December 23rd, 2013 by Sarah Sluis

This holiday season, plenty of people shopped on Black Friday assuming they were getting the best deals. Those days, however, many savvy consumers are no longer relying on retailer’s cues about what constitutes their lowest price. Thanks to the internet, social media, and technology that analyzes prices, buyers know more about pricing than ever. “My eleven-year-old daughter uses Camelcamelcamel.com” to check price history, marvels Neil Lustig, CEO of price optimization company Vendavo. Camelcamelcamel.com gives users the discounting history of Amazon and Best Buy products. If a search reveals plenty of periodic sales, his daughter advises they wait a week to see if the item dips in price.

“In a way, it’s come full circle,” Lustig says, speaking of a recent New York Times article that documented how haggling has seen a resurgence. Now that a consumer can whip out their mobile phone and show a store manager there’s a better price somewhere else, the practice has emerged as a win-win option. Retailers combat showrooming, and consumers walk away with the best price. Retailers don’t even call it haggling, they call it price matching. “B2C used to be all haggling until the introduction of catalogs,” Lusting observes. “If you’re a consumer the price transparency is ridiculously good,” he says, but “it’s a scary time to be a retailer.”

One thing is clear: discounting isn’t going away. According to Mark Ellwood, the author of Bargain Fever: How to Shop in a Discounted World, in 2011 forty to forty-five percent of all retailers’ inventory sold at a discounted price. Ten years ago, only 20 percent of inventory was discounted. On the consumer side, Ellwood attributes that shift to the rise of the internet. Since consumers can surreptitiously and easily check prices online, the stigma of deal-hunting has decreased.

Retailers also have technology on their side, giving them the ability to fight data with data. Customer data in CRM systems can help segment out customers and understand which ones need markdowns to purchase, and which consumers will buy at higher prices. Marketing automation systems have the capability to intuit which customers might respond to 20 percent coupons for their entire purchase, and which ones will be satisfied by receiving 20 percent off one item.

B2B price optimization systems offer similar insights. They can let salespeople know if a customer angling for a volume discount always ends up cutting back his order, or if a customer generally accepts a deal after it’s been discounted twenty percent. B2B sellers are also dealing with customers that have more knowledge of pricing than ever. In manufacturing, buyers can often learn the exact cost of all the raw materials of a product, Lusting notes, enabling them to ask for discounts that give sellers the slimmest margins.

At times, finding a deal can seem like more of a hassle than it’s worth. I love a good deal, but the deluge of coupons offered by a retailer like Macy’s sometimes feels more frustrating than fun. “People self-select. Some people like to haggle, for some people this is horrible, exhausting, and intimidating,” observes Lustig. It ma y seem logical that increased price transparency would have customers clamoring for more consistent pricing, but that’s not the case.

When Macy’s tried to cut back on its couponing years ago, their customers responded negatively, and J.C. Penney is still recovering from its disastrous cutback in couponing. Price transparency may be bringing more science into the pricing process, but for most, it’s still a process ruled by emotion. According to Ellwood, deal-hunting is ultimately fueled not by logic, but the emotional rush that comes when consumers think they pulled one over on the retailer.

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