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Improving Price Image With Retail Customers

Written By: Gargi Sarma 


Any business hoping to gain the confidence and allegiance of its clientele must have a positive price image. Companies need to take a more comprehensive approach that takes into account the different aspects that influence customers' perceptions, rather than just setting competitive rates. This article will discuss ways to enhance customers' perceptions of prices, with a focus on market basket analysis and profit drivers in particular.

Figure 1: Effect of price on consumer perceptions (Source: Oliver Wyman)

For instance, product variety and base prices have a modest short-term influence but a significant long-term impact on price perception. On the other hand, loyalty programs and promotions have minimal long-term impact but can quickly increase sales by offering instant, short-term value. The short-term elasticity of the efforts and the levers' contribution to the price image can be understood as inversely related lines (Figure 1).

To improve the price image with retail customers, this article examines several factors, including price elasticity, market basket, promotions, loyalty programs, profit drivers, psychological pricing, and tactics for maintaining lower prices than rivals in the online space.

  • Price Elasticity: Making smart pricing decisions that optimize income without alienating customers is made possible by understanding how demand reacts to price changes. For instance, research indicates that while price-sensitive goods like electronics profit from competitive pricing and marketing, low-elasticity, necessities like gasoline can fetch higher margins.Example: A study by the National Bureau of Economic Research found that the average price elasticity of demand for all goods is -0.7, meaning a 10% price increase leads to a 7% decrease in demand. Understanding such data helps businesses balance price changes with potential revenue impact.

  • Item Role: A 2-by-2 matrix is a strategic tool that categorizes items based on their ability to promote, drive profits, need visibility, and contribute to the overall image of a brand. This matrix aids businesses in prioritizing products and adjusting pricing strategies accordingly.

Figure 2: Example of Category Role Matrix

  • Example: Nike prioritizes higher margins on popular footwear (profit drivers) while maintaining competitive pricing on apparel (image items) to appeal to a broader audience. This balances profitability with a positive brand image.

  • Market Basket Analysis: By examining how consumers buy complementary or packaged goods, one can identify profitable niches and possible price points. Think about a clothes store. Purchase analysis shows that buyers frequently get shirts and pants together. Providing bundle discounts for various combinations raises the average order value while also encouraging purchases. Example: Walmart successfully increased average order value by analyzing purchase data and offering targeted promotions on complementary items. This data-driven approach led to higher sales without resorting to general price reductions.

  • Promotions and Loyalty Programs: While preserving a favorable price image, strategically placed promotions can increase sales and foster brand loyalty. Loyalty programs that provide early access to sales or unique discounts to loyal consumers foster a sense of value and encourage recurring business. For example, Sephora's Beauty Insider program builds a devoted customer base by offering tiers of prizes to encourage purchases.Example:  Amazon Prime offers exclusive deals and early access to sales, driving customer loyalty and increasing purchase frequency. This program demonstrates how loyalty programs can enhance price image by offering tangible value beyond discounts.

  • Psychological Pricing: Tapping into pricing psychology allows for the subtle manipulation of consumer behavior. Products might appear more valuable or affordable by employing strategies like anchoring with higher reference prices or using the number "9" in price tags (e.g., $19.99).Example: A study by Cornell University found that consumers perceive products priced at $9.99 more favorably than those priced at $10. This highlights the effectiveness of subtle psychological cues in influencing purchase decisions.

  • Online Competitive Pricing: Maintaining lower rates than rivals is a crucial tactic for obtaining a competitive edge in the internet market. Customers who have instant access to information can compare prices across many channels. To keep their rates profitable while staying appealing, businesses need to use data analytics, dynamic pricing techniques, and ongoing market monitoring. 

Case Studies: Putting Theory into Practice

  • Starbucks: Starbucks masterfully leverages both high-image items and promotions. Their core coffee beverages command premium prices due to brand positioning and perceived quality, while limited-time offers (pumpkin spice lattes!) create excitement and drive customer engagement.

