Readers Respond: Radical variable pricing
One of the more radical theories kicked around during a panel discussion on pricing and margins at the Do it Best May Market involved variable pricing. James Cabirac of Kief Hardware in Galliano, La., described his store's interest in an electronic price-tag system that could automatically adjust prices depending on the time of day -- for instance, raising some of them after 6 p.m.
It's still just an idea, but it generated several reader comments.
"So you are penalized with higher prices if your schedule is different, or if you prefer to shop at a different time of day? Don't like it."— Dennis Bosman
"I fully support the idea and have thought about doing it myself. Especially useful for Saturdays when we are the only hardware store open within 35 miles. We could easily go up 5% on that day. Also would save on labor to change out stickers from price changes.”— Preston Bullock Jay's Hardware
"Below is a funny e-mail I received -- it relates perfectly to this topic."— Matt Mazzone Mazzone True Value
[Here is the e-mail joke in circulation online, author unknown:]
Customer: Hi. How much is your paint?Clerk: Well sir, that depends on a lot of things.Customer: Can’t you give me an approximate price?Clerk: Our lowest price is our introductory special at $12 a gallon. After that we have dozens of different prices up to $199.Customer: What’s the difference in the quality of the paint?Clerk: Oh, there’s no difference. It’s all exactly the same stuff.Customer: Well, in that case I’ll take your $12 paint.Clerk: Well actually the $12 variety is only available on our website. If you want to buy it here at the store you’ll be charged an additional $20 Customer Convenience Fee.Customer: So if I go home and get it off the website, its only $12?Clerk: That’s correct sir -- plus a Credit Card Usage Fee of $6, and then there’s standard shipping and handling of $15.Customer: What? So in other words buying online would cost me almost exactly the same as what I’d have to pay here in the store?Clerk: I suppose so, but if you buy it here you get to use it immediately. Online purchases take 10 business days to get to you -- unless you pay the optional $25 Express My Paint Fee.Customer: You’ve got to be kidding me!Clerk: Well no sir, but it’s academic anyway, as right now the $12 paint is completely sold out in both places.Customer: That’s BS. I’m looking at shelves full of the stuff!Clerk: Ah, but that doesn’t mean it’s available for sale. We sell only a certain number of introductory priced cans on any given day. Oops, look at that! It just became available again -- at $17.50.Customer: C’mon! You mean to say it went up while I’m standing here?!Clerk: ’Fraid so. Inventory control changes our prices all the time. I strongly recommend you purchase your paint as soon as possible as it could go up again. How many gallons do you want?Customer: Well, maybe three gallons. No, make that four, I don’t want to run out. I assume I can return anything I don’t open?Clerk: Certainly sir. The $12 paint is non-refundable, but if you return it within 48 hours you will be entitled to a $5 credit toward the future purchase of another gallon of the same color at the same or higher price.Customer: That’s crazy. In that case I’ll just give any unopened cans to my brother as he’s planning to repaint his home soon.Clerk: Sorry sir, no-can-do! Our terms and CANditions -- that’s a little in-house joke -- prohibit paint transfer. It is strictly for the use of the original purchaser.Customer: But wait a minute, I hadn’t spotted those “Paint Sale -- $9.99* a Can” signs over there? That sounds like a much better deal.Clerk: Ah yes, that’s from our low cost paint division. The asterisk denotes that the cans are actually half-gallons and the price is based on a minimum purchase of two. There is also an additional Environmental Fee of $5 per can, a non-refundable Can Deposit of $3.50, a Paint Facility Charge of $5 and if you want more than one color, the second has a $25 surcharge and the third is $50 extra.Customer: This is utterly ridiculous. To hell with this! I’ll buy what I need somewhere else!Clerk: Well sir, you may be able to buy paint for some rooms from another store, but you won’t be able to find paint for your connecting hall and stairway anywhere but here. And I should also point out that if you want Uni-Directional paint, it is priced at $249 a gallon.Customer: I thought your most expensive paint was $199!Clerk: That’s only if you paint non-stop all the way around the room and back to the point at which you started. Stairways and hallways are considered one-way exceptions to the rule.Customer: So, if I buy the $199 paint and use it in my hallway what are you going to do about it -- send some goons in to paint over it?Clerk: Wow, I believe you’re getting it now sir. But no, please, that would be plain silly. We’ll simply charge you a Direction Adjustment Fee, plus the difference to $249 on your next purchase.Customer: Next purchase? No way! I’m out ‘a hereClerk: At Skyhigh Paints we never forget you have a choice, so thanks for shopping with us. Have a nice day! Sound at all familiar?
"If a customer who was in the store in the morning and comes back to buy the same item he needed one or two more of and sees the prices has increased in four hours, your store is saying everything is high priced. You have to be smart when you variable price items; they need to be blind items. For every item you drop prices to be competitive you should find 60 items to increase your margins, like brass fittings, nuts and bolts -- items that are slow turning need to earn their shelf space."— Anonymous
"Customers come into our stores and pre-shop. They plan their projects, go home and figure out what it will cost and then come back and buy. There is nothing more frustrating than pricing something one day and then when you go back to buy, it is a different price. I think retailers will lose their customers’ trust if they see this happen.
“What is the purpose of doing this? Airlines do it to incentivize customers to plan further out and lock in reservations. I’m not sure what the advantage would be for retailers.”— Anonymous