Is price matching good for business?

Aldi, Lidl, Morrisons and Tesco have all done it, and with the economy teetering on the brink of recession, perhaps it is the right thing to do. I speak of course of price matching, that tool that businesses often use to try and present an agreeable and affordable image to customers.

But what exactly is price matching?

Price matching is a strategy whereby businesses match the prices of their competitors for the same product. It is usually done when a business is attempting to attract more customers whilst retaining existing customers, usually offered when competitors are offering a lower price for a product or service. 

Price matching can take many forms including that of a best price guarantee, a brand match (often used by Sainsbury’s) or an old fashioned price match. 

Does price matching bring any benefits to businesses or is it a mere gimmick?

In a manner of speaking, price matching can and does bring benefits to a business that is willing to commit.

It has been found that price matching can increase customer satisfaction, as price matching businesses often show how their prices compare to competitors online, giving customers greater ability to feel that they are making an informed choice when they shop. Selling at the lowest possible price can also consequently lead to increased loyalty and repeat business from satisfied customers, if, and only if, they feel the service they received in store was excellent. All of which can help make the business more competitive and attractive within a competitive market place. 

However, price matching does come with its issues.

Price matching with your competitors can lead to price wars, where businesses fight to charge lower and lower prices, which may lead to the weakening of your company through a degraded revenue or profit margin. In turn this can result in customers abandoning ship if they feel that the lower prices are being offered as a result of a decline in quality.

Ultimately, a number of factors must be considered before a business adopts a price matching strategy, including the state of the company, the state of the market and finally the customer’s perception of the business.