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Combatting Price as the Online Differentiator

Dan Feuer
Director of Outbound Product Management

Something struck me the other day that I haven’t been able to shake just yet – my 8 year old daughter said something like this to me – ‘why can’t we just go to the store to buy this, why do we need to shop online and find the best deal’.  I had some good reasons (mostly driven by my desire not to deal with holiday crowds and not wanting to buy her another shopkin) but her question really caught me a bit off guard.   It made me pause and think about my shopping behaviors. 

The really fascinating part for me is that price was one of the first things I thought about.   As I look back to just a couple of years ago, my first inclination would have been just to go to a store (and deal with the crazy crowds), perhaps make an outing of it, grab some lunch, and probably hit up a few other stores.   Fast-forward to today and I gravitate to grabbing my morning coffee, opening up my computer, browsing and then browsing some more to see if I can get a better deal.  It seems that I have somehow been reconditioned to think and behave differently.  

I think all retailers, be it in store or online, are being confronted with some harsh realities.   Lets discuss the online piece.   In thinking this through, I have come to realize that companies who operate online are dealing with a complex set of market forces that will require them to continue to evolve their online and overall business strategies.   Lets look at the facts:

One of the primary benefits of online commerce has been the ability for the consumer to quickly and easily shop for the best price across a near endless inventory.  The tools at the hands of the online consumer today are innumerable – search engines, online coupons, marketplaces, even price comparison browser plugins.   A couple of extra minutes of exploring can save someone significant amounts of money while getting just the right specifications, like color.   Online operators should now expect that their customers are viewing multiple sites, usually at the same time, focused on finding the best aggregate deal terms (price, color/size, shipping cost, delivery time).  

Online commerce is increasingly competitive and businesses must optimize their front and back end operations to stay competitive.   Strategies/tactics likes free shipping rapidly eat at margins.  The usage of loss leaders dictates that the average basket size must increase.   For these businesses, these cost centers must be absorbed and offset somewhere.    

Price is a dangerous long-term differentiator.   We all know that some online companies have chosen to subsidize their losses in the short-run for market share.  But for the majority of businesses, this is neither practical nor sustainable because at some point, the money will dry up, private investors will stop investing or Wall Street will negatively respond.  

At first glance, this appears to be one quagmire that businesses can’t easily solve.   But if we step back and get at the root of the issue, there emerges a strong contender for a solution.   Without over analyzing this (and referencing back to how I used to behave), there are strong psychological factors associated with our purchases, be it online, in a store or even in restaurants.   Even despite the challenges of shopping during holiday time, shopping is social, personal, informational, shareable and comforting.   While great experiences are euphoric for many, horrible experiences become fodder for the water cooler.    

When we start to talk about price and experience, we all know that people will pay for positive experiences and regret every last penny they spent when the experience did not meet their expectation.   The initial $15 spend on that shopkin that turns into a $200 or $300 half day event at the outdoor mall is not thought about too much if everyone has a great time.   On the flip slide, how many times have we all heard – ‘I got this great new shirt but it wasn’t worth it as it took me 30 minutes as their website kept crashing’ or ‘I thought the food was great but the service was horrible’.  

In my mind, for online retailers the solution to this problem lives in creating the right experience that helps produce these psychological triggers, that drives repeat business, increases order value and ultimately, reduces the focus on price.  Each company and brand will create different experiences based on their customer profile but there are some consistent themes that we can discuss.

Brand – For many websites today, the website is the brand and vice versa.  Does your website speak to your target audience, your motto, your values, etc?   If someone visits your site for the first time, will they know what you stand for in 10 – 30 seconds?   Have you added content to your site that would enable a visitor to connect with your brand (images, videos, articles, etc)?

Design & Usability – Can a customer easily find what they are looking for, can they easily navigate across the site, do they experience broken links, how long does it take to go through checkout, are the images clear, is the text the right size – all of these items impact time spent on site, desire to revisit.   For a great read about approaching design, click here

Knowledge & Information – How much content do you have on your website – this can be about your products, your brand, user guides, faq, return policies, sizing charts, etc.   Online shoppers do a great deal of research and when you don’t have the information they are looking for, they are onto the next site.

Human Contact – Can a visitor to your site easily reach a human in some way, be it with online chat, email or phone.  How many clicks does it take for a user to find the right contact point?  When contact is made, does a human actually respond and are they knowledgeable?  For more about brand ambassadorship, click here.

Relevancy of Content – Can you tailor the shopping experience to each individual user?  Do you have the tools to not only segment but also alter the content on the page?   Serving up irrelevant information leads to frustration and eventual disconnect with the shopper.  

Communities & Cross Shopper Interactions – While not for every brand or online site, communities are a great way to enable your customers to interact with one another.   The point is not to have them make a purchase each time but rather keep them engaged with your brand.   

Social and Visual Interactions  – Two of the hardest things to replicate online is the desire of many to touch and feel an item before purchasing it as well as talk about it with others.  Is the size right, is the grip right, how does it look in sunlight, do my friends like it, etc.  There are now a host of tools that can be used to enhance the online shopping experience, from video to UGC images to virtual dressing rooms to social sharing.  Here and here are great reads about social and visual shopping.  One of the biggest things to realize is that throwing the kitchen sink at your ecommerce site is not the solution – the tools you employ need to be strategic, integrated into your UX & brand and provide real value to your customers.   

I would love to hear from you and understand what else you are doing to create memorable online experiences. 


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