How marketplaces threaten your price image and what you can do about it

The way your customers perceive your products’ pricing when comparing them to your competition is known as price image. The Apple brand, for instance, is a great example of a premium brand that sets high prices for its technology products (prestige pricing) and therefore generates the idea that its products are of higher quality than its competitors.

However, if suddenly several big-ticket items of this brand started showing a lack of quality, e.g. serious software issues, then the price image of those products would definitely worsen. As a consequence, consumers would think twice before purchasing an Apple product in the future. When demand is affected by product pricing it is known as price sensitivity.

In this fictitious example, buyers would experience a high price sensitivity to Apple’s high prices since they would be perceived as unjustified, considering the recent quality decline. External factors, such as high inflation could also elevate the price sensitivity and ultimately lead to less purchasing power.

Apart from brand reputation and the actual prices of products, here are other factors that could influence the price image of products: 

• Cost reductions (discounts, etc.): If a brand or retailer is constantly lowering its prices or promising big sales events, then it will most likely be perceived as more accessible to low and middle-income households and therefore impossible to be marked as a premium store.
• Physical stores: Although the covid-19 pandemic boosted the growth of online shopping, around 80% of global sales are still happening in physical stores. This is why the appearance of an offline store, which can be characterised by the design and cleanliness of the space, also influences the price image significantly.

With new developments in online retail comes greater complexity. The perception of prices, which determines if an online user ends up buying your products or not, has become distorted to some extent on marketplaces. It is not uncommon for a buyer to find price discrepancies of the same product on different websites (e.g. marketplaces, direct-to-consumer channels), which may damage a brand’s credibility and reputation. This also applies to the reputation of a marketplace, as recurrent expensive products may lead to users never returning to that marketplace again.

Nonetheless, marketplaces often seem more attractive to consumers than online shops since the prices there are cheaper or because the platform has stock availability. Amazon, for instance, is known to be used as a frequent search engine for buyers to compare prices and according to PowerReviews, around 38% of US consumers start their customer journey there, whereas only 35% do so on Google.

An example that illustrates quite well how price discrepancies take place on marketplaces is commented by Oliver Dauvers on Editions DAUVERS: In France on October 10, 2022, the popular patafix product by UHU was sold on ManoMano for 11.54€, being almost 2 times more expensive than on Leroy Merlin (6.65€). Even when compared with the retailer Castorama (3.35€) one is able to observe a significant price difference between the two marketplaces and the online shop.

How would you react as a first-time user of ManoMano? You would probably find it too expensive and consequently develop a high price sensitivity for this platform. Regarding the UHU brand, you would either search for a better price elsewhere or opt for a cheaper variant. All in all, this experience would negatively affect both the brand and the marketplace. 

According to McKinsey research, one of its clients revealed that “70 percent of its customers would only buy an item on a marketplace if they believed they would pay the same or less than they would if they purchased it directly from the seller.” This data reveals the importance of price for buyers and the urgency for merchants to control those prices if they want to avoid being depicted in a bad light. 

Marketplaces:

• Define your minimum and maximum price: Make sure you have decided on your price range for each product to avoid loss of profit or a negative brand image.
• Personalise your pricing: Each marketplace is different, and so should your pricing. Amazon, for instance, is known to offer the most attractive prices thus if you want to stand out from the competition you should consider setting low prices as well, or otherwise you won’t get the Buy Box, which accounts for over 80% of all Amazon sales.
• Be consistent: For your products to sell in the long run, both in terms of profitability and branding, you mustn’t lower or increase prices too often and too differently from the original price.
• Monitor your competition: Use a repricing tool always to be ahead of your competition and offer competitive pricing.

Your website:

• Use Penetration Pricing to generate customer loyalty: When you start selling on your website or when you introduce a new product into the market, lowering your prices may catch buyers’ attention from the start and make them come back for more in the future.
• Take advantage of upsell and cross-sell opportunities: Contrary to a marketplace, here you have the freedom to set the prices you want for your products, as long as it is profitable for you. You can promote the purchase of multiple products together by lowering the price of some and increasing the price of others that go well together, so customers feel the need to get the full pack. Perhaps you might also be interested in selling specific items solely on your e-commerce site which you can price higher than the rest.
• Schedule unique promotions and sales: Here you can decide freely when and how to create promotional campaigns that will make customers visit your online store specifically.

In the previous section we summarised the main differences between pricing on marketplaces and your website, but what should you do as a brand and retailer to avoid a negative price image on marketplaces? 

As a brand

• Identify unauthorized sellers: Are there maybe unauthorised sellers damaging the image of your brand? 
• Have an eye on your sellers’ prices: Are all sellers respecting your price bonds or running out of stock.
• Pay attention to ratings and reviews: In order to know what your customers think of your brand, you should read through the comments they leave on your brand’s page on each marketplace so you can improve your products and services.
• Have an overview of the market: If you know how your direct competitors are selling on marketplaces, you can learn how to adjust your price image as well.

As a retailer

• The product catalog: Select products that align with your image, no matter if you are a discounter or a premium retailer. In addition, make sure the brands and type of products on the marketplaces you wish to sell fit the audience. 
• Have an overview of the market: If you know how your direct competitors are selling on marketplaces, you can learn how to adjust your price image as well.
• Be careful with the shipping costs: Often the shipping costs make buyers reconsider whether to purchase or not a certain product so make sure you offer competitive prices.
• Communicate your promotions up front to marketplaces: In order to be a consistent seller you should make sure that in the contract with a marketplace you make clear when and how your promotions take place, so they can also adjust their own prices.

The best way to have full control over your price image, no matter if you are a brand or a retailer selling on marketplaces, is to use a price intelligence tool. It will not only give you access to your competitors’ data and give you an overview of your market but also help you set the right prices at the right time so that your potential customers can have a consistent and positive perception of your prices.

Thanks to the pricing solutions Lengow is offering after the acquisition of Netrivals, you can now be competitive at all times and avoid marketplaces disturbing your products’ price image.