Personalized Pricing: How To Ensure Top-Notch Customer Experience

Retail is a rapidly growing industry with?$26 trillion of global sales ?in 2021. Leading retailers compete for customers' loyalty and try to improve their buying experience at every stage of interaction. That's why businesses try to find a customized approach to every client, which raises the interest in the personalized pricing model across different retail sectors.

Customer-centric pricing can be a game-changer. Whether an online or brick-and-mortar shop, leading businesses should consider rethinking their models and move from dynamic pricing focused on matching supply and demand to personalized pricing aimed at offering a special price to every buyer.

Why Retailers Need To Strive To Win The Single Customer—Not A Group

Consumer retention and loyalty are some of the biggest assets which promise fast and stable business development. That's why retailers no longer focus on a target audience as a whole but on an individual buyer, trying to turn a customer journey (be it online or offline) into a personalized experience.

According to Gartner, companies that?exceed expectations ?during the customer journey grow twice as fast as companies that provide an average buying experience. For instance, virtual fitting rooms are surging in popularity. This gamified process enables buyers to try on clothing items virtually within the comfort of their couches.

Thus, the introduction of the new, interactive experience for consumers becomes a gold mine for retailers. By 2025, the global virtual fitting room market is expected to reach?$6.5 million , which will raise the adoption of similar approaches. The better buying experience retailers provide, the higher retention rate expected.

How Retailers Tap Into Personalized Pricing

Is the price a part of the shopping experience? Absolutely. Price is one of the major factors that forge a consumer's buying decision and loyalty.

Plenty of companies strive to implement this pricing model and circumvent price discrimination. Yet the process may be slowed due to the lack of means for delivering personalized price offers. Therefore, retailers should seek opportunities to provide customers with a unique offering that would include both a tailor-made shopping experience and the best price.

The direct interaction with a customer enables businesses to implement personalized pricing more effectively. Companies collect data on the consumer's engagement with a product and use it to customize prices. Retailers commonly take into account different factors like buyer's purchase history, online search behavior, devices used for shopping, location, among others. In practice, retailers come up with coupons and special options via loyalty programs as a practical embodiment of personalized pricing.

This model is especially popular among grocery stores since they encourage shopping at a particular network. Retailers provide the best possible deals to buyers via subscription services, like a club card or a reward club. This membership enables customers to get coupons and sales for items they have in their baskets the most frequently.

Personalized prices and special offers are only the halfway of the successful buyer's journey. Even after paying for the product, a consumer can get a negative impression of the retailer due to the shipping problems. According to Salesforce,?89% of customers ?are more likely to make another purchase after a positive customer service experience. Therefore, the post-purchase experience shouldn't be dismissed since it makes customers return.

In other words, personalized shopping experience should be provided at every stage of the consumer journey. Post-purchase experience refers to high-quality delivery with accuracy and transparency as the main priority. It means that retailers provide buyers with an opportunity to set up delivery information convenient for them.

Key Challenges and Potential Solutions

Once retailers decide to implement personalized pricing, they do face a few significant challenges, including:

? Storage and effective access to quality, unsampled data on user behavior, purchase history, etc.

? The last mile problem, or delivery of goods to customers at a regularly differentiated price, as price discrimination can cause reputation and loyalty loss. Simply put, when discussing purchase experiences, buyers may come to the point that both have purchased the same product at different prices.

Therefore, the integration of personalized pricing requires retailers to comply with the legal framework. For example, in the European Union, providing customized prices for a single buyer may be a violation of?the General Data Protection Regulation . That's why businesses need technical capacity to deliver differentiated prices across a cluster of buyers, even if it consists of two or three people.

Retailers also need accounting policies and enterprise resource planning with a potential to store not only one price, but a range of prices for multiple customers. The integration of buyers' data and its permanent availability carried out by the transition from relational to analytical databases allows retailers to proactively respond to the changes in buyers' behavior and provide them with the most relevant offerings.

Finally, consumers are used to consuming personalized content. They not only want to see a range of suggested videos on YouTube or TikTok but also receive special offerings from favorite stores. And, as Michael LeBoeuf, an American business author,?states : "A satisfied customer is the best business strategy of all."

To succeed, retailers use different approaches which help them build robust customer lifetime value. Personalized offerings are one of the foundations, allowing retailers to win the competition for every buyer and ensure a consistent revenue stream.