Price image is relevant to any business, as it dictates whether a product of a specific brand will sell, especially in a highly competitive environment such as online marketplaces. Although marketplaces are advantageous to consumers and merchants for various reasons, they can also become merchants’ downfall if not studied carefully.
In this article, you will learn how marketplaces are changing the perception of your prices and what your business can do to control them.
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:
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.
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?
All the market and price intelligence you need to thrive in the Commer…Learn more
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.
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