From: bizjournals.com

“I’m looking for a deal. So what’s your best price?” Or “If you can beat this guy’s price, I’ll buy from you.”

The Internet has made it easier and easier for customers who want to shop based on price. So what do you do?

John Wanamaker, of the Philadelphia department store bearing his name, is credited with inventing the price tag in 1861. Before that, people asked or negotiated.

Today, although price tags have made most prices transparent, some products — such as cigarettes or liquor — have controlled pricing. So you see signs touting “the lowest price permitted by law.”

Other items like fine wine didn’t have a universal pricing system until publications such as Wine Spectator started to publish reviews that included the prices wineries suggested for their products. The posted review is called a “shelf talker” in industry slang and usually includes the price.

One major problem with price matching is that “the ceiling becomes the floor.” That really good deal you gave a customer becomes the price they expect to pay for the same item in the future, unless they can negotiate an even better deal for reorders.

What to Do?

First of all, the guy who says: “If you can beat this guy’s price, I’ll buy from you” probably isn’t that undesirable a customer. They’ve invested the time, done the legwork, and provided some sort of proof the price is legitimate. The sale walked in the door. So let’s start with that most famous scenario:

1. Shop Around, We’ll Beat Your Best Price

You let them do the legwork and you get the sale even if it approaches break even. You are working under the assumption that the distributor has a set pricing model that isn’t supposed to be undercut, or that store doesn’t get the product anymore.

2. Buy Now, If You Find a Cheaper Price, We’ll Refund the Difference

Similar to the above example, but you get the sale now. Once the purchase is made, few people continue to comparison shop. If they do, you will deliver.

3. Buy Now, If You Are Unhappy, Return It

Another variation on the above, only this time they get their money back. No matter how you phrase it (“no questions asked”), people still assume it will be an awkward moment. Do they want to bother comparison shopping when they’ve already bought?

4. Rebates

The product is offered at a spectacular price BUT the customer must mail in or go online to register the purchase and claim the rebate. A 2009 survey in Consumer Reports indicated that 25 percent of consumers never claim rebates. They consider it a chore. You put the savings into their hands, but they chose not to take action.

5. Prepaid Debit Cards

Stores find this a great way to give rebates. If the card is unique to their store, or “closed loop” in industry jargon, the savings are recycled back as new purchases at the store. If they don’t get used, the money stays with the store.

6. Continuous Sales

Department stores appear to run nonstop sales, especially on clothing. Fran Dresher on the TV series The Nanny famously said, “It ain’t on sale if it ain’t half off.” As Americans we are conditioned to buy things we consider a good deal. You’ve taken the initiative to make the sale as opposed to competing on a price the customer brings to you.

7. Does it Come With Everything?

The loss leader pricing might be good, but what else do you need to buy to get the product to work properly? Remember when flat screen TVs were new and you needed expensive HDMI cables to make the right connections?

8. Gaps in Coverage

Insurance is a product where price comparison is difficult. You’ve seen the TV ads where consumers meet with an agent to learn about gaps in coverage. Identifying gaps helps make the case for why certain products cost more.

9. Aftermarket Service

What if it breaks? Office supply superstores often offer extended product warranties. They may not make much money on the competitively priced piece of hardware, but make money instead on the service plan.

10. What Should We Omit?

A New York financial advisor had a great way of establishing their value and rationalizing pricing. They would explain to a prospect what they provide in service and how it’s priced. If the prospect insisted on paying less, the advisor would counter: “That’s fine. Which part of the service do you want to omit?”

Competing on price can be difficult, but there are a lot of ways to do it.