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Is Price Off Destroying Full Price?

What does recommended retail price (RRP) really mean anymore? Does it mean anything to the average shopper? Or do they not value the ticketed price of anything? There is no doubt that pricing strategy and the intelligent use of off-price as a tactical weapon sits at the very core of success in retail. But is discounting becoming the retail equivalent of heroin for both retailers and shoppers? Are we training shoppers to just sit and wait for the items to go on sale? The answer it may surprise you is yes and no.

The real answer lies in the grey area of segmentation rather than in the black and white of one-size fits all. For a start – according to the trade practices act – a price which is used to discount from, must be established for a fixed period of time before discount claims using double pricing or percent off are made. This ensures that – technically speaking – there is always a recommended retail price.

Within the lifecycle of all products and within the multiple segments of shoppers who buy those products there are different behavioural triggers. Some shoppers for example want to be the first to have something new. Some just want variety. Some value their time and want instant gratification. For these and other segments, discount means very little provided the products in question represent relative value in their eyes.

But it is also true that there is a big segment of shoppers made up of people who are genuine bargain hunters – who see “bagging a bargain” as much as a sport as meeting a genuine functional need. It would be very foolish indeed however to see these people as representing a trend or behavioural driver which will change shopping forever into a single minded search for cheap. In fact the opposite is true.

The more discounting dominates the promotional noise that reaches the vast majority of shoppers, the more the segments that are turned on by other things – like service, range, newness, originality, experiential and entertaining shopping experiences – long for differentiation. The retail equivalent of “road rage” is fuelled by shoppers feeling that their time is being taken for granted. Or worse still, being wasted.

When retailers diminish the perceptual experience down to a single variable (price), the less value customers see in the act of purchasing. This means you better be bloody efficient or risk the consequences. Discounting does put pressure on the recommended or accepted standard retail price of like for like goods. After all, it is about the acceptable average price the shopper expects to pay for the goods. That is their value benchmark.

However, very large customer segments globally have again and again demonstrated that they will pay more for more. They hate paying more for less and lose faith when they feel they have been mislead into paying more for the same. Discounting alone is not the enemy that many fear as most customers accept a variance from retailers that they understand as promotional pricing. The real danger is in what is removed by retailers to sustain lower prices on an ongoing basis. Taking away what the shopper really values is what ties you to an ever-increasing reliance on discounting. And that is what will eventually reduce your pricing strategy to one weapon.