Price Image is the Customer's perception of a Retailer store's price level, related to Competitors and Market Price, whether they consider you as "Cheaper", "Same" or "More Expensive" than your competitors.
Price image is an essential element of a Retailer's strategic positioning. It needs to be defined, managed and monitored as the Price image doesn't always reflect the reality where your prices fall but it's more a psychological understanding of your price position in the Customer's mind.
Several drivers are influencing Customer's price image reflection, and cannot be neglected, such as:
● Range Price Structure (average offered, price entry level, number of items by price thresholds)
● Price Communication, Price Guaranteed.
● Promotions (frequency, mechanics, level of discount, product selection)
● Store environment (size, display, decor, ambiance), Store catchment area (location, competition)
● Price Index (Price index levels are defined through the Pricing Policy)
These drivers are usually defined in the Pricing Policy
🧪 Example of Pricing Policy Set-up
Pricing policy support entirely the Price Image, when well defined it helps the Retailer and its teams (Sourcing, Pricing Team, Store Team) to make price adjustments quickly to ensure their promise to their customers.
To set up a Pricing Policy few components need to be pre-defined:
- Categories: Select priority Categories according to their Category Role and for which the price sensitivity is important for Customers.
- Household Basket: Identify which items are found the most often in the basket of your customers. It is a very important component as those items will really address the expectations of your customers in terms of prices for the products they use in their daily consumption. The HHB list needs to be reviewed on a regular basis every 3 months to take into account seasonal impact, category trends, and economic situation...
- Number of Items: define the number of Items to be part of the Competitors' Survey by Division, by Category, by Sub-Category, by Segment.
- Frequency: decide at which frequency the Competitors Survey is done by Division, by Category. Due to price fluctuation, we don't survey Wet Market products at the same frequency as Grocery Products or Non-Food products.
- Price Index: traditionally Price Index is defined by Head Office and will determine at which Selling Price an Item needs to be sold versus its competitors following the Pricing Policy set.
- Price Change Frequency: define at which frequency selling prices must be changed. Dynamic Pricing is a more and more frequent practice.
Pricing Policy needs to be established by channel offline or online as the above components will be different from a convenience, supermarket, neighborhood, or hypermarket store.
When those components have been identified by channel, Pricing Team is ready to proceed with the Competitor's Price Survey. Indeed, selecting the right target Competitors will be also a very important factor to build Price Image among your Customers.
❓How can a Retailer reinforce its Price Image
Price image is critical because a customer’s perception of a Retailer’s average price level will have a profound impact on both traffic and spending.
Having a great Price Index is not enough. The retailer needs to let Customers (and the world!) know how great its price offering is. There are various ways to do so and there is no Golden Rule - except to communicate. For example, some Retailers will choose to exhibit a Trolley comparison at their Store Entrance with their cashier receipt and Competitors' A,B,C receipts. Some will communicate through their social media, Billboards, and their shopping online website.
There are usually Offers given to Customers that will reinforce the Retailer's Price Image, to set a target Promotion Selling Price discount versus your competitors will convey a clear message to your customers that you are the best place for shopping price-wise. Availability of products during the promotion period is essential as if not it could have a negative impact.
The best advocates of a retailer's Price Image are its own Team. The more teams know where the store stands in terms of comparative pricing vs. competitors, the more they will convey the message.
Having a Price-Match Guaranteed gives customers a free mindset when shopping in Stores and helps strengthen Trust. They have the Retailer engagement that whatever the price difference versus Competitors you'll propose them to reimburse the difference for the same item.
The way of displaying your items in Stores has also an impact on Price Perception. Depending on the Price Sensitivity of categories, retailers can think about:
● At what height should cheaper or price-sensitive items be displayed?
● What space should be allocated to cheaper or price-sensitive items?
● Where in the customer flow should cheaper or price-sensitive items be located?
🎁 Take Aways
A Store (physical or digital) Price Image - or how much customers perceive they have "value for money" - is therefore the result of the subtle mix of perceptions (influenced by the drivers above mentioned) and realities (the level of each selling price defined by the Pricing Policy).
🧰 Related Working Processes
● Price Image survey
● Customer Panels
● Price Survey (including web scrapping)