Value Proposition

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M AY 2 0 11

m a r k e t i n g

& sa les

p r a c t i c e

The value proposition in multichannel retailing

Consumers love low prices, but retailers shouldn’t overlook the way shoppers perceive value online and in stores.

Jeffrey Helbling, Josh Leibowitz, and Aaron Rettaliata

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It might be a retailer’s worst nightmare: a consumer stands before a wall of flatscreen TVs, contemplates a purchase, and pulls out a smartphone to see if a better deal is available elsewhere. This increasingly common sight may heighten retailers’ fears that they are caught in an inevitable race to the bottom on price. Yet while price competition is tough, our consumer research and client experience show that perceptions of value still matter in the ever-more-complex multichannel-retailing environment. Retailers can employ proven tactics to shape perceptions and take advantage of the fact that consumers care about more than just the price tag when they buy. A recent survey we conducted1 shows that price is just one of a range of factors consumers take into account when buying products: they also consider the degree of trust they have in a retailer, its product assortment, and their previous buying experiences (Exhibit 1). So even in the most competitive product categories, such as consumer electronics, retailers can look beyond price and actively shape perceptions of the value they offer. None of this happens by chance; retailers can implement strategic moves to get credit for superior value. Consider, for example, how consumers view leading sellers of women’s apparel in the Web 2011 United States (Exhibit 2). While actual average prices at Kohl’s and JCPenney are similar Multichannel (the x-axis), consumers clearly perceive Kohl’s as offering lower prices (the y-axis).

Exhibit 1 of 2

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Multichannel pricing survey of 6,000 US consumers and price checks (conducted during September and October 2010) of more than 1,100 items at 20 retailers.

Exhibit 1

Consumers...