Showrooming has dominated the headlines lately. You know what showrooming is—the chances are better than good you’ve had it happen in your very own store. Customers come in, they shop around, they find something they like, and out comes the smartphone. The price is checked, usually against Amazon, and increasingly, it’s the online retailer who makes the sale. You’re left standing there with nothing. To stop the bleeding, many retail chains have adopted price-matching guarantees. Is this a good idea?
It may be, but it may also be a knee-jerk reaction that is being implemented much too soon.
Let’s look at showrooming. It’s not a new phenomenon. All showrooming actually is is the latest technology being used to facilitate human behavioral patterns that have been around since the dawn of time. The media coverage is bringing new panic to an old problem.
Understanding What Motivates Your Customers
Some percentage of shoppers thinks that they will always, without fail, use price as the single most important determining factor in their purchasing decision. This belief is central to their self-image. In their personal value system, saving money is considered to be a very good thing. There’s often a competitive element to this: she who saves the most wins! Good shoppers save money, but they also earn social capital. In some circles, being the person who always knows how to find the best deals commands significant respect.
Part of the reason shopping prowess earns one respect and acknowledgement—validation that comes from one’s peer group or one’s own self—is because making the best use of your purchasing dollar can be incredibly difficult. Think back to the earliest days of human commerce, those first bazaars where buyers and merchants came together to trade. It wasn’t easy to compare prices then. If you wanted to know if the better deal on lemons could be here in front of you or at the stall on the other side of the bazaar, you physically had to journey over there and find out what the prices were. Some shoppers were willing to do that; others weren’t.
Jump forward a few centuries, to the days of printed sales circulars and catalogs. It’s easier for customers to price shop. The cost of comparing went down, the benefit went up. That resulted in more price-driven customers. Then there were radio and eventually television commercials, which were even easier to consume—no literacy required. The ranks of price shoppers swelled again.
Every time those consumers became more adept shoppers, retailers respond with a price-matching strategy. This has happened time and time again, throughout the course of history. Price matching strategies are taken up with great enthusiasm … and then quietly, over the course of years, abandoned totally or in part.
The question we should ask ourselves is not when we should start matching prices, but when we should stop. This is where customer knowledge is key. Not every customer sees saving money as a moral imperative. Others prefer using their dollars to make meaningful social change. That’s why there’s a Tom’s Shoes. There are customers who could care less if they pay thirty percent more for their coffeemaker, if they can be seen buying it in the right store. That’s why there’s Williams-Sonoma.
If you treat every customer as if they’re primarily price motivated, you’re going to lose the interest of those customers—those infinitely more profitable and loyal customers—who choose you for entirely different reasons. Companies that develop a deeper, more nuanced understanding of their customer’s motivations don’t necessarily need to price match. They’ve moved their relationship with the customer to a place where price becomes much less central to the conversation.
Now the use of smartphones has brought the cost of comparison shopping to practically nil. As one would expect, there’s a predictable swell in the ranks of price shoppers. Less interesting than tracking what retailers adopt a price matching strategy is pinpointing those companies that have enough confidence in their identity to choose another road.