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Price: the siren of an etailer's marketing mix

We’re a nation of shopkeepers. So if technology makes it quick, easy and affordable to open a shop online, then it’s no wonder we have so many etail businesses in the UK. But what strikes us as concerning is the lack of distinguishing propositions between these competing etail businesses. It’s clearly harder to differentiate when you don’t have a three-dimensional environment to play in. So how is differentiation approached in today’s etail marketing mix?

By and large it’s about price.

Google Shopping makes it easy to get an etailer’s products out into the consideration set of customers. But it's services like these which focus consumers on price more than anything else. Consequently price becomes the focus for the etailer. It appears to be the easiest element of the Marketing mix to work with, because it’s the easiest and quickest to change. But it creates a race to the bottom and time-consuming paranoia, as etailers react in knee-jerk fashion to the price of products advertised by their competitors. Pricing is complicated and it’s really important, but it shouldn't dominate the marketing mix and isn’t being managed cost-effectively. The right kind of customer analysis will provide etailers with a list of items they should match prices on – the KVI list – which items to undercut the competition on and which they can afford to charge more for. A customer-focussed approach, as always, is less risky than carpet bombing.

So what about the other 'P's in the Marketing mix?

Arguably the most important is the 'P' of Product. This is especially true for etail businesses where the 'P' of Place or distribution, offers little competitive advantage other than in delivery options. Product offers an etail business the opportunity to more strongly differentiate. There are two types of 'product' for any retailer. The first is product SKU, what is stocked vs. not. Listing good quality, exclusive products negates the need for price matching and moving focus away from price. In turn this exclusivity helps build overall equity in the brand experience, the other 'product type'. For bricks & mortar retailers this is all about how the shopper is served, what they’re offered, in what kind of environment. It’s no wonder that many successful etail businesses look to open physical stores to help them differentiate, because these elements are hard to execute in a digital world. We're not saying that etailers don't focus on products and only on price. They wouldn't be in business otherwise. What we're saying is that too often we see etailers have bought and listed too many products. What follows is a fight to see how many can be flogged at the best price possible. So there's not as much focus on delivering edited ranges to suit the customer, nor on the overall shopping experience, pre-, during- and post-purchase.The thought process looks a bit like:

Buy lots of products to hedge our bets - set the price - hope for the best - try shouting the loudest - mark down to clear stock.

Which brings us onto the 'P' of Promotion. The focus on promotion lies in shouting about the products you've got and trying to get the customer to buy them with as little markdown as possible. This is where promotion becomes synonymous with the communication of discounts, rather than the more subtle promotion of the brand experience and values. So it's not really a separate 'P' at all - it's really the same one as price.

Strategically combining the 'P's of Product and Promotion

We think that for etailers to move themselves away from differentiating on price, they have to place greater emphasis on how they approach Product and Promotion in harmony. They must use customer and market-driven insight to decide: what value-added experience they want to provide, what that means in detail (rather than a high-level mission statement) across all customer touch points and how, what and to whom they should communicate to. This will force them to think beyond using personalisation technology as a means of filtering their giant product ranges and more about what happens to the customer on their journey before and after they visit as well. So the thought process should look more like:

Understand customer opportunity - buy products - set the price - build engagement through relevant promotion of the brand and product offer to different customer groups - measure, refine, repeat.