in a store.
But the truth of the matter is, regardless of where your customer chooses to buy, they expect their experience to be the same.
Is it possible to price on an omnichannel level? Are there omnichannel pricing strategies you can use to ensure you’re able to provide your customers with the right level of connection points all while keeping them happy?
In this blog post, we’re going to walk you through the core issues and problems that arise with omnichannel pricing and some clever strategies you can use to make sure you maximize growth, protect your profit margins and still provide a cohesive retail experience.
Let’s dive in,
What is an eCommerce omnichannel experience?
We mentioned earlier that omnichannel experiences are a unified channel-based approach to your retail or eCommerce store.
Adopting an omnichannel experience means you have an advantage over vendors and competitors who only sell on one channel.
Why you need to think about your omnichannel pricing?
Customers are savvier today than they were years ago. They have more information available to them, meaning they can conduct their own research. They can work out what price they’d be happy to pay. Some of them may even use a comparison tool to help them do that.
So while it may seem like a great idea to have wildly different prices on each device, you need to think about how that will make the potential customer feel. Seeing a huge pricing discrepancy on one channel could lead to them moving towards your competitor rather than you.
For many merchants, optimizing pricing and promotions is a difficult task – one made more difficult when you add further channels.
When it comes to omnichannel pricing you need to have an understanding of the following:
- Understanding your customer
- How you are different from your competitors?
- Understanding the nuances of using each channel you’re on and how they affect your pricing strategy
- Executing pricing across your various different channels.
Understanding the channel
It’s not a good idea to pull pricing options out of the air and hope for the best. Some channels actually have rules regarding what you can and can’t charge for certain items. For example, Amazon requires you to choose prices that are the same, or below the prices, you have elsewhere on the internet.
Before jumping head first into every single channel you can find, think about the role this channel will play in your overall strategy, and whether you can afford to use that channel.
When you consider your pricing strategy while simultaneously dealing with multiple channels, you must ensure your pricing is also in line with the level of customer satisfaction you hope to provide.
Providing too many promotions or personalizations on one channel might alienate those who use a different channel to purchase.
For example, if one of your goals is to price your products based on your competitors, what happens when they change their prices rapidly and you have to go an update all your different channels.
When it comes to omnichannel pricing, (especially if you have an international audience) you must factor in the season, inventory levels, and the levels of demand for each product.
If you are planning on offering promotional offers, then the best way to conduct these promotions is to offer the discounts on the most profitable channel.
When you start to adopt an omnichannel strategy, you need to consider the fact that it’s an ongoing process. You will find it difficult to simply set prices and call it a day (unless of course your entire business model is based on a certain price point). For example the Dollar store.
The three types of omnichannel pricing strategies
There are three types of omnichannel pricing strategies we’re going to discuss in this blog post: omnichannel, channel-specific and combination.
As per the table above, channel-specific pricing involves including different prices for different channels.
This is usually done by the retailer choosing to use specific promotions on certain channels to vary the prices.
In this case, a price the customer might see online could vary from what they see in the store, the catalog or social media.
Channel-specific pricing is most effective when the shopping journey is linear. Meaning, customers spend less time exploring prices and ideas and the road from research to purchase is more of a straight line.
The benefits of using channel specific pricing are: you can increase your profit margins on certain channels, however, savvier shoppers may become frustrated or annoyed if they come to realize the prices are inconsistent with each other, often leading to a negative impression of your brand.
Omnichannel pricing is an approach where the pricing stays the same across all channels and mediums.
If your focus is on the customer experience, this pricing strategy will be most effective for you. It’s easy for the customer to interact with you, regardless of which channel they use – meaning the barrier to purchase is significantly reduced as your pricing is consistent across all your channels.
If your business model is looking for customer retention and loyalty, omnichannel pricing might be the way forwards. You can adopt a competitive price approach and increase your share of the market without alienating customers who will spend a significant amount of time researching yours and your competitor’s products and pricing before they make a purchase.
For example, UK based catalog retailer, Argos allow customers to buy online and collect in store. Because of this, they need to ensure the pricing online reflects the prices you’d pay if you originally went to the store. The option of buying online and collecting in store, or choosing a home delivery puts the choice in the hands of the customer whereby they are able to choose the method that best suits their lifestyle.
There are often use cases where you might want a hybrid approach between omnichannel and channel-specific pricing strategies.
In this case, a combination approach might be better. Combination approaches work best when you want to provide the same price across all your channels, however, you allow for certain exceptions.
This is most common when an eCommerce merchant wants to provide a single price but use specific channels to mark down prices or provide specific promotions.
The only way this works, however, is if you are able to provide a unified customer experience.
Starbucks, for example, offers an online reward program users download to their phone. Here they are able to order their drinks in advance ready for collection.
The rewards one might earn from using the app are specific to those with the app. Meaning, customers who don’t use the app won’t be able to take advantage of the deals and offers. There might therefore be situations where two customers pay completely different prices for their drinks as one makes use of the in-app deals and one doesn’t.
When it comes to pricing, you need to consider the elasticity of your products. Each niche will allow for wider or smaller price flexibility. For example, it’s more economical to sell $3 packs of chewing gum in a store than it is online. In the same vein, for industries like electronics, it’s much easier to have fluctuating price points.
Deciding your omnichannel pricing strategy
We mentioned there are a number of different omnichannel pricing strategies you can use for your customers. But before you jump right in and make a decision there are some questions you should ask yourself:
What level of coordination do you have with your various channels? This question seeks to answer the logistics behind simply using multiple channels. Here, you should factor in the cost and time it’s going to take for you to successfully maintain the channels you choose to use.
Are there regional differences that might prose problems? If you’re an international seller, Winter in Australia is summer in America, so having discounts on every single channel throughout the entire year on hats and scarves will hurt your profit margins.
Understanding your customer base? For certain industries and products, you will naturally attract bargain customers. These are customers who are looking for the best deal and have no real interest in becoming a loyal customer.
Do you have to contend with channel-specific competitors? You might use Instagram, your website and Facebook to sell your products. While your website converts visitors well, you could be competing with a company who dominates Instagram and also offers a lower price on that channel.
Omnichannel pricing strategies Takeaways
An omnichannel approach to retail (when done right) brings many benefits for your business. Because you’re focusing on the customer, allowing them to choose where they want to shop, you increase their satisfaction which will inevitably lead to higher sales in the future. You are able to strengthen your brand using a single identity across various channels your customer will come to know and love also offering them multiple connection points to learn further about your product.
Data. When adopting an omnichannel experience, you are afforded with a great wealth of data about your customers, how they interact with various channels and you can measure the effectiveness of certain channels in comparison to the other ones you choose to use.
Retailers are most successful when they use an integrated omnichannel pricing strategy that allows them to offer channel-specific promotions to help increase customer satisfaction and profit margins.
Also keeping track of your competitor’s pricing will allow you to stay ahead of the game and optimize your own pricing. Your biggest competitor in a store might be different to your biggest competitor on Instagram or marketplaces like Amazon.
If you implement omnichannel experiences for your customers, what pricing strategies have you used? Leave a comment below!