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Combatting Disloyal Shoppers with Pricing Optimisation

Want to promote loyal customers? Saving money is a key driver of consumer loyalty in Australia

Last month, I spotted an article discussing the concept of “disloyalty” among consumers in Australia. Emotional connection to a brand is important, and a brand or retailer’s product range matters to a shopper, as well. However, loyalty diminishes when someone is met with an unsatisfactory price. If they can save money by purchasing a comparable item on the shelf or by shopping with a competitive retailer, many consumers will make that switch. This is why one of the most important ways to combat disloyal shoppers is with pricing.

Inside Retail covered recent consumer research from Emarsys which found that 65% of Australian consumers said “they will choose other brands if a cheaper option is available.” Further, a majority of respondents said that “consistently low prices are the top reason for staying loyal to a retailer.”

Because of the work I do at Revionics, I was not at all surprised to read that consumer switching is often initiated by price perception. We’ve developed our solutions in response to pricing dynamics and evolving trends, and we see the role that pricing plays through our data, too: saving money is a clear motivating factor for shopper decisions.

Reading this article got me thinking about the questions retailers should be asking in order to combat disloyal shoppers with optimised pricing.

Which products do your shoppers know the price of?

If a price tag is what influences loyalty the most, it’s important to understand precisely which prices are top of mind for consumers. A consumer is more likely to know and quickly recall the price of an item, having it serve as their pricing benchmark ­by which other prices are evaluated, if it’s an item they routinely purchase. In other words, your Key Value Items, or KVIs.

When making their regular shopping trip, a shopper knows that the milk they always buy will cost them a certain amount per litre, or that they won’t pay more than a couple of dollars for the sandwich bread their family loves. It’s on these items that a shopper would take immediate action, switching brands, if the price they see is suddenly more than they expect.

Shoppers can also "sense" when pricing is out of whack, even on background items that are not KVIs. If a shopper expects an item to be in the ballpark of $2 and stops at the shelf to see that it’s actually $5, that will absolutely form an impression in their mind.

That’s why it’s important to perform an analysis on an individual product level, assessing how every item’s price plays a role in loyalty, and where price increases can be taken with little impact on loyalty. Retailers have the ability to adjust prices on less-sensitive items to help fund lower prices on loyalty-critical KVIs.

How do you price strategically for loyalty, with your competitors in mind?

To fight disloyalty, after determining which items are most important to consumers, a retailer needs to understand where it must be most competitive on price compared to other retailers in the market.

Pricing is complex – there are so many angles to consider. For that reason, here are the questions I’d recommend asking to get to the heart of a competitive pricing strategy. These are sure to stimulate some thought-provoking questions for an organisation, and certainly worth evaluating on an ongoing basis.

  • Am I looking at multiple competitors in multiple regions, requiring more nuance in my competitive strategy?
  • Am I looking at competitors’ pricing by category?
  • Am I doing enough analysis of competitors to know who my consumers actually compare me to?
  • Am I a price leader, or am I a follower?
  • Am I viewed as a value leader? A service leader? An ethical brand? How does that factor into my customer loyalty?

Even if a retailer identifies themselves as a high-quality brand, justifying a higher price point for some categories or products, it’s still important that they’re competitive on the items that matter most. You may decide you don’t need to be the cheapest in the market. However, shopper preferences and motivations can fluctuate over time, as we saw with the disruptions from the pandemic.

Following an assessment of the right products to be competitive on, retailers can also ask:

  • Do I understand how I can fund competitive low pricing through some of my less price-elastic items?
  • How frequently am I evaluating where I stand in the market?
  • Can I re-evaluate my pricing on a regular monthly basis, or even more frequently on a weekly basis?
  • Are my competitors changing prices more frequently than me?

Win over disloyal shoppers for good with pricing optimisation

In a previous blog, I discussed how AI accelerates decision making around price so that retailers can build consumer trust. I think trust goes hand in hand with the topic of loyalty. If you know that consumers are motivated to change brands to save money, and you keep prices low for the items that are most important to them, they’ll trust you more, and reward you with their loyalty.

To learn more about how one Revionics customer, Rimi Baltic, has leveraged Price Optimisation to improve price perception, take a look at the case study.