Blog: William McKnight

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Customer Specific Pricing

Customer Specific Pricing (CSP) allows retailers to vary the price they charge their customers for the same products. I find it occurring more and more, especially in the online environment. Business intelligence is the prime enabler of this strategy. Many retail organizations are afraid of publishing the fact they do this, fearful of irritating the customer base. Most customers, even those on the receiving end of better pricing, would instinctively say they are opposed to CSP. It cuts against our grain somehow. But it shouldn’t necessarily. Retail has been doing forms of this for years.

CSP gets back to the retail organization’s business model. As long as discriminatory features are not used in its application, I believe it is the responsibility of each organization to set their focus point, short-term or long-term, and price accordingly by customer.

Know, however, that those customers who are attracted to your pricing deals may not be the most loyal. Which is precisely why some retail organizations have gone “CSP-lite” with variants such as customer specific warranties and shipping charge fees and options. Or, some do CSP with a “couponing” strategy, selectively offering coupons as opposed to handling CSP directly at the checkout. Speaking of coupons, my friend Neal Rapoport is the creator of www.dealtaker.com where internet offers and how to get them are continually posted. Check it out.

This requires sophistication. It requires a data warehouse with years of history data so that customer profiling can be done with real information. I have written about profiling strategies before, based on what I've done with some retail organizations implementing business intelligence. At the time, the use of the profiling was primarily determining whether to invest in a customer in the form of general marketing and customer service. Today, that model includes pricing.

If you have any thoughts about customer specific pricing, from either the “good business” or consumer perspective, please post them here.

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