Maybe it’s the retailers’ fault. After all, they have trained us to expect discounts at checkout, from the open-a-card-save-15-percent-today spiel to “Preferred Customer” coupons and punch-card credits.
Who pays full price anymore?
Still, it’s unlikely big box marketing gurus could have imagined shoppers turning a Lowe’s customer service desk into something resembling a Chinatown market stall. But that’s what is happening, as retailers increasingly engage in price negotiation. Credit attitude changes -- at least in part -- to smart phones and other online shopping trends, says Sharon Beatty, Ph.D.
“We’ve done some research on the issue of price negotiation. What the trends show is that consumers have more power,” says this Reese Professor of Marketing for Culverhouse.
Consider that Target customer – the one back there on aisle 14, swiping a vacuum cleaner’s bar code with her phone. She knows immediately that Wal Mart has the same vacuum for $4.87 less. To keep that shopper from speeding to Wal Mart – or buying it online from her phone -- retailers like Target and Best Buy have initiated price-matching promises.
How can a store paying for restroom soap and cheerful seasonal decorations and employees’ red shirts compete with online competitors? Beatty isn’t sure. “If these companies continue to do this, the problem is their survival.”
Target, Lowe’s and other retailers now recognize that consumers enter their stores armed not only with price apps, but with arguments (“I am a good customer.”) about why they should get a discount. Companies are now trying to determine how to train employees to handle such scenarios, and to do so fairly, without showing preferential treatment to the most demanding.
Meanwhile specialty stores like Bath and Body Works crank out buy-two-get-one coupons and other in-store incentives for crossing their thresholds. The idea, of course, is that if someone shops in person they are more likely to buy. After all, you can’t sniff Eucalyptus Spearmint Stress Relief Bath Soak online -- at least not yet.
Beatty’s research indicates that shoppers are more likely than ever to bargain in traditional retail settings. Once they successfully snag a deal – perhaps 10 percent off for a loose button – they are likely to bargain again. So, like customers conditioned to expect coupons or online price matching, they may be miffed if they don’t get future discounts. In other words, retailers are enabling bargaining. But they’re also encouraging shopper goodwill, says Beatty. And, since those shoppers can’t bargain with Amazon – at least not yet – it keeps them coming back. Here’s how Beatty’s study explains it:
Taken as a whole, our findings suggest that when retailers allow customers and frontline employees to bargain and the customer gets the discount or deal, the retailer can reap many benefits since these shoppers walk away happier and planning to return. Thus, firms need to decide how much and under what conditions they want to empower their employees to negotiate with customers. Firms may reap benefits by empowering their employees to offer small discounts and deals when asked by the customer, although as noted earlier there are negative consequences too (lower profit potential, more time taken with the customer, and potentially more employee stress).
Does your retailer fear the phone? Online options are changing the ways we shop, from price- matching to negotiating. As some retailers fail to compete in this new world, expect more malls to include gyms where department stores used to be, and for parking spaces to be affected accordingly.
More about that in the next post. Meanwhile, feel free to shop till you drop – or as long as your phone battery lasts.