  • Amazon: Amazon utilizes dynamic pricing based on demand and competitor analysis. This data-driven approach allows them to stay competitively priced on everyday items while maintaining strong profit margins.

Providing Pricing Imagery Using Analytics:

A strong tool for evaluating and improving price image is data analytics. Businesses can obtain insights into consumer behavior, industry trends, and the efficacy of pricing initiatives by utilizing sophisticated analytics technologies. Real-time modifications are made possible by continuous monitoring, guaranteeing that pricing reflects both market conditions and customer expectations. Examining client comments, evaluations, and social media exchanges yields insightful qualitative information that helps further hone pricing tactics.

Taming the Marketplace: Strategies for Retailers and Brands to Control Price Image

Marketplaces offer a tempting double-edged sword for brands and retailers: massive reach and fierce competition. While the potential for sales is enticing, navigating the complex pricing landscape can be treacherous. A single price fluctuation can damage your brand image, leaving you locked in a race to the bottom. So, how do you stay afloat and cultivate a positive price image amidst the marketplace churn? Let's explore strategies for both retailers and brands:


  1. Competitive Intelligence: Knowledge is power. Utilize price tracking tools to monitor your competitors' offerings. This data allows you to set informed pricing strategies, avoiding undercutting yourself while remaining competitive.

  2. Dynamic Pricing: Optimize your pricing algorithms to adjust based on factors like demand, seasonality, and competitor behavior. This agility ensures you stay competitive without sacrificing profit margins.

  3. Minimum Advertised Pricing (MAP): Implement MAP policies with your suppliers to prevent unauthorized discounting and maintain brand value. Remember, a consistent price across all marketplaces builds trust and discourages price wars.

  4. Bundling and Promotions: Craft strategic bundles or limited-time promotions that offer perceived value without slashing individual prices. This technique attracts customers while protecting your margins.

  5. Leverage Fulfillment Strategies: Consider offering free shipping or faster delivery options to enhance perceived value and justify higher price points. Remember, convenience can be a powerful differentiator.


  • Smartwatch retailer: Utilizes dynamic pricing, adjusting costs based on competitor analysis and real-time demand. This prevents undercutting while remaining competitive.

  • Clothing boutique: Bundles complementary accessories with clothing items, offering increased value without directly discounting the core products.


  1. Brand Equity is King: Invest in building a strong brand identity that resonates with your target audience. A premium image justifies higher prices and commands customer loyalty.

  2. Quality Focus: Emphasize the superior quality of your products through storytelling and clear communication. Highlighting unique materials, ethical sourcing, or exceptional craftsmanship justifies premium pricing.

  3. Selective Distribution: Partner with reputable marketplaces that align with your brand values and target audience. This curated approach protects your brand image from association with discount-driven platforms.

  4. Post-Purchase Experience: Don't stop at the sale. Deliver exceptional customer service, offer extended warranties, and build ongoing relationships. This fosters brand loyalty and reinforces the value proposition behind your pricing.

  5. Monitor Online Reviews: Actively track and respond to customer reviews, particularly those mentioning price concerns. Addressing feedback transparently showcases your commitment to customer satisfaction and reinforces brand value.


  • Outdoor gear brand: Focuses on sustainability and ethical sourcing, justifying premium prices with compelling storytelling and transparent communication.

  • Luxury fashion label: Selectively partners with high-end online marketplaces, maintaining brand exclusivity and image.


Setting competitive prices is just one part of a broad strategy to improve price image. Businesses can find chances for strategic pricing and product bundling by utilizing market basket research. Furthermore, by comprehending profit sources, businesses can concentrate on long-term expansion and devoted clientele. Value-added services, open communication, and customer education all work together to create a favorable price image that appeals to consumers and builds long-term relationships based on trust. Businesses that put these tactics first are better positioned to prosper and develop a devoted clientele in today's cutthroat marketplace.

About RapidPricer

RapidPricer helps automate pricing, promotions, and assortment for retailers. The company has capabilities in retail pricing, artificial intelligence, and deep learning to compute merchandising actions for real-time execution in a retail environment.

